SEC seeks police assistance in implementing CDO vs web-based firms

The Securities and Exchange Commission (SEC) has requested the assistance of the Philippine National Police (PNP) in enforcing the cease-and-desist order (CDO) which the corporate regulator has issued against web-based marketing firms Prosperity.com and Powerhomes Unlimited Corp.

In a letter to PNP Chief P/Gen. Leandro Mendoza, SEC associate commissioner Edijer Martinez said the request for police assistance is in accordance with the Securities Regulation Code (SRC), which states the SEC may enlist the support of and/or deputize any and all government enforcement agencies, be it civil or military, as well as any private institution, association or person in the implementation of its powers and functions.

On Jan. 26, 2001, the SEC issued the CDO against the two companies after they were found to have issued securities without prior registration at the SEC, a violation of the provisions of the SRC.

The securities in question are in the form of a 15-megabyte webspace for each subscriber in exchange for $294 or its peso equivalent. The website will then be the platform for networking in a multi-level system which rewards the subscriber with dollar commissions and points for every pair of sales down the line. The points can then be accumulated and exchange for downpayments in real estate or vehicle investments.

On Feb. 14, the Court of Appeal’s 10th Division issued a 60-day temporary restraining order (TRO) against the SEC, arguing that the CDO would result in the company’s closure if the sale of its life-and-blood – the websites – is prohibited.

However, Martinez said "while initially, a temporary restraining order was issued by the Court of Appeals to enjoin the implementation of above CDO against Prosperity.com, the said Appelate Court has recently dismissed the very petition for certiorari where such provisional relief was sought for.

A resolution dated March 13 issued by the CA had dismissed the petition filed by Prosperity.com and asserted that it had engaged in forum shopping and must be cited for contempt.

"For all intents and purposes, the request before the SEC is still in place until petitioner’s (Prosperity’s) motion is duly granted," the CA said.

The forum shopping charges surfaced when Prosperity filed a motion to dismiss its petition at the CA even before the court could issue the TRO, as its case at the SEC was still in progress. "Thus, two actions of the same nature were presented for consideration to two bodies simultaneously. This is what the rules on forum shopping seek to prevent," the CA said.

Prosperity.com legal counsel Ernesto Tabao said they have filed a motion for reconsideration at the CA and added that the company is still doing business as usual until the 60-day TRO is decided with finality.

He said the firm could not be held guilty of forum shopping since it was them who even asked that its petition at the CA be withdrawn as their case at the SEC was still being heard.

The CA admitted that due to the voluminous load of cases received everyday, the said intention to withdraw was not immediately referred, hence the court proceeded to rule on the TRO petition.