Facts:

Kalahi Reality Inc (KRI), a stock corporation engaged in realty business.

KRI filed SEC Forms 17-L (notification of inability to file all or any portion of SEC Form-A or 17-O) and 17-
Q (quarterly report which contains interim financial statements and interim management discussion)
although it is not previously registered as a reporting company.

SEC, through the Corporate Governance Department (Now CGFD) required KRI to submit an updated list
of its stockholders.

On November 06, 2006, SEC directed KRI to submit its 2005 Annual Report (SEC Form 17-A), and 1st to
3rd Quarter Reports for 2006 (Form 17-Q) , 2006 Information Sheet ) and written explanation why it
should not be held liable for violation of the SRC for failure to file the required reports.

It was assess a penalty of 862,700. It sought reconsideration, it was ordered to pay 782,000.

KRI raised the issue that they were not notified of the 1st and 2nd violations but still the SEC assessed
corresponding penalties for such violation. The SEC on the other hand explained that it is the duty of
KRIs Corporate Secretary to inform the SEC that it has attained a status of a public company. This
requirement is mandated under SEC Memorandum Circular No. 5 Serices of 2005. Also, KRI didi not
comply with SRC Rule 68 which requires all external auditors to issue a supplemental written statement
indicating the total number of its SH each owning more than one hundred or more shares.

ISSUE: WON the CFD correctly imposed the appropriate penalties against KRI for late and non-filing of
the reportorial requirements as a public company.

RULING: Only the penalty of REPRIMAND should be imposed to KRI.

First: Evidently, KRI late in filing the required reports (2005 Annual Report, 2005 1st-3rd Quarter Reports,
and 2006 Information Statement) for a public company. HOWEVER, KRI became aware of its status as a
public company only on 06 November 2006 when it was directed by CFD in a single notice, to submit the
required reports and an explanation for its non-compliance.

As to the payment of penalties, SEC cited Philippine Veterans Bank v Callangan, where the SC rule that a
corporation, believing in good faith that it is not a public company should be held liable only from the
time of its failure to submit the required reports after being informed by the Commission that it qualifies
as a public company.

Here, KRI became aware of its status as a public company only on 06 November 2006, hence its liability
for late filing should be counted only from said date.

Relevant also was the fact that CFD in a single notice, informed KRI of all its violations. Hence, according
to SEC, it should be considered as the latters first citation for an offense.