SEC appeals CA ruling on Meralco stockholders TRO

MANILA, Philippines – The Securities and Exchange Commission (SEC) asked the Court of Appeals (CA) yesterday to allow implementation of its cease and desist order (CDO) on grounds that the law empowers the regulatory agency to stop officials of the Manila Electric Co. (Meralco) from counting proxies in favor of pro-management directors. Commenting on the CA’s TRO, the SEC said Meralco’s assertion that the CDO had disenfranchised the affected stockholders has no factual and legal basis.

“Moreover, there is grave abuse of discretion where the acts complained of amount to an evasion of positive duty or a virtual refusal to perform a duty enjoined by law or to act at all in contemplation of law as where the power is exercised in an arbitrary and despotic manner by reason of personal hostility,” read the SEC’s comment.

“It is such whimsical and capricious exercise of judgment as is equivalent to lack of jurisdiction. This is not the situation in this case.”

The SEC said non-compliance with the rules on proxy solicitation is not an intra-corporate controversy within the jurisdiction of the regular courts.

It is a matter within the SEC’s administrative and regulatory jurisdiction under section 20 of the Securities Regulation Code (SRC), the SEC added.

The SEC said the transfer of the power to hear and decide intra-corporate controversies to the regular courts did not strip the SEC of its administrative and regulatory powers.

The CDO was issued in the valid exercise of its regulatory jurisdiction under the SRC, the SEC added.

The SEC said although the CDO was signed only by Commissioner Jesus Martinez, it was backed by the two other commissioners.

Martinez deliberated the issue raised in the urgent motion with Commissioner Raul Palabrica through telephone continuously until he returned to Manila around 3 p.m. of March 26, 2008, read the SEC comment.

The CA issued the 60-day TRO in response to Meralco’s petition, which alleged that the SEC had no jurisdiction over the case because it was an intra-corporate dispute falling within the jurisdiction of the regular courts.

The SEC issued the CDO based on a complaint of the Government Service Insurance System  (GSIS) that Meralco management failed to comply with the rules on proxy solicitations when corporate officials counted the proxies in favor of pro-Lopez directors during the power firmís annual stockholdersí meeting last May 27.

During the meeting, five pro-Lopez directors received the highest number of votes. 

They are: Manolo Lopez, Jesus Francisco, Christian Monsod, Felipe Alfonso and former prime minister Cesar Virata. 

The next highest number of votes went to GSIS president and general manager Winston Garcia and Bernardino Abes, followed by Daisy Arce and Jeremy Parulan from Philippines First Insurance Co. Inc.