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G.R. No. 125469 – 346 Phil. 218 – 287 SCRA 232 – Mercantile Law – Corporation Law – Extent of Power of the Securities and Exchange Commission – PSE is under the jurisdiction of SEC
Puerto Azul Land, Inc. (PALI) is a corporation engaged in the real estate business. PALI was granted permission by the Securities and Exchange Commission (SEC) to sell its shares to the public in order for PALI to develop its properties.
PALI then asked the Philippine Stock Exchange (PSE) to list PALI’s stocks/shares to facilitate exchange. The PSE Board of Governors denied PALI’s application on the ground that there were multiple claims on the assets of PALI. Apparently, the Marcoses, Rebecco Panlilio (trustee of the Marcoses), and some other corporations were claiming assets if not ownership over PALI.
PALI then wrote a letter to the SEC asking the latter to review PSE’s decision. The SEC reversed PSE’s decisions and ordered the latter to cause the listing of PALI shares in the Exchange.
ISSUE: Whether or not it is within the power of the SEC to reverse actions done by the PSE.
HELD: Yes. The SEC has both jurisdiction and authority to look into the decision of PSE pursuant to the Revised Securities Act and for the purpose of ensuring fair administration of the exchange. PSE, as a corporation itself and as a stock exchange is subject to SEC’s jurisdiction, regulation, and control. In order to insure fair dealing of securities and a fair administration of exchanges in the PSE, the SEC has the authority to look into the rulings issued by the PSE. The SEC is the entity with the primary say as to whether or not securities, including shares of stock of a corporation, may be traded or not in the stock exchange.
HOWEVER, in the case at bar, the Supreme Court emphasized that the SEC may only reverse decisions issued by the PSE if such are tainted with bad faith. In this case, there was no showing that PSE acted with bad faith when it denied the application of PALI. Based on the multiple adverse claims against the assets of PALI, PSE deemed that granting PALI’s application will only be contrary to the best interest of the general public. It was reasonable for the PSE to exercise its judgment in the manner it deems appropriate for its business identity, as long as no rights are trampled upon, and public welfare is safeguarded.
