SEC vs. INTERPORT RESOURCES CORPORATION G . R. No. 13 58 08 O c tobe r 6, 20 08 Chico-Nazaario, J.: F cts!

The Board of Directors of IRC approved a Memorandum of A reement !ith "#B $"anda #o%din s Berhad&. 'nder said memorandum of a reement, IRC ac(uired )**+ of the entire capita% stoc, of "-#I $"anda -ner . #o%din s Inc.& !hich !ou%d o!n and operate a )*/ me a!att as tur0ine po!er eneratin 0ar e. In e1chan e, IRC !i%% issue to "#B 22+ of the e1panded capita% stoc, of IRC. 3n the side, IRC !ou%d ac(uire 45+ of the entire capita% of 6RCI $6hi%ippine Racin C%u0&. It is a%%e ed herein that a press re%ease announcin the approva% of the a reement !as sent to the 6hi%ippine 7toc, -1chan e throu h facsimi%e and the 7-C, 0ut the facsimi%e machine of the 7-C cou%d not receive it. #o!ever, the 7-C received reports that the IRC fai%ed to ma,e time%. pu0%ic disc%osures of its ne otiations !ith "#B and that some of its directors, heavi%. traded IRC shares uti%izin this materia% insider information. 8or this reason, the 7-C re(uired the directors to appear 0efore the 7-C to e1p%ain the a%%e ed fai%ure to disc%ose materia% information as re(uired 0. the Ru%es on Disc%osure of Materia% 8acts. 'nsatisfied !ith the e1p%anation, the 7-C issued an order findin that the IRC vio%ated the Ru%es in connection !ith the then 3%d 7ecurities Act !hen it fai%ed to ma,e time%. disc%osures of its ne otiations !ith "#B. In addition, the 7-C found that the directors of IRC entered into transactions invo%vin IRC shares in vio%ation of the Revised 7ecurities Act. Respondents, ho!ever, (uestioned the authorit. of the 7-C to investi ate on said matter since accordin to 6D 9*/-A, :urisdiction upon the matter !as conferred upon the 6-D $6rosecution and -nforcement Department& of the 7-C ; ho!ever, this issue is a%read. moot since pendin the disposition of the case, the 7ecurities Re u%ation Code !as passed there0. effective%. repea%in 6D 9*/-A and a0o%ishin the 6-D. The. a%so contended that their ri ht to due process !as vio%ated !hen the 7-C re(uired them to appear 0efore the 7-C to sho! cause !h. sanctions shou%d not 0e imposed upon them since such re(uirement shifted the 0urden of proof to respondents. The case reached the CA and said court ru%ed in favor of the respondents and effective%. en:oined the 7-C from fi%in an. crimina%, civi% or administrative cases a ainst respondents. In its reso%ution, the CA stated that since there are no ru%es and re u%ations imp%ementin the ru%es re ardin disc%osure, insider tradin , or an. of the provisions of the Revised 7ecurities Act, the 7-C has no statutor. authorit. to fi%e an. suit a ainst respondents. The CA, therefore, prohi0ited the 7-C from ta,in co nizance or initiatin an. action a ainst the respondents for the a%%e ed vio%ations of the Revised 7ecurities Act. <hi%e this case !as pendin in this Court, Repu0%ic Act No. =599, other!ise ,no!n as the 7ecurities Re u%ation Code, too, effect on = Au ust /***. 7ection = of 6residentia% Decree No. 9*/-A, as amended, !hich created the 6-D, !as a%read. repea%ed as provided for in 7ection 54 of the 7ecurities Re u%ation Code Iss"es! (1) <hether or not the 7-C has authorit. to fi%e suit a ainst respondents for vio%ations of the R7A (2) <hether or not their ri ht to due process !as vio%ated !hen the 7-C denied the parties of their ri ht to cross-e1amination #e$%! (1) Yes. 7ections =, >* and >4 of the Revised 7ecurities Act do not re(uire the enactment of imp%ementin ru%es to ma,e them 0indin and effective. The provisions of the R7A are sufficient%. c%ear and comp%ete 0. themse%ves. The re(uirements are specifica%%. set out and the acts !hich are en:oined are determina0%e. To ru%e that a0sence of imp%ementin ru%es can render ineffective an act of Con ress !ou%d empo!er administrative 0odies to defeat the %e is%ative !i%% 0. de%a.in the imp%ementin ru%es. <here the statute contains sufficient standards and an unmista,a0%e intent there shou%d 0e no impediment as to its imp%ementation. The provision e1p%ains in simp%e terms that the insider?s misuse of non-pu0%ic and undisc%osed information is the ravamen of i%%e a% conduct and that the intent of the %a! is the protection of investors a ainst fraud committed !hen an insider, usin secret information, ta,es advanta e of an uninformed investor. Insiders are o0%i ated to disc%ose materia% information to the other part. or a0stain from tradin the shares of his corporation. This dut. to disc%ose or a0stain is 0ased on / factors: $)& the e1istence of a re%ationship ivin access, direct%. or indirect%. to information intended to 0e avai%a0%e on%. for a corporate purpose and not for the persona% 0enefit of an.one@ and $/& the inherent unfairness invo%ved !hen a part. ta,es advanta e of such information ,no!in it is unavai%a0%e to those !ith !hom he is dea%in . This o0%i ation to disc%ose is imposed upon AinsidersA !hich are particu%ar%. officers, directors or contro%%in stoc,ho%ders 0ut that definition has a%read. 0een e1panded and does not inc%ude those persons !hose re%ationship of former re%ationship to the issuer or the securit. that is not enera%%. avai%a0%e and the one !ho %earns such a fact from an insider ,no!in that the person from !hom he %earns such fact is an insider. In some case, ho!ever, there ma. 0e va%id corporate reasons for the nondisc%osure of materia% information 0ut it shou%d not 0e used for non-corporate purposes. Respondent contends that the terms &' ter( $ ) ct&, &re so* b$e +erso*&, &* t"re *% re$( b($(t,& *% &-e*er $$, v ($ b$e& are va ue%. used in the R7A 0ecause under the provision of the said %a! !hat is re(uired to 0e disc%osed is a fact of specia% si nificance. But the court dismissed said contention and stated that ' ter( $ ) ct is a%read. defined and e1p%ained as one !hich (*%"ces or te*%s to (*%"ce or ot.er/(se ))ect t.e s $e or +"rc. se o) sec"r(t(es. 3n the other hand, &re so* b$e +erso*& has a%read. 0een used man. times in

:urisprudence and in %a! since it is a standard on !hich most of %e a% doctrines stand $even the doctrine on ne %i ence uses such standard& and it has 0een he%d to mean A ' * /.o re$(es o* t.e c $c"$"s o) co''o* se*se o) /.(c. $$ re so* b$e 'e* . ve (* b"*% *ce& As to &* t"re *% re$( b($(t,& the proper ad:udicative 0od. !ou%d 0e a0%e to determine if facts of a certain nature and re%ia0i%it. can inf%uence a reasona0%e person?s decision to retain, 0u. or se%% securities and thereafter e1p%ain and :ustif. its factua% findin s in its decision since the same must 0e vie!ed in connection !ith the particu%ar circumstances of a case. As to &-e*er $$, v ($ b$e&, the court he%d a%so that such is a matter !hich ma. 0e ad:ud ed iven the particu%ar circumstances of the case. The standards of !hich cannot remain at a standsti%%. (2) No. There is no vio%ation of due process in this case since the proceedin s 0efore the 6-D are summar. in nature. The hearin officer ma. re(uire the parties to su0mit their respective verified position papers to ether !i%% a%% supportin documents and affidavits of !itnesses. A forma% hearin is not mandator. and it is !ithin the discretion of the hearin officer to determine !hether or not there is a need for a forma% hearin . Moreover, the %a! creatin the 6-D empo!ers it to investi ate vio%ations of the ru%es and re u%ations and to fi%e and prosecute such cases. It does not have ad:udicator. po!ers. Thus, the 6-D need not comp%. !ith the provisions of the Administrative Code on ad:udication. The 7-C retained :urisdiction to investi ate vio%ations of the R7A, reenacted in the 7ecurities Re u%ations Code despite the a0o%ition of the 6-D. In this case, the 7-C a%read. commenced investi atin the respondents for vio%ations of the R7A 0ut durin the pendenc. of the case the 7ecurities and Re u%ations Code !as passed there0. repea%in the R7A. #o!ever, the repea% cannot deprive the 7-C of its :urisdiction to continue investi atin the case. Investi ations 0. the 7-C is a re(uisite 0efore a crimina% case ma. 0e referred to the D3B since the 7-C is an administrative a enc. !ith the specia% competence to do so. Accordin to the doctrine of primar. :urisdiction, the courts !i%% not determine a controvers. invo%vin a (uestion !ithin the :urisdiction of an administrative tri0una% !here the (uestion demands the e1ercise of sound administrative discretion re(uirin the specia%ized ,no!%ed e and e1pertise of said administrative tri0una% to determine technica% and intricate matters of fact.