SEC pushes special court for securities fraud, disputes

The Securities and Exchange Commission is seeking the creation of a special commercial court that will solely act on cases involving securities fraud and intra-corporate disputes.

SEC Chairman Lilia R. Bautista said there must be a special court that will look into suspension of payments and rehabilitation cases, intra-corporate disputes, and complaints against perpetuators of pyramid or Ponzi scams, to ensure the speedy resolution of corporate cases.

"What is really needed is a special court to hasten the criminal prosecution of securities law violators and at the same time expedite cases concerning insolvent companies," Bautista said, adding that the Regional Trial Court has its hands full, acting on civil cases and corporate legal cases.

When the SEC transferred to the RTC the jurisdiction over intra-corporate disputes and cases involving suspension of payments as mandated by the Securities Regulation Code, concerns were expressed by the public over the clogged dockets of the courts and as to whether RTC judges could resolve the corporate legal cases with the same expertise as the hearing officers of the SEC.

The creation of a special task force, however, may take time and substantial appropriation from the national budget.

The Supreme Court, in the exercise of its authority, designates the RTC branches that shall exercise jurisdiction over these cases.

Before the effectivity of the SRC, the SEC had original and exclusive jurisdiction to hear and decide cases involving the following:

• devices or schemes employed by the board of directors, business associates, officers or partners, amounting to fraud and misrepresentation that may be detrimental to the interest of the public and/or of the stockholders, partners, members of the association or organization registered with the Commission.

• controversies arising out of intracorporate or partnership relations, between and among stockholders, members, or associates;

• controversies in the election or appointment of directors, trustees, officers, or managers of such corporations, partnership or association; and

• petitions for suspension of payments and/or rehabilitation proceedings.

Suspension of payment cases filed prior to the effectivity of the SRC have remained with the SEC. Most of these cases involve some large companies such as Victorias Milling Co. Inc., the Eyco Group of Companies, Duty Free First Superstore, Philippine Airlines, Serg’s, the Uniwide Group of Companies, National Steel and the ASB Group of Companies. These companies have yet to see the end of their debt woes.

The SEC wants to rid itself of these corporate cases to enable it to concentrate on capital market reforms. But, there are some quarters that believe that the SEC remains the best agency to handle such corporate disputes because of its experience in handling such cases.

Bautista said the creation of the task force would also speed up the recovery of investments of victims of pyramiding or Ponzi scams.

The SEC encourages individual investors to file criminal cases of syndicated estafa and swindling against the pseudo-investment companies since the SEC only files cases for violation of the SRC.

The estimated two million pyramiding victims can file separate actions before the prosecutorial offices under the Department of Justice and in regular courts. This, however, would further clog the court dockets.