CAP hits SEC order on financial reports

College Assurance Plans Phils. Inc. has assailed an order issued by the Securities and Exchange Commission, directing it to submit its audited financial statements, saying such move is a "veiled fishing expedition" in order to obtain evidence that may be used against the pre-need firm.

The SEC, through its Compliance and Enforcement department, served last Sept. 28 a subpoena duces tecum on CAP’s former auditor, CGM & Co., requiring the submission of CAP’s financial statements for Dec. 31, 2003.

Through legal counsel Gilbert Reyes of the Poblador, Bautista & Reyes law office, CAP insisted that there is no basis for SEC’s directive and is only meant to harass the pre-need firm.

"We stress that the subpoena is a veiled fishing expedition in order to obtain evidence that may be used against our clients in the baseless criminal cases the SEC has filed before the Department of Justice," CAP said.

CAP cited Sec. 53 of the Securities Regulation Code which states that any person requested or subpoenaed to produce documents or testify in any investigation shall simultaneously be notified in writing of the purpose of such investigation.

"Rule 11, Article 3 of SEC Circular No. 4 with regard to the power of the CED to issue subpoena in the course of its investigation, requires that simultaneous notice in writing of the purposes of the investigation given. No such notice in writing clarifying the basis and the purpose your investigation has been provided. Thus, there can be no denying that this intended examination is a clear violation of our clients’ right to due process of law and a high-handed abuse of process on the part of your office," Reyes said.

Reyes said the subpoena does not even refer to any complaint lodged against its clients warranting the investigation by the CED. "We thus find this whole exercise highly irregular and arbitrary for which reason we are vigorously objecting to the production by our auditor upon your instance of the subject audit working papers without express authorization from the rehabilitation court," the law office further said.

Considering that there is no legal basis and justification to require the submission of the working papers, Reyes said they are witholding their consent to the production of any of their clients’ records in their care and trust unless expressly authorized by the rehabilitation court.