SEC Adm. Case No. 10-01-06 Sherman Brothers Management Limited, Inc.

Securities and Exchange Cemmission SEC Bldg., EDSA, Greenhills, Mandaluyong City Republic of the Philippines

In the Matter of

SHERMAN BROTHERS MANAGEMENT LIMITED, INC.

DEPARTMENT, COMPLIANCE And eNFORCEMENt Petitioner. SEC Admin. Case No. 10-01-06 (CED Case No. 01-2593)

DECISION

2001 filed by the Compliance and Enforcement Department ("CED')1. of Sherman Brothers Management Limited, Inc. ('Sherman'? dated 06 September For .consideration is the Petition for Revocation of Certificate of Incorporation

FACtS OF tHE CASe

SEC Registration No. A200018721 with the -following primary purpose: Sherman was registered with the Commission since 29 December 2000 under

associations, corporations, partnerships and other entities "To engage . in marketing consultancy to persons, firms necessary in meeting the objectives of the enterprise, such as product development, marketing promotions, advertisement, corporate imaging and product launching and designs. "

However, upon investigation by the CED, Sherman was found to have "acted

beyond the powers granted to it by its primary registration."2 Moreover, the Market as broker/dealer in securities without the necessary license therefor, and acted

Regulation Department certified that Sherman has not been issued any secondary license to act as broker/dealer in securities, investment house and dealer in government securities.3

In view of the same, the Commission, on 28 March 2001, issued a Cease and

3 Id., Annex A. 2 CED's Petition, Paragraph 1. 1 now Enforcement and Prosecution Department.

In the Matter of Sherman Brothers Management Limited, Inc. (SEC Admin. Case No..10-01-06) Page 2 of 5

serious misrepresentation as to what the corporation can do or is doing to the great violations of Sections 8 and 28 of the Securities Regulation Code4, and Section 6(1)(2) of Presidential Decree No. 902-A, as amended, specifically on the ground of or other form of securities or otherwise engage in the business of.a broker/dealer in securities. Said CDO was declared permanent in a Resolution dated 04 May 2001. from receipt why its Certificate of Incorporation should not be revoked for culpable prejudice of the public. Desist Order (CDO"), enjoining Sherman from soliciting and/or accepting money for investment purposes and also from accepting orders to buy and sell shares of stock The same resolution directed Sherman to show cause within thirty (30) days

of Incorporation should not be revoked. Notwithstanding the same, Sherman failed to show cause why its Certificate

Hence, CED filed the present petition.

ISSUE

Commission to revoke Sherman's Certificate of Incorporation based on CED's Petition and submitted evidence. The sole issue in the present case is whether there is a valid ground for the

RULING The ansWer is in the AFFIRMATIVE. Section 6(1)(2) of Presidentiai Decree No. 902-A, as amended, reads: Commission shall possess the following powers: "Sec. 6. In order to effectively exercise such jurisdiction, the

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provided by law, inc!uding the following: I)To suspend, or revoke, after proper notice :and hearing. partnerships or associations, upon any of the grounds the franchise or certificate of registration of corporations,

XXX XXX XXX 2. Serious misrepresentation as to what the public:"(emphasis supplied) corporation can do or is doing to the great prejudice of or damage to the general

A corporation is allowed and can legally exercise only such powers granted by

4 Republic Act No. 8799(2000).

In the Matter of Sherman Brothers Management Limited, Inc. (SEC Admin. Case No. 10-01-06) Page 3 of 5

confers and limits the powers that a corporation may exercise.7 the iaw for its creations and those enumerated in its charter. As regards the iatter. the same can be found in the purpose clause of the Articles of Incorporation which

basically states that its primary purpose is "[t]o engage in marketing consultancy to persons, firms, associations, corporations, partnerships and other entities xxx." Its charter does not provide that it can act as a broker in securities. In addition, Sherman's Certificate of Incorporation expressty states: In the present case, the purpose clause of Sherman's Articles of Incorporation

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permit is likewise obtained. Commission or other government agency unless such license or requiring a Secondary License or Permit to operate from this does not authorize it to: undertake business activities This Certificate grants juridical personality to the corporation but

XXX XXX xxx"(emphasis supplied)

and under the name of Shermar:, show that it bought and sold securities in behalf of Sherman indeed acted as a broker in securities, read as follows: apparently acted as .a broker in securities. Numerous "contract notes"8, issued by third persons. Nonetheless, based on the evidence attached to CED's Petition, Sherman The contents of the aforesaid contract notes, which prove that

"Account Name: xxx Account Number: xxx Address: xxx Date: xxx

Contract Note Number: xxx In accordance with your instructions, we have today BOUGHT/SOLD the following for your account: SECUR!TYIFUND DESCRIPTION SYMBOL BUYISELL TRADE DATE QUANTITY UN!T PRICE AMOUNT COMMISSION AMOUNT DUE

X XXX XXX XXX XXX XXX XXX XXX XXX

TOTAL AMOUNT DUE: XXX Today's Exchange Rate: XXX (Sg.) Amount Due in your currency: XXX

Authorized Signature" :(emphasis supplied)

5 CESAR L. VILLANUEVA, PHILIPPINE CORPORATE LAW 20 (2001 ed.). 6 Id., at 232. CED's: Petition, Annex B. 7 Id., at 197.

In the Matter of Sherman Brothers Management Limited, Inc. (SEC Admin. Case No. 10-01-06) Page 4 of 5

business of buying and seiling securities without the power to do so under its charter. foregoing to be sufficient in proving CED's ciaim that Sherman engaged in the as payment for the purchase of securities in behaif of its clients. Thus, we find the Moreover, several receipts also show that it received various sums of money

selling securities requires a secondary license from the Commission pursuant to Section 28 of the Securities Regulation Code which reads: Furthermore, it shouid be ncted that engaging in the business of buying and

Associated Persons. -- 28.1. No person shall engage in the Commission. business of buying or selling securities -in the Philippines as a broker or dealer, or act as a salesman, or an associated person of any broker or dealer unless registered as such with the "Sec 2s. Registration of Brokers, Dealers, Salesmen and

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investment house and dealer in government securities,10 it should likewise be held has not been issued any secondary license to act as broker/dealer in securities, liable for violating the aforesaid provision. Considering that the Market Regulation Department certified that Sherman

power to do so under its charter and without a license from the Commission, Sherman's Certificate of Incorporation. should be revoked on the ground of serious misrepresentation as to what it can do or is doing to the great prejudice of the general public Thus, by engaging in the business of buying and selling securities without the

June 200611 for failure to file its Generai Information Sheets (GIS) and Audited financial Statements (AFS) from 2001 to 2006. On the other hand, pursuant to SEd executory considering that corporations revoked by virtue of the said order are given until 02 August 2013 to file their Petitions to Set Aside the Order of Revocation. of Incorporation was revoked on 02 August 2006 pursuant to SEC Order dated 27 Circular No. 15, Series of 2009, the said revocation has not yet become final and Nonetheless, the records of the Commission show that Sherman's Certificate

Limited, Inc. is hereby REVOKED with FINALITY for violating Section 6(I)(2) of Presidential Decree No. 902-A, as amended, and Section 28 of the Securities GRANTED. The Certificate of Incoporation of Sherman Brothers Management WHEREFORE, premises considered, the instant Petition is hereby

9 Id., Official Receipt Nos. 1104428, 1104577, 1104432, 1103980 dated 04 August 2000, 31 August. 10 Id., Annex A. 11 Published in the July: 03, 2006 issue of Philippine Star. 2000, 04 August 2000, 24 March 2000 respectively, all issued to Mr. Michael Mcavoy.

In the Matter of Sherman Brothers Maiiagerment Limited, Inc. (SEC Admin. Case No. 10-01-06) Page 5 of 5

furnished with a copy of this Decision for its appropriate action. Regulation Code.. Let the Company Registration and Monitoring Department be

SO ORDERED

Mandaluyong City, 10 June 2010.

Fe B. Barin Chairperson T b.b

MA. JUANITA E. CUETQ12 Commissioner RAUL J. PALABRICA Commissioner

MANUEL HUBErTO B. GAITE ADIO M . JALA

Commissioner (ssioner

12 On official leave.