In a July 20, 2004 memorandum addressed to Ma. Lourdes de Guzman, vice president of the PSE Compliance and Surveillance Group, the Market Surveillance Division said, "We reviewed the alerts gathered during the period and we found no compelling incidence to incite an investigation."
"Most of the alerts generated were probable and habitual marking-the-close (that is, no particular item turned up to our defined series as well as broker frequency). Such alerts were thus filtered through via our initial tests, hence no further investigation was deemed necessary," the memo stated.
The Market Surveillance Division also reviewed Meralco’s past disclosures for any possible correlation as per the price movements and the trades in question in consonance to the brokers involved.
The division said the news items gathered were mostly about Meralco’s appeals for fare hike, refund for customers and prospects for fund raising exercise.
"Any such news could not have exclusively or specifically established any significant to any one trading participant as it would to the entire list. Moreover, the manner by which such transactions were carried out in the market did not point to any disclosure issue or act against regulatory measures," the division stated.
"We, therefore, recommend no further investigation for Meralco on the grounds presented," the memo concluded.
The division’s evaluation of the trading activities of Meralco was based on the instruction of the PSE following news reports about First Resources’ buying of large Meralco shares for GSIS during these months.
The memorandum was signed by Melchor Dikitana, Dong Ogabang, Edylyn Rosacia and Larry Liracao of the Market Surveillance Division of the PSE, a self-regulatory body.
The PSE’s action was separate from the inquiry now being conducted by the Securities and Exchange Commission (SEC) against First Resources on the same GSIS transactions.
Meanwhile, lawyers Teodoro Cruz Jr. and Perpetuo Lucero Jr., counsel for First Resources, asked the SEC for the basis of its investigation of the stock brokerage firm.
"The manner by which the investigation is being conducted and the fact that it is directed only against our client necessitates that the basis for the investigation be made clear," Cruz and Lucero said.
They pointed out that First Resources is not the only broker which transacted Meralco B shares from October 2003 to January 2004 "and yet it is the only one being investigated."