SEC En Banc Case No. 10-20-476 / 12-20-479IGC SECURITIES, INC., Appellant, VS. ANTONIO S. ARANETA, JR. ARANETA AND CAPITAL MARKETS INTEGRITY CORPORATION (CMIC) / IGC SECURITIES, INC., Appellant, VS. CAPITAL MARKETS INTEGRITY CORPORATION (CMIC)
Securities and Exchange Commission COMMISSION EN BANC Republic of the Philippines Department of Finance
IGC SECURITIES,INC.
Appellant,
CAPITAL MARKETS INTEGRITY CORPORATION, -versus- Appellee, For: Violations of Capital Markets Integrity Securities Regulation Code SEC En Banc Case No. 10-20-476 Corporation Rules and
IGC SECURITIES, INC., Appellant,
CORPORATION, CAPITAL MARKETS INTEGRITY -versus- Appellee. Promulgated: 19 August 2025 Integrity Corporation Rules and Securities Regulation Code For: Violations of Capital Markets SEC En Banc Case No. 12-20-479
DECISION
Memorandum of Appeal (In re: Decision dated 18 August 2020) dated 25 September 2020 (docketed as SEC En Banc Case No. 10-20-476) [the the reversal and the setting-aside of the Resolutions dated 16 December 2019 and 18 August 2020 (collectively, the "First Assailed Resolutions") issued by the Capital Markets Int First Appeal"], filed by IGC Securities, Inc.IGC Securities),praying for Before this Commission are the: (a) Entry of Appearance with Cor rporation (CMIC); and (b) the Memorandum of Appeal (In re: Decision dated 5 December 2020) dated 17 November 2020 (docketed as SEC En Banc Case No. 12-20-479) [the "Second Appeal"] filed by IGC Seo raying for the reversal and the setting-aside of the Resolutions dated 25 August 2020 and 15 September 2020 (collectively, the "Second Assailed Resolutions") issued by the CMIC.
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC Securities.Incvs.CMI Page 2 of 30 DECISION
which affirmed the Resolution dated 16 December 2019,reads: The dispositive portion of the Resolution dated 18 August 2020
penalties on IGC Securities for the following violations: Corporation affirm, as it hereby affirms, the imposition of the following RESOLVED FURTHER, That the Board of Directors of the
of the CMIC Rules IGC Securities' first violation of 52.1.8 of the 2015 SRC Rules IGC Securities' first violation of IGC Securities' and its Associated IGC Securities'violation of Article V, Section 1(a), (e), and (f) of the IGC Securities' first violation of Article V, Section 2 of the CMIC IGC Securities first violation of Article VI, Section 1b)(v of the Article VI,Section 1b)iv)c of the Person's second violation of Article VI, Section 2 of the CMIC Rules Rules Article VI,Section 1a), bi)iia) CMIC Rules, in relation to Rule CMIC Rules CMIC Rules Rule Violated (Php30,000.00) (Php30,000.00) Thirty (Php30,000.00) (Php30,000.00) Fifty (Php50,000.00) Thirty Thirty (Php30,000.00) Thirty Thirty Thousand Thousand Thousand Thousand Thousand Thousand Penalty Pesos Pesos Pesos Pesos Pesos Pesos
CMIC Rules Article XI-B, Section 1(h) of the IGC Securities' first violation of Pesos (PhP200,000.00) Written Two Hundred reprimand and Thousand
IGC Securities with its Associated Person relative to the penalty Corporation affirm, as it hereby affirms, the joint and several liability of imposed. RESOLVED FINALLY, That the Board of Directors of the
15 September 2020,1 which affirmed the Resolution dated 25 August 2020, in part, reads: On the other hand, the dispositive portion of the Resolution dated
following penalties on IGC Securities for the following violations: Corporation affirm, as it hereby affirms, the imposition of the RESOLVED FINALLY, That the Board of Directors of the
bi)(ii) of the CMIC Rules IGC Securities' second violation of Article VI, Section 1(a) Rule Violated (Php30,000.00 A fine in THIRTY THOUSAND Penalty the amount of PESOS
1 Resolution No. 32, Series of 2020.
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC Securities,Inc.vs.CMIC Page 3 of 30 DECISION
CMIC Rules IGC Securities' third violation of of Article VI, Section 1(b), IGC Securities' second violation Article VI, Section 1a),bi)ii) of the CMIC Rules (b)(vi)(c) of the CMIC Rules of Article V, Section 2 of the IGC Securities' second violation A fine in the amount of A fine in the amount of A fine in the amount of FIFTY THIRTY THOUSAND PESOS (Php30,000.00) (Php50,000.00) THIRTY THOUSAND PESOS (Php30,000.00) THOUSAND PESOS
PARTIES
Ayala Triangle, Ayala Avenue, Makati City. issued a Certificate of Registration bearing No. 01-2004-00072. Its principal place of business is at Suite 1006, Tower One & Exchange Plaza It is licensed to operate as a broker-dealer in securities, having been existing under Philippine laws, having been issued a Certificate of Incorporation with Registration No. AS93009203 on 24 November 1993. Appellant IGC Securities is a corporation duly organized and
investing public by ensuring that trade participants comply with applicable rules and regulations. Its principal place of business is at the Taguig City. to act as a Self-Regulatory Organization (SRO) whose mandate is to maintain the integrity of the capital market and minimize the risk of the 10/F PSE Tower, 5th Avenue corner 28th Street, Bonifacio Global City, existing under Philippine laws, having been issued a Certificate of Incorporation with SEC Registration No. CS201104274.CMIC is licensed Appellee, the CMIC, is a domestic corporation duly organized and
Department of the CMIC (IED-CMIC) motu proprio, based on the involving the ARA Accounts which the IGC Securities facilitated and/or institution of two (2) different actions: first is the action that was commenced and prosecuted by Antonio himself as the complainant, and second, is the action instituted by the Investigation and Enforcement complaint of Antonio which is sanctioned under the CMIC Rules.2 Appeal and Second Appeal resulted from the transactions, and the actions carried out. In particular, the letter-complaint filed by Antonio Sebastian Araneta (Antonio) against IGC Securities on 27 June 2019 resulted in the The factual antecedents borne in the records show that the First
2 Section 1, Article II of the CMIC Rules.
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC Securities, Inc. vs. CMIC Page 4 of 30 DECISION
is warranted, which is what this Commission effected herein, applying Section 1 Rule 313 of the Rules of Court suppletorily.4 same questions of law, and are anchored on the same or similar acts/omissions of IGC Securities which allegedly constitute violations of the relevant provisions of the CMIC Rules, the consolidation of the same Considering that the First Appeal and Second Appeal present the
RELEVANT FACTS
THE FIRST APPEAL
Four Million (PhP34,000,000.00) from BPI Securities Corp. (BSC) to IGC Securities.7 Agreement5 (the "Agreement") with IGC Securities pursuant to which, Antonio caused the initial fund transfer of Pesos: Two Hundred Million (PhP200,000,000.00), and shares of stock valued at about Pesos: Thirty On 23 August 2017, Antonio executed an Investment Advisory
Accounts (referred to collectively as the "ARA Accounts") with IGC Money Market Fund;8 and (c) ARA-3386B (the "Third ARA Account") the securities that came from BSC. Securities were involved,to wit: (a) ARA-3386 (the "First ARA Account") the main account used to monitor the model portfolio provided in the Agreement, (b) ARA-3386A (the "Second ARA Account"),a sub-account created by IGC Securities pursuant to an alleged unsigned letter of Leon Cruz Araneta (Leon) to monitor withdrawals from Leon's Metrobank another sub-account created by IGC Securities which was intended for In carrying out the provisions of the Agreement, three (3) ARA
B. Araneta (Baltazar) to act jointly in relation to the ARA Accounts.10 2018 (the "Authorization Letter") where he authorized Leon and Baltazar On 19 October 2018, Antonio signed a Letter dated 18 October
all the actions consolidated; and it may make such orders concerning proceedings therein as may tend to 6 Ibid. Annex "1-A" (Official Receipt showing payment/deposit of the amount to IGC Securities). 10 Comment to Memorandum of Appeal dated 3 November 2020, Par. 6; (see Annex "2). 3 "Section 1. Consolidation. When actions involving a common question of law or fact are pending before the court, it may order a joint hearing or trial of any or all the matters in issue in the actions; it may order 4 SEC. 1-6, Rule I Part I of the 2016 Rules of Procedure of the Securities and Exchange Commission dispensation of justice and whenever practicable, be applied by analogy or in a suppletory character and 5 Comment to Memorandum of Appeal dated 3 November 2020; Annex "1". 7 Ibid. Pars. 1 and 2. 8 See Resolution dated 16 December 2019 Page 12. 9 Ibid. See also Resolution dated 25 August 2020. Pages 2 and 3. avoid unnecessary costs or delay. effect provides that: :"The pertinent provisions of the Rules of Court may, in the interest of expeditious
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC Securit es,Inc.vs.CMIC Page 5 of 30 DECISION
Termination") sent to IGC Securities, terminated the Agreement; requested for a Certificate of Holdings and Cash Positions on the ARA Accounts; and instructed IGC Securities to transfer all the shares and cash under his ARA Accounts to BSC. The decision to terminate the Agreement came about after IGC Securities failed to provide Antonio with any report/update on his ARA Accounts.12 On 19 June 2019, Antonio, through a Letteri1 (the "Notice of
BSC formally demanded from IGC Securities the transfer of Antonio's shares under the ARA Accounts.13 Pursuant to the instruction of Antonio in the Termination Letter,
to comply with his instructions and requests involving his account, i.e. transfer of shares and cash positions to BSC; (b) breach of the Agreement; and (c) failure to provide invoices and reports.14 (the "Complaint") against IGC Securities for the latter's alleged: (a) failure On 27 June 2019, Antonio filed with the CMIC a letter-complaint
Irregularities under Article XI-B, Section 1(h) of the CMIC Rules; (c) the the Rules on Supervision under Article VI, Section 2 of the CMIC Rules. 1(b)(v) of the CMIC Rules; (b) the provisions on Trading Related Code of Conduct and Professional Ethics for Traders and Salesmen under ArticleV,Section 1(a)(e) and (f) and Section 2 of the CMIC Rules;and (d) not be penalized for violating the relevant provisions of the CMIC Rules. The CMIC initially found that IGC Securities violated: (a) the Ethical Standards Rule under Article VI, Section 1(a), (b)(i)(ii)(a), and Section "Show Cause Letter"),directed IGC Securities to show cause whyit should On the basis thereof, the CMIC, in its letter dated 01 July 2019 (the
CMIC Rules, and maintained that the Complaint was instigated and propagated by Baltazar to malign its reputation. In particular, IGC Securities maintained that since the ARA Accounts are joint accounts of be held liable for breach approved risk mana Antonio and Leon, the latte transactions involving the s In its undated letter,15 IGC Securities denied having violated the authority to enter into binding it was submitting regular es argued that it cannot also t requiring observance of
monthly reports to Leon. LTU Securities also maintained that the
11 Ibid. Par. 8 (see Annex "3"). 13 Ibid. Par. 9. See also Memorandum of Appeal dated 25 September 2020. Par. 3.16. 15 Memorandum of Appeal dated 25 September 2020. Annex "N" 12 Ibid. Par. 7 14 Ibid. Par. 10. (see Annex "4").
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGCSecurities.Inc.vs.CMI Page 6 of 30 DECISION
issued a Resolution finding it liable for the same violations of the CMIC administrative case, which is anchored on the Complaint, is dismissible Rules. on the ground of litis pendencia considering that the CMIC has already
termination of the Agreement notwithstanding the lapse of more than allowing Leon to solely carry-out transactions involving the same constitute a violation of the CMIC Rules. Antonio equally took exception is the sole owner of the ARA Accounts, contrary to the allegation of IGC Agreement which resulted in losses, as well as its act in recognizing and at IGC Securities' failure to comply with his instruction relating to the Securities; and the latter's failure to comply with the terms of the thirty (30) days from its receipt of the same. In his Letter-Reply dated 7 August 2019,16 Antonio claimed that he
as the person who will be helping him in managing his accounts. it essentially reiterated its defenses. IGC Securities emphasized therein personally handle his affairs allegedly prompted him to introduce Leon that Antonio's advanced age which rendered him incompetent to IGC Securities filed its Rejoinder dated 4 September 201917 where
a violation of the CMIC Rules. the individual account of Leon; and its failure to comply with the instructions of Antonio, as well as the terms of the Agreement, constitute the CMIC Rules. The CMIC found that the ARA Accounts were the single account of Antonio; hence,the act of IGC Securities in modifying certain Leon; its transfer of stocks and money position from the ARA Accounts to CMIC issued a Resolution dated 16 December 2019 imposing upon the former the appropriate penalties for violating the relevant provisions of entries/records to make them appear as joint accounts of Antonio and Finding no merit in the arguments proffered by IGC Securities, the
which are allegedly attendant in the instant case, are additional grounds with Motion for Reconsideration dated 07 January 2020, therein seeking the reversal and the reconsideration of the CMIC's earlier Resolution fon lack of merit. In support thereof, IGC Securities essentially reiterated its earlier allegations and arguments which are anchored in its claim that the ARA Accounts are the joint accounts of Antonio and Leon. Moreover, IGC Securities also claimed that prescription,18 and denial of due process19 IGC Securities, through counsel, filed a Formal Entry of Appearance
17 Memorandum of Appeal dated 25'September 2020. Annex "F". 19 Ibid. Pars. 4.5, 4.9, and 4.10. 16 Comment to Memorandum of Appeal dated 3 November 2020. Par. 14 (see Annex "7"). 18 Motion for Reconsideration. Pars. 4.1 to 4.3.
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC Securities, Inc. vs. CMIC Page 7 of 30 DECISION
that warrant the dismissal of the Complaint.
Resolution"), which resulted in the filing of the First Appeal. Securities in its Resolution dated 16 December 2020 (the "First Assailed The CMIC Board denied the Motion for Reconsideration of IGC
Securities breached the Agreement, which constituted a violation of the affirmation en toto of the First Assailed Resolution. Antonio maintained that the CMIC did not commit reversible error in finding that IGC relevant provisions of the CMIC Rules. The sanctions imposed upon IGC Securities were thus correct, according to Antonio.20 In his Comment to Memorandum of Appeal, Antonio prayed for the
memoranda; the Masterlist of clients showing only the name of Antonio; Securities' failure to provide Antonio with the reports prescribed under latter, constituted a violation of the CMIC Rules.22 November 2020, the CMIC prayed for the denial of the First Appeal for invoices, statements of account, check vouchers, stock credit/debit and (b) the audit trail reports generated from its system showing that the Agreement; its transfer of the majority of the stocks and cash holdings of the ARA Accounts to the personal account of Leon,at the behest of the want of merit. The CMIC affirmed and reiterated its findings that the ARA Accounts are the single accounts of Antonio which, based on: (a) the Leon was not included in the creation of the ARA Accounts.21 Thus, IGC In its Comment (on Appellant's Memorandum of Appeal) dated 04
THE SECOND APPEAL
09 December 2019, on the basis of the Complaint filed by Antonio.23 records of IGC Securities covering the period from 22 November 2019 to The IED-CMIC conducted a special investigation on the books and
After the termination of the special investigation,the IED-CMIC
CMIC has determined should be investigated and resolved to enforce securities laws, rules and The complaint averred that IGC Securities failed to comply with, and had not responded to his Also, no periodic reports or invoices for any buy or sell transaction were provided by IGC Securities these stocks were adjusted. (See Letters of Instructions dated 16 June 2019 and 17 June 2019). 20 Comment dated 3 November 2020. See pages 14, 17 and 18. 21 Comment dated 4 November 2020. Pars. 31.1.1; 49-51, 54-55, 60, 68-69. 22 Ibid. Pars. 31.1., 31.2, 31.3, and 31.4, 93-95, 105. 23 Resolution dated 25 August 2020. Page 2. Section 1, Article II of the CMIC Rules expressly grants the CMIC jurisdiction to take cognizance of, and pass upon examination findings, reports of trading-related irregularities and matters which the requests to discontinue the Agreement and to transfer all of his shares and cash positions to BSC. and that significant unrealized losses in certain stocks were incurred as well as the cost/share of regulations
SEC En Ban A Ise Nos. 10-20-476 and 12-20-479 IGC Securities. S.Inc.vs.CMIC Page 8 of 30 DECISION
memos, Masterlist of Clients, among others.24 records showed otherwise, i.e., only the name and/or signature of found that IGC Securities violated Article VI, Section 1(a) and (b)(i)(ii) of the CMIC Rules when it carried out unauthorized actions,modifications single account of Antonio.The IED-CMIC did not agree with IGC Securities that the ARA Accounts are the joint accounts of Antonio and Leon as the Antonio was indicated in the invoices, vouchers, stock credit and debit of, and/or transactions involving the First ARA Account which is the
securities with an aggregate value of PhP120,988,558.80 from the First Antonio for the transfer of his cash and stock holdings to BSC.26 of Leon,25 in violation of Article VI, Section 1(a), (b)(i)(ii) of the CMIC Rules. These transfers allegedly violated the written instructions of ARA Account and the Third ARA Account to the personal account of Leon (ARA 132), and (b) made book transfers of money balances in the aggregate amount of PhP20,130,216.74 to and from the personal account The IED-CMIC also found that IGC Securities: (a) transferred
comply with the terms of the Agreement, specifically the provisions on the risk management limits. The records evaluated by the IED-CMIC showed that IGC Securities did not provide any recommendation to Antonio despite that the majority of the securities held by the latter have reached the maximum risk management limits, in violation of Article VI, Section 1(b)(ii) and (b)(vi)(c) of the CMIC Rules. Finally, the IED-CMIC found that IGC Securities allegedly failed to
liable for violation of the relevant provisions of the CMIC Rules. March 2020 directing IGC Securities to explain why it should not be held On the basis thereof.the CMIC issued a Show Cause Letter dated 06
that the Agreement was only signed by Antonio did not change the nature pendencia, citing for this purpose the existing administrative case regards the latter ground, IGC Securities again reiterated its position that of such account.27 therein praying for the dismissal of the action on the ground: (a) of litis pending with the CMIC which Antonio filed against IGC Securities;and (b) the First ARA Account is a joint account of Antonio and Leon, and the fact Dismiss with Written Explanation Ad Cautelam (the "Motion to Dismiss") that it did not violate the relevant provisions of the CMIC Rules. As On 3 June 2020, IGC Securities, through counsel, filed a Motion to
26 Id. Page 6. 25 Id. Pages 4 and 5. 27 Id. See Annex "G". 24 Ibid. pages 3 and 4
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC Securities, Inc. Vs. CMIC Page 9 of 30 DECISION
IGC Securities,the CMIC issued a Resolution dated 25 August 2020 (the "Second Assailed Resolution") where it imposed upon IGC Securities the Finding no merit to the explanations and arguments proffered by
Rules. appropriate penalties for violating the relevant provisions of the CMIC
essentially reiterated the allegations and arguments in its Motion to Dismiss, save for its new argument on prescription, was denied by the CMIC for lack of merit. The Second Assailed Resolution sustained the The Request for Reconsideration filed by IGC Securities, which
Second Appeal. findings in the earlier Resolution which, according to the CMIC, was supported by substantial evidence. This denial resulted in the filing of the
November 2020, Antonio and the CMIC, respectively, prayed for the lack merit and basis. Antonio and the CMIC maintained that the ARA Accounts are the single accounts of Antonio, and the transactions carried out by the IGC Securities involving the ARA Accounts sans the express authority of Antonio,which equally constituted breach of the Agreement, violated the relevant provisions of the CMIC Rules. dismissal of the First Appeal and Second Appeal arguing that the same In their respective Comments dated 03 November 2020 and 04
ISSUES
(B (D (A C Whether the CMIC was correct in finding that IGC Securities Whether the CMIC was correct in imposing the penalties provided Whether the IGC Securities was denied due process; Whether the CMIC committed reversible error in not dismissing the under the Assailed Resolutions subject of the instant Appeals. instant case on the ground of prescription; violated the Ethical Standards Rule, the Code of Conduct and Professional Ethics for Traders and Salesmen, and committed a trading-related irregularity proscribed under the CMIC Rules; and
RULING
collectively as the "Appeals") are bereft of merit. The First Appeal and Second Appeal (hereinafter referred to
issues raised by IGC Securities which maintained that the instant Appeals Preliminarily, this Commission will pass upon the procedural
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC Securities,Inc.vs.CMIC Page 10 of 30 DECISION
are dismissible on the ground that the CMIC violated its right to due barred by prescription. process, and the violations/irregularities committed by it are already
IGC Securities was not denied of due process.
were fatally infirm as it was denied of the opportunity to confront and available even in administrative proceedings, the CMIC allegedly denied it of due process when it proceeded to hear and decide on the matters subject of the Appeal sans the absence of Antonio in the proceedings conducted by it. cross-examine Antonio.28 Considering that the right to due process is IGC Securities maintains that the proceedings before the CMIC
We do not agree with IGC Securities.
doctrine in Samalio vs. Court of Appeals,30 is apt and instructive, to wit: Commission, which is tasked to pass upon the instant Appeals, are are satisfied when the respondent is given the opportunity to be heard, relevant parties were accorded such opportunity, the allegation that failure of administrative bodies to carry before the courts of justice does not render such proceeding void. The classified as administrative in nature where the demands of due process there is a denial of due process will cease to have a legal basis; and the either through oral arguments or pleadings,or to seek a reconsideration of the action or ruling being assailed.29 If the records show that the The proceedings a quo before the CMIC, and now before this y out a trial-type proceeding
resolve a case based solely on position papers, affidavits or opportunity to be heard either through oral arguments or through pleadings is accorded, there is no denial of procedural due instances essential. The requirements are satisfied where the parties are afforded fair and reasonable opportunity to explain their side of the administrative tribunals allows a certain degree of latitude as long as fairness is not ignored. In other words, it is not legally objectionable for being violative of due process for an administrative agency to Due process in an administrative context does not require trial- type proceedings similar to those in courts of justice. Where process. A formal or trial-type hearing is not at all times and in all controversy at hand. The standard of due process that must be met in
29 Vivo vs. Philippine Amusement and Gaming Corporation, G.R. No. 187854, November 12, 2013 [Per J. 28 Appeal. Pars. 6.28 and 6.29. 30 G.R. No. 140079, March 31, 2005 [Per J. Corona, En Banc]. Bersamin En Banc
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC SecuritiesInc.vs.CMIC Page 11 of 30 DECISION
documentary evidence submitted by the parties as affidavits of witnesses may take the place of their direct testimony. (Emphasis supplied)
process since the records show that it actively participated in all such Appeals, We are cognizant of the fact that the IGC Securities, duly in the proceedings a quo did not result or amount to a denial of due afforded every opportunity to present its side, and to refute the voluminous pleadings that it filed with,and submitted to the CMIC in the a motion for reconsideration in both cases which were given due course and considered by the CMIC Board. Finally, in relation to the instant represented by a competent and recognized law firm, exhaustively presented to this Commission its comments/objections to the resolutions and findings of the CMIC, and submitted evidence in support thereof. This Commission thus holds that IGC Securities' inability to confront Antonio proceedings. allegations and the evidence presented by Antonio in the numerous and proceedings a quo. The records equally bear that the IGC Securities filed In the instant case, the records show that IGC Securities was amply
resolutions of the CMIC, were met. notice, and the opportunity to be heard or to question the assailed Verily, the twin requirements of administrative due process, i.e.
failed to state the legal basis therefor Assailed Resolution and the Second Assailed Resolution of the CMIC denying its motions for reconsidera resolutions will readily explained its findin Moreover, We do not agree with IGC Securities that the First aGG1P gal/factual bases thereof.The were infirm as they allegedly reful examination of the said CMIC already exhaustively
fact that IGC Securitie G10 ument or evidence in its motions for 1G01 ration by the CMIC of its earlier findings. 0 A did not affect the validity of the Firsi embodied the leg and Serond Ass il hases fo IGC Securities' motions for specially that the same
thus: sustained the validity of minute resolutions as adjudications on the merit, reconsideration. . In this regard Supreme Court has consistently
actions filed before it constitute actual adjudications on the merits. Court. When the Court does not find any reversible error in the decision of the CA and denies the petition, there is no need for the The Court has repeatedly said that minute resolutions dismissing the They are the result of thorough deliberation among the members of the
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC Securities, Inc. vs. CMIC Page 12 of 30 DECISION
reached.31 (Emphasis supplied) agrees with and adopts the findings and conclusions of the CA. The decision sought to be reviewed and set aside is correct. It would be an exercise in redundancy for the Court to reproduce or restate in the minute resolution denying the petition the conclusions that the CA Court to fully explain its denial, since it already means that it
therefore fail for want of merit and basis. The claim of IGC Securities that it was denied of due process must
Theacts/omissionsofIGC Securities which violated the CMIC Rules are not yet barred by prescription.
error in taking cognizance of, conducting an independent investigation, and in passing upon the acts/omissions or irregularities that it Section 4, Article II of the CMIC Rules, to wit: committed considering that the same have already prescribed, citing IGC Securities also maintains that the CMIC committed a reversible
or interested party from filing a Complaint with CMIC. (Emphasis supplied) knowledge of its commission. The Complaint should conform to the to file a Complaint within the prescribed period shall bar the aggrieved Section 4. Procedure for the Investigation of Complaints Against any Trading Participant for Trading-related Irregularities or other violations of the Securities Laws within six (6) months from Complaint form, which CMIC may prescribe from time to time. Failure Trading Participants. An aggrieved or interested party (the "Complainant") may file a written Complaint with CMIC against
Securities' allegation. Again, We find that the evidence on record does not support IGC
its obligations under, and breached the provisions of the Agreement.33 The continued breach by IGC Securities of its contractual obligations including the obligation to terminate the Agreement, and to comply with filing of the Complaint before the CMIC on 27 June 2019.These material the instructions of Antonio in the Notice of Termination resulted in the Termination32 after he discovered that the former has failed to perform Antonio served upon IGC Securities on 19 June 2019 the Notice of
32 Comment dated 3 November 2020. Par. 8 (see Annex "3"). 33 (bid. Par. 7. 31 Agoyvs. Araneta Center, Inc. G.R. No. 196358, March 21, 2012 [per J. Abad, Third Division].
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC Securities, Inc. vs. CMIC Page 13 of 30 DECISION
his rights and interests. We thus agree with the CMIC that prescription from the CMIC for the acts/omissions of the IGC Securities which violated has not set in the instant case. prescribed under the CMIC Rules. In other words, it took Antonio less Securities' breach of the Agreement, to 27 June 2019 when he filed the of termination of the Agreement and the date of the filing of the Complaint in fact shows that Antonio wasted no time in seeking redress dates disclose that the Complaint was filed within the 6-month period than a month from 19 June 2019, when he became aware of IGC Complaint with the CMIC, to enforce his rights. The proximity of the date
We now pass upon the substantive issues.
excess funds but not enough productive investment.34 This, among others, enables the financial markets to promote and facilitate economic connecting a borrower with investment opportunities to a lender with efficiency and production. etc. are then characterized as "claims on the borrower's future income or assets." Under this ecosystem, the financial markets act as intermediaries of funds from and across individuals, firms, and even the government plays a very important role and function in the country's economy. It from lenders or investors in exchange for securities. These securities which are sold in the form of either shares of stock, bonds, or debentures, allows entrepreneurs and existing businesses to secure needed funds The securities market which facilitates capital raising, channeling
regulated activity as it is considered imbued with public interest. The nature, importance and impact of securities brokerage business which justifies its regulation by the State was explained in Philippine Stock Exchange vs. Secretary of Finance,36 to wit: of offering and/or selling securities as a broker/dealer35 is a highly In the Philippines, as well as in foreign jurisdictions, the business
country's economy and commercial development cannot simply be The importance of the stock market and the transactions therein to the
36 G.R. No. 213860, July 05, 2022 [Per J. Hernando, En Banc]. is in the business of buying and selling securities for its own account, with or without the assistance of a broker. Broker/dealers therefore operate in two (2) capacities i.e. as agent 34 See Villafuerte vs. SEC et. al., G.R. No. 208379. March 29, 2022 [Per J. Hernando, En Banc] between a buyer and seller, and charging a commission for services rendered. Section 3.4 of the SRC, on the other hand,defines a "dealer" his/her own account in the ordinary course of business". A dealer is also a registered firm who (broker) or as principal (dealer) 35 Section 3.3 of the Securities Regulation Code (SRC) defines a "broker" as "a person engaged in the business of buying and selling securities for the account of others". A broker is a registered firm which executes trades in securities for the account of others, acting as an intermediary as "any person who buys and sells securities for
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC SecuritiesInc.vs.CMIC Page 14 of 30 DECISION -- brushed aside. The Court in Abacus Securities Corp. vs Ampil stated:
regulation. and the national economy. The rise and fall of stock market indices reflect to a considerable degree the state of the economy. Trends in stock prices tend to Consequently, securities transactions are impressed with public interest, and are thus subject to public Stock market transactions affect the general public herald changes in business conditions.
needed investments. be meticulously examined to determine whether it is in line with the Constitutional principle to recognize the indispensable role of the private sector, encourage private enterprise, and provide incentives to regulation may discourage investors, including foreign investors, to enter the market due to high costs and burdens of doing business. The Chief Justice noted that "whenever there is a regulation imposed by the State in the commercial aspect of the stock market, the Court should not simply brush aside the issue; rather, such issue must transactions may be perpetrated; on the other hand, too much Given this consequential importance, the State is empowered to regulate stock market transactions. As mentioned by Chief Justice Alexander G. Gesmundo (Chief Justice Gesmundo), an absolutely unrestricted market could be potentially harmful as fraudulent
behalf of the principal. As the principals of these brokers are generally undisclosed, brokers are generally personally liable for contracts thus entered into. (Emphasis supplied) Trading through a broker or a securities intermediary is allowed under Section 43.1 of Republic Act No. 8799, or the Securities Regulation Code transactions at the stock exchange. They buy and sell stocks on (SRC). Brokers are essentially the counterparties to the stock
responsibilities, and obligations which include, among others, the registration current and accurate,39 as well as full and continuing in the business of buying or selling securities in the Philippines as a broker/dealer (which the CMIC Rules refer to as Trading Participants38) to be registered with the Commission. The license/registration granted to broker/dealers carry with it well-defined and exacting duties, submission of the necessary documents or information to keep the Section 28 of the SRC37 makes it mandatory for any person engaged
37 "Section 28. Registration of Brokers, Dealers, Salesmen and Associated Persons. - 28.1. No person 38 Section 2, Article 1 of the CMIC Rules defines "Trading Participants" as brokers and/or dealers duly licensed by the Commission and authorized to exercise a Trading Right pursuant to the rules of the Exchange. Unless the context requires otherwise, the term shall include directors, officers, Associated Persons, Salesmen and other agents of Trading Participants." shall engage in the business of buying or selling securities in the Philippine as a broker or dealer, or act as a salesman, or an associated person of any broker or dealer unless registered as 39 See Section 28.10 of the SRC. such with the Commission. Xxx." (Emphasis supplied)
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC Securities, Inc. vs. CMIC Page 15 of 30 DECISION
including the suspension or revocation of their (primary and/or appurtenant thereto is conditioned on their full compliance with all applicable laws, rules and regulations;41 and their failure to do so may i.e., as a permit, their continued enjoyment of the rights and privileges result in the imposition by the Commission of the appropriate penalties, secondary) license.42 the nature of the secondary license(s) granted to Trading Participants, the SRC-IRR,40 for the protection of the investing public. Consistent with compliance with the relevant and applicable provisions of the SRC and
abuse of discretion.44 The instant Appeals seek the exercise by the are being assailed by IGC Securities. This is a function that this Commission will now perform. IGC Securities, in accordance with the rules promulgated by them.43 The the appellate authority of the Commission which can modify, revise, reverse or set-aside an order, decision, or resolution found to be contrary to law; without evidentiary basis; or have been rendered with grave Commission of its appellate authority over the CMIC whose Resolutions securities laws, rules and regulations are carried out under a regulatory to discipline and impose sanctions upon their members, which includes exercise by SROs of their statutory and regulatory powers are subject to structure which empowers SROs, such as the CMIC, at the first instance, In our jurisdiction, the implementation and enforcement of the
grants the Commission the power to affirm, reverse, or modify a decision, This is consistent with the rule established in jurisprudence that an final order,or resolution appealed from based on the evidence on record Procedure of the Securities and Exchange Commission (the "2016 Rules" Relative thereto, Part V, Rule III, Section 3-12 of the 2016 Rules of
its own rules, and enforce compliance therewith x x x this Code, the rules and regulations thereunder, and its own rules, and enforce compliance therewith, notwithstanding any provisions of the Corporation Code to the contrary, by its members, persons associated with its members of its participants.) "The regulatory structure under the SRC is therefore a two-tiered scheme, with the SROs as the first- level regulatory entity. The regulatory jurisdiction of SROs is defined in Section 40.2 of the SRC, which mandates SROs to "comply with the provisions of this Code, the rules and regulations there under, and 40 See Section 30 of the SRC. 41See Section 40.2 of the SRC (Every self-regulatory organization shall comply with the provision of 42 See Sections 29 and 40.5(b) of the SRC 43 Sec 40.6 of the SRC. level regulatory entities, subject to the review, regulation, and supervision of the SEC as the second-
It is readily apparent from the foregoing that, in enacting the principle of self-regulation into 44 See Section 40.7 of the SRC. statute, Congress delegated a modicum of regulatory power to the SROs. These regulatory powers are exercised"[i]n lieu of direct regulation by the SEC of Exchanges and other securities- related organizations," and are therefore of the same legal nature as that of the SEC's powers." (Emphasis supplied) (Palanca IV vs. RCBC Securities, Inc., G.R. No. 241905, March 11, 2020 [Per J. A.B. Reyes, Jr. Second Division]
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC Securities,Inc.vs.CMIC Page 16 of 30 DECISION
appeal throws the entire case open for review, to wit:
matters not specifically raised or assigned as error by the parties. if their consideration is necessary in arriving at a just resolution of the case.45 (Emphasis supplied) open to review, and that this Court has the authority to review An appeal, once accepted by this Court, throws the entire case
Securities, established the following acts, omissions of, and/or transactions effected by IGC Securities involving both the ARA Accounts and the Agreement: The evidence on record, as well as the admissions made by IGC
(e (c (a b terminate the Agreement,51 and to transfer his management limits prescribed under the Agreement, recommendation to Antonio after the agreed thresholds IGC failed to furnish Antonio with invoices on the buy IGC Securities refused and/or failed to comply with the instructions of Antonio in the Notice of Termination to IGC Securities transferred the stock and cash IGC Securities failed to provide Antonio with the IGC Securities failed to observe the approved risk and and sell of securities covered by the ARA Accounts;50 and IGC Securities created and maintained the Second ARA Account and Third ARA Account without the consent and approval of Antonio, and carried out buy and sell transactions therein upon the instructions of Leon periodic reports required under the Agreement;4 were breached;49 personal account of Leon (ARA 132), and directly value of the subscriptions to and redemptions from the money market funds of Antonio;46 only;47 stockholdings of Antonio in the First ARA Account to the recorded to the personal account of Leon the aggregate neither informed nor provided any
thirty (30) calendar days.",; see also Resolution dated 16 December 2019. Pages 7 and 9. 51 Appeal. Annex "3" (Item No. 3 of the Agreement provides that: "The Agreement shall be for a period of one (1) year and can be cancelled by either party in writing at any time after serving a notice of 46 Resolution dated 16 December 2019. Pages 7, 22 and 23. 48Appeal. Annex "1" (Item No. 6 of the Agreement provides that: "IGC Securities, Inc. will provide a written monthly report as of the end of each calendar month which will be given on or before 15 calendar days from month-end. 49 Resolution dated 16 December 2019. Pages 23 and 24 50[bid. Page 16 45 Barcelona vs Lim. G.R. No. 189171, June 3, 2014 [Per J. Sereno, En Banc]. 47 Ibid.
SEC En Banc Case Nos. 10-20-476 and 12-20-479 GC Securities.Inc.vs.CMIC Page 17 of 30 DECISION
shareholdings in the ARA Accounts to BSC.52
and/or transactions did not constitute a violation of the CMIC Rules IGC Securities maintained that the foregoing acts, omissions
because the ARA Accounts are the joint accounts of Antonio and Leon. In
the instruction of Leon who is a joint owner of the ARA Accounts, the particular, IGC Securities argued that since they were made pursuant to
same were valid and regular in all respect.
The CMIC and Antonio,on the other hand,maintained that the ARA
CMIC Rules when it carried out the instructions of Leon who is not an owner of the same. Accounts are the sole accounts of Antonio,and IGC Securities violated the
Given the polarized positions of the parties herein, the determination of the nature of the ARA Accounts is indispensable for this Commission to properly and correctly rule on whether IGC Securities indeed violated the CMIC Rules. In other words, since it is impossible for
Of them is certainly wrong. the respective positions of both parties to be simultaneously correct, one
If the ARA Accounts are joint accounts, ICG Securities would be justified in carrying out the instructions of Leon as joint owner of the accounts.This conclusion,however,will not hold if the ARA Accounts are the individual single accounts of Antonio,as what Antonio claims,and the CMIC found.
IGC Securities' alleged breach of the provisions of the Agreement will also be considered and passed upon as the s same was carried out in its capacity as a Trading Participant,i.e., they relate to the provision of the products and service F0 license granted to it as a broker/dealer. In other words as a broker/dealer enabled IGC Securities to lawfully ume the obligations in the Agreement; without su es'provision of the services therein would have be and/or breach of its e Agreem IGC Securities'performance nent is necessarily governed by the standai rescribed under the CMIC Rules (as well as the nd regulations)which are in place to protect the investing public, and to uphold the integrity of the markets.
52 Ib id.
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC Securities, Inc. vs.CMIC Page 18 of 30 DECISION
Rules, this Commission will be guided by, and will implement the rules procedures and evidence are not strictly applied,53 and that the quantum of proof necessary to sustain a finding is merely substantial evidence,54 adequate to support a conclusion. or a joint account of Antonio and Leon; as well as if the IGC Securities' breach of the Agreement violated the relevant provisions of the CMIC obtaining in administrative proceedings that technical rules of or that amount of relevant evidence a reasonable mind might accept as In determining if ARA Accounts are the single accounts of Antonio,
finds and so holds that the ARA Accounts are the single accounts of Antonio, contrary to the claim of IGC Securities. After a careful review of the evidence on record, this Commission
no earlier versions of such reports were submitted, We agree with the CMIC that such modifications are highly suspect. If, as claimed by IGC submission of, and reliance on the Audit Trail Reports which it prepared and obviously unilaterally modified in 2018 to include the phrase "0R that the submission of these reports affirmed, albeit impliedly, that the that what IGC Securities deliberately submitted to the CMIC were the updated Audit Trail Reports which were modified only on "2/7/18",and from the IGC Securities' system bear only the name of Antonio.55 They show that from its creation, the transactions involving the First ARA Account, and subsequently the Second and Third ARA Accounts, which IGC Securities entered in its own system reflected their correct classification, ie., the single account of Antonio. IGC Securities' LEON C. ARANETA" has actually worked to its disadvantage in the sense ARA Accounts are the single individual accounts of Antonio. Considering credit/debit memoranda covering the ARA Accounts that were extracted The invoices, statements of account, check vouchers, and the stock
a conclusion. This is different from the quantum of proof required in criminal proceedings which evidence sufficient to establish her guilt beyond reasonable doubt which is a condition sine qua non for conviction. Ergo, the dismissal of the criminal case will not foreclose administrative action against respondent." (Velasquez vs. Hernandez. G.R. No. 150732. August 31, 2004 [Per J. Tinga, En Banc]). 55 Comment dated 4 November 2020. Par. 31.1; See Appeal (Annex "B"). fundamental and essential requirements of due process in justiciable cases presented before them. In administrative proceedings, technical rules of procedure and evidence are not strictly applied and administrative due process cannot be fully equated with due process in its strict judicial sense." administrative case would have to be sustained for as long as it is supported by substantial evidence necessitates a finding of guilt of the accused beyond reasonable doubt. The Ombudsman, in ordering the withdrawal of the criminal complaints against respondent was simply saying that there is no and the rules obtaining in courts of law. Administrative tribunals exercising quasi-judicial powers are unfettered by the rigidity of certain procedural requirements, subject to the observance of (Samalio vs. Court of Appeals. G.R. No. 140079. March 31, 2005 [Per J. Corona, En Banc]). 54 "Administrative proceedings are governed by the "substantial evidence rule." A finding of guilt in an that the respondent has committed the acts stated in the complaint or formal charge. As defined, substantial evidence is such relevant evidence as a reasonable mind may accept as adequate to support "Further, administrative bodies are not bound by the technical niceties of law and procedure
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC Securities, Inc. vs. CMIC Page 19 of 30 DECISION
subsequent inclusion of the "OR LEON C. ARANETA" in the records of the instructions of Leon, who was all the while not a joint-owner of the said accounts. Taken together, these pieces of evidence adequately support, that the ARA Accounts are the single accounts of Antonio. there would have been no need to modify the records at all. The ARA Accounts which were within the custody and control of IGC Securities appear to have been made for a particular purpose to make it eventually justify the acts of IGC Securities in implementing the and a reasonable mind can accept as adequate,the conclusion of the CMIC Securities, the ARA Accounts were the joint accounts of Antonio and Leon, appear that the ARA Accounts are joint accounts of Antonio and Leon; and
Audit Trail Reports beginning only in February 201957 do not show prima facie joint ownership of the ARA Accounts by Antonio and Leon. These basis in support of its conclusion in the Assailed Resolutions. Information Form (CAIF) allegedly executed by Leon together with Antonio when the First ARA Account was created,56 and (b) the corrected documents failed to trounce the pieces of evidence that the CMIC used as We equally find that the (a) the separate Customer Account
therein.58 Despite the absence of a provision therein that provides for, or Securities also regularly submitted reports covered by the Agreement to Leon only,as if the latter was a party thereto. These acts of IGC Securities authorized or substantiated the same. the IGC Securities and Antonio were the parties thereto and for which reason, the IGC Securities was bound to recognize and deal only with sanctions the opening and maintenance of a joint account to be owned by Antonio and Leon, or even additional accounts, the records show that IGC Securities unilaterally created the Second ARA Account, the Third ARA Account, and modified the Audit Trail Reports at the behest of Leon. IGC clearly constitute a breach of the Agreement, as correctly found by the CMIC, considering that there is nothing in the provisions therein that to have been breached by IGC Securities, the same clearly shows that only Antonio in all matters relating to the implementation of the provisions thereof, including and especially the performance of its obligations Anent the Agreement which Antonio alleged, and the CMIC found,
56 Id. Par. 6.1.2. 58 "The basic principle of relativity of contracts is that contracts can only bind parties who entered into it, and cannot favor or prejudice a third person, even if he or she is aware of such contract and has liability to speak about. This principle is embodied in Art. 1311 of the Civil Code, which states that and obligations arising from the contract are not transmissible by their nature, or by stipulation, or by. provision of law." (International Exchange Bank vs Rudy S. Labos and Associates, Inc., G.R. No. 206327, 6 July 2022 [Per J. Hernando, First Division]). 57 Id. Par.6.3.2. acted with knowledge thereof. Where there is no privity of contract, there is likewise no obligation or "contracts take effect only between the parties, their assigns and heirs, except in case where the rights
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC Securities,Inc.vs.CMIC Page 20 of 30 DECISION
strength of the Authorization Letter which Leon presented/submitted to the questioned transactions involving the ARA Accounts solely on the it, to wit: The evidence on record also shows that IGC Securities carried out
Assuming, arguendo, that ARA-3386 was single and not joint, the actuation of ISI were still warranted under the circumstances.
company, and without need of my approval nor my consent.59 Xxx. In a separate advice, the Letter of Authority from Mr. Antonio Sebastian Araneta Jr. dated 18 October 2018, citing advanced age, granted full authority to LCA to personally handle and make decisions on my behalf with regards to all of the accounts and holdings in your
Without the Agreement being expressly amended by Antonio and IGC Securities, the latter did not acquire any authority to create the Second and Third ARA Accounts, more so, to carry out transactions involving the amounts and/or shares covered under the Agreement. At best, the Antonio in the ARA Accounts that were not subject of the Agreement Authorization Letter covered only the other amounts and/or shares of The Authorization Letter did not operate to amend the Agreement.
Authorization Letter expressly provided that Leon was to act jointly with to act jointly in managing/transacting the ARA Accounts negates the the Agreement because Leon was never a party thereto; and the Baltazar. instructions of Leon, expressly authorized by Antonio to manage the ARA Accounts jointly with Leon.We thus agree with the finding of the CMIC that IGC Securities actions/transactions involving the ARA Accounts constituted a breach of claim of IGC Securities that it did not violate the CMIC Rules because the evidence on record shows that it only recognized and complied with the Agreement, the fact that the same clearly authorized Leon and Baltazar Granting ex gratia, that the Authorization Letter amended the completelydisregardingBaltazar who was
relevant provisions of the CMIC Rules, and in imposing penalties commit reversible error in finding that IGC Securities violated the provided therein. Prescinding from the foregoing, We hold that the CMIC did not
Standards Rule. multiple violations of the Ethical IGC Securities committed
59 Entry of Appearance with Memorandum of Appeal dated 25 September 2020. Pars. 6.9 and 6.9.2 (Page 20
SEC En Banc C Ca e Nos. 10-20-476 and 12-20-479 IGC Securities,Inc.vs.CMIC Page 21 of 30 DECISION
The Ethical Standards Rule embodied in the CMIC Rules mirrors the provisions in the SRC and SRC-IRR,which are considered best practices in securities regulation and adopted from the securities laws of the
processes prescribed under the CMIC Rules which, if carried out, may standards of commercial honor" and "just and equitable principles of trade." regulations are designed to extend greater protection to the investing public, and to elevate business practices within the securities brokerage result in the Trading Participants being considered as observing "high "just and equitable principles of trade" relates to the transcendental goal restoration of investor confidence in the capital markets.6o These general their business. They serve as guide to specific actions, systems, and industry. Section 1(a), Article VI of the CMIC Rules which mandates Trading Participants to observe"high standards of commercial honor"and of protecting investors and promoting public interest, resulting in the principles do not, per se, make broker/dealers ethical in the conduct of United States, specifically the Securities Exchange Act of 1934. These
among others, in determining compliance by Trading Participants with the Ethical Standards Rule, which were clearly violated by IGC Securities, to wit: Notably, the CMIC Rules adopt and use the following measures,
First, Section 1(b)(i)(ii(a), Article VI61 of the CMIC Rules requires Trading Participants, in the conduct of their business, to act honestly, fairly, with due care and diligence, and in the best interest of the client and for the integrity of the market.
60 Ramirez, Steven, The Professional Obligations of Securities Brokers Under Federal Law: An https://lawecommons.luc.edu/cgi/viewcontent.cgi?referer=&httpsredir=1&article=1276&context=f 61 Section 1(b)(i)(ii)(a), Article VI Antidote for Bubbles? 70 U. Cin. L. Rev. 527 (2002). Accessed at: acpubs
following principles and requirements which incorporate International Organization of Securities manner, CMIC, in addition to requirements imposed under other SRC Rules, will be guided by the Commission standards. "(b) In considering whether a Registered Person is conducting his business in an ethical and fai
honestly, fairly and in the best interest of his client and for the integrity of the market. Honesty and fairness. In conducting his business activities, a Registered Person should act
Where a Registered Person advises or acts on behalf of a client, he shall ensure at all times that are accurate and not misleading and do not violate SRC Rule 24.1 (d), paragraph 1. any representations or other communications made and information provided to the client
() Diligence. In conducting his business activities, a Registered Person should act with due skill, care and diligence, in the best interest of his clients and for the integrity of the market.
A Registered Person shall take all reasonable steps to promptly execute client orders and inconformity with the instruction of the client.
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC Secritis, Inc.Vs. CMIC Page 22 of 30 DECISION
the same. redemptions from the money market funds of Antonio to the personal separate violations of Section 1(b)(i)(ii)(a), Article VI of the CMIC Rules. are required by the CMIC Rules. If countenanced, these acts will destroy the integrity of the market, and erode the investing public's confidence in Relative thereto,We find that the IGC Securities'(i) act of transferring the stock and cash stockholdings of Antonio to the personal account of Leon account of Leon; (ii) clear disregard of Antonio's right to terminate the Agreement; (iv) failure to observe the approved risk management limits prescribed under the Agreement; (v) act of executing the instructions of Leon involving the funds and securities under the ARA Account which are subject of the Agreement; (vi) creation and maintenance of the Second ARA Account and Third ARA Account based on the instructions of Leon only; and (vii) submission of inaccurate Portfolio Performance Reports to a person who is not a party to the Agreement, constitute seven (7) Considering that, as established earlier, only the IGC Securities and Antonio are the parties to the Agreement, and the ARA Accounts are the single individual accounts of Antonio, these acts of IGC Securities are detrimental and prejudicial to the interests of Antonio, and clearly shows the lack or even absence of honesty, fairness, care, and diligence which Agreement and to transfer his shareholdings in the ARA Accounts to BSC; (iii) failure to submit to Antonio the reports required under the (ARA 132), and recording the aggregate value of the subscriptions to, and
Section 52.1.863 of the SRC IRR, requires Trading Participants to provide relevant reports on transactions involving the client's account. Second, Section 1(b)(v), Article VI62 of the CMIC Rules in relation to their clients, on a monthly basis, with a statement of account, and
Relative thereto, We find that the IGC Securities' (i) failure to provide Antonio with the periodic reports required under the Agreement; (ii) failure to provide Antonio with the statement of accounts on the ARA SRC-IRR. Accounts which are his single individual account; and (iii) failure to provide Antonio with the invoices on the involving the ARA Accounts which it effected constitute three (3) separate violations of Section 1(b)(v), Article VI of the CMIC Rules in relation to Section 52.1.8 of the
Third, Section 2, Article VI64 of the CMIC Rules requires Trading
62 "(v) Information for clients. A registered Person shall make adequate disclosure of material information in his dealings with his clients.
(c After a Registered Person has effected a transaction for a client, he shall endeavor to confirm promptly with the client, in writing, the essential features of the transaction pursuant to SRC Rule 30.2."
Trading Participant who are directly or indirectly related to the conduct of its securities business. The supervisory system shall be reasonably designed to achieve compliance with the rules of the CMIC, the Exchange, other applicable laws, including, but not limited to, Republic Act 28.1 (4) (G) for maintaining a system to supervise the activities of all persons employed by the No. 9160, as amended, or the Ant 64 (a) The management of every Trading Participant shall establish and maintain an appropriate (b) Associated Persons shall be responsible, in addition to the duties enumerated under SRC Rule
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC Securities, Inc. vs. CMIC Page 23 of 30 DECISION --Y
Rules, and other applicable laws, rules and regulations. broker and all persons involved in its business operations with the CMIC Participants to establish, maintain and implement an effective compliance function that ensures full compliance by the registered
business operations, IGC Securities should be held accountable for its failure to do so in the instant case. Relative thereto, We find that the IGC Securities' (i) act of transferring the inaccurate Portfolio Performance Reports to a person who is not a party to the Agreement, constitute five (5) separate violations of Section 2, function which compromised the interests of its client, and the integrity of the market. Considering that Section 2, Article VI holds Trading Participants fully responsible in properly supervising its personnel and stock and cash stockholdings of Antonio to the personal account of Leon redemptions from the money market funds of Antonio to the personal account of Leon; (ii) failure to submit the reports required under the prescribed under the Agreement; (iv) act of executing the sole instructions of Leon involving the funds and securities under the ARA Account which are subject of the Agreement; and (v) submission of Article VI of the CMIC Rules. These violations affirm IGC Securities' failure to either establish, maintain or implement an effective compliance (ARA 132), and recording the aggregate value of the subscriptions to and Agreement; (iii) failure to observe the approved risk management limits
Fourth, Section 1(b)(vi)(c), Article VI65 of the CMIC Rules requires
business functions. The compliance function shall be performed by an Associated Person who shall and effective compliance function within the firm which is independent of all operational and be registered with the Commission and required to report directly to the board of directors and the company President. The management shall ensure that the Associated Person/s performing the compliance function possesses sufficient training and experience in securities regulation matters and an understanding of the securities activities of the firm enabling them to effectively execute their duties.
Trading Participant who are directly or indirectly related to the conduct of its securities business. The supervisory system shall be reasonably designed to achieve compliance with the rules of the CMIC, the Exchange, other applicable laws, including, but not limited to, Republic Act No. 9160, as amended, or the Anti-Money Laundering Act ("AMLA"), and the Trading Participant's own b) Associated Persons shall be responsible, in addition to the duties enumerated under SRC Rule 28.1 (4) (G) for maintaining a system to supervise the activities of all persons employed by the internal policies and procedures. A firm's supervisory system shall include at least the following: Xxx.
65 "(vi) Conflicts of Interest. A Registered Person should avoid conflicts of interest and when they (c) Although final responsibility for proper supervision shall rest with the Trading Participant, compliance function. Xxx. cannot be avoided, should ensure that his clients are fairly treated and properly informed of such conflict of interest. diligence of a good father of a family is required from the Associated Person/s in the conduct of their
Xx.
comply with SRC Rule 52.1, paragraph 10. Where the Registered Person, or a third party assets, the Registered Person shall ensure that client positions or assets are adequately on behalf of the Registered Person, is in possession or control of client positions or and assets, act to ensure that client assets are accounted for properly and promptly and safeguarded. ( Client assets -- A Registered Person shall, in the handling of client transactions
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC Securities.Inc.vs.CMIC Page 24 of 30 DECISION
properly accounted for and safeguarded. This provision ensures that Trading participants to ensure that clients' assets and positions are brokers consider the best interests of their clients, rather than prioritizing their own financial gain or other conflicting interests. This protection is crucial because brokers often possess significant influence over clients' investment decisions and access to their assets, thus creating potential avenues for exploitation.66
separate violations of Section 1(b)(vi)(c), Article VI of the CMIC Rules. stock and cash stockholdings of Antonio to the personal account of Leon failure to observe the approved risk management limits prescribed under the Agreement; (iv) act of executing the sole instructions of Leon involving the funds and securities under the ARA Account which are subject of the Agreement; (v) creation and maintenance of the Second ARA Account and Third ARA Account based on the instructions of Leon only; and (vi) its submission of inaccurate Portfolio Performance Reports to a person who is not a party to the Agreement; constitute six (6) Relative thereto, We find that the IGC Securities' (i) act of transferring the redemptions from the money market funds of Antonio to the personal account of Leon; (ii) failure to comply with the instructions given by Antonio to transfer his shareholdings in the ARA Accounts to BSC; (ii) (ARA 132), and recording the aggregate value of the subscriptions to and
for Traders and Salesmen. IGC multiple violations of the Code of Conduct and Professional Ethics Securities committed
market, and even the country's economy. promotion of the integrity of the capital market. It is therefore not Code of Conduct as major violations, recognizing the potential Salesmen (the"Code of Conduct") embodied in Article V of the CMIC Rules businesses of Trading Participants for the protection of investors,and the surprising that the CMIC Rules consider and classify violations of the catastrophic effects that such violations will have on investors, the embodies the principles which Trading Participants are required to adhere. We cannot overemphasize the value and importance of these principles which are designed to foster a culture of honesty, transparency, fairness, and ethical decision-making in the conduct of The Code of Conduct and Professional Ethics for Traders and
of honesty, integrity, fairness, and good business practice; do nothing that Rules require traders and salesmen to adhere at all times to the principles Section 1(a), (e), and (f), and Section 2 of the Article V of the CMIC
professionalism/3-research-and-position-papers/conflicts-of-interest.pdf 66 CFA Society UK., Conflicts of Interest. https://www.cfauk.org/-/media/files/pdf/pdf/5-
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC Securities, Inc. vs. CMIC Page 25 of 30 DECISION
will adversely affect their duties to the public and the regulator; properly the interests of their client as paramount and not, under any account for, and adequately safeguard the assets of clients; and consider circumstance, prejudice the same.
Portfolio Performance Reports to a person who is not a party to the to the investing public, the Exchange, and this Commission. account of Leon (ARA 132), and recording the aggregate value of the subscriptions to and redemptions from the money market funds of the Agreement; (iv) failure to observe the approved risk management limits prescribed under the Agreement; (v) act of executing the sole Account which are subject of the Agreement; (vi) creation and maintenance of the Second ARA Account and Third ARA Account based on the instructions of Leon only; and (vii) submission of inaccurate Agreement, constitute seven (7) separate violations of Section 1(a), (e), and (f), and seven (7) separate violations of Section 2, Article V of the CMIC Rules. These acts of IGC Securities display a clear disregard of the principles which compromised its clients' assets, and breached its duties transferring the stock and cash stockholdings of Antonio to the personal Antonio to the personal account of Leon; (ii) clear disregard of Antonio's right to terminate the Agreement and to transfer his shareholdings in the ARA Accounts to BSC; (iii) failure to submit the reports required under instructions of Leon involving the funds and securities under the ARA Relative thereto, We find that the IGC Securities' (i) act of
IGC Securities committed Trading-Related Irregularities
CMIC Rules. proscribed under Article XI of the
Participant from using or disposing clients' funds or securities without authority, to wit: Section 1(B)(h) the CMIC Rules expressly prohibits a Trading
Participant shall not: Section 1. General Conduct. In addition to the manipulative and fraudulent practices prohibited by the Securities Laws, a Trading
XXx.
(g course of its trading business; Engage in the unauthorized use or disposition of funds or securities entrusted by a client to a Trading Participant in the
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC Securities, Inc. Vs. CMIC Page 26 of 30 DECISION
account of Leon (ARA 132), and directly recorded in the personal account stockholdings of Antonio in the First ARA Account to the personal of Leon the aggregate value of the subscriptions to and redemptions from the money market funds of Antonio,67 We agree with the finding of the CMIC Rules. CMIC, and hereby hold that IGC Securities violated Section 1(B)(h) the Considering that IGC Securities transferred the stock and cash
The multiple violations of the CMIC Rules warrant the
imposed by CMIC against IGC Securities, consistent with Article XII of the CMIC Rules. modification of the sanctions
prevent fraudulent and manipulative acts and practices, and deter regulations, and/or have committed acts or practices that are inconsistent with the principles of just and equitable principles of fair trade.68 Under the CMIC Rules,the exercise by the CMIC of its disciplining authority is intended to ensure compliance with securities laws and misconduct; with the end goal of improving overall business standards in trading participants found to have violated the securities laws, rules or the securities market.69 The SRC expressly grants CMIC the power to discipline its memben
business as a member with safety to investors, creditors, other members, participants or the self- Commission of the action taken. Any person aggrieved by a summary action pursuant to this paragraph provisions of paragraph (a) of this subsection. The Commission, by order, may stay a summary action summarily or after due notice and hearing (which hearing may consist solely of the submission of affidavits or presentation of oral arguments) that a stay is consistent with the public interest and the 69 Section 1, Article XII of the CMIC Rules. Commission, the rules or regulations thereunder, or the rules of the self-regulatory organization. In any disciplinary proceeding by a self-regulatory organization (other than a summary proceeding pursuant to paragraph (b) of this subsection) the self-regulatory organization shall bring specific against the charges, and keep a record of the proceedings. A determination to impose a disciplinary (b) A self-regulatory organization may summarily: (l) Suspend a member, participant or person organization; or (ii) Suspend a member who the self-regulatory organization finds to be in such financial or operating difficulty that the member or participant cannot be permitted to continue to do regulatory organization: Provided, That the self-regulatory organization immediately notifies the shall be promptly afforded an opportunity for a hearing by the association in accordance with the on its own motion or upon application by any person aggrieved thereby, if the Commission determines protection of investors. 67 Resolution dated 16 December 2019. Pages 7, 22 and 23. 68 "40.6. (a) A self-regulatory organization is authorized to discipline a member of or participant in or expulsion of such member or participant, and the suspension or bar from being associated with a member, if such person has engage in acts or practices inconsistent with just and equitable principles of fair trade or in willful violation of any provision of the Code, any other law administered by the charges, provide notice to the person charged, afford the person charged with an opportunity to defend sanction shall be supported by a written statement of the offenses, a summary of the evidence associated with a member who has been or is expelled or suspended from any other self-regulatory such self-regulatory organization, or any person associated with a member, including the suspension presented and a statement of the sanction imposed.
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC Securities,Inc.vs.CMIC Page 27 of 30 DECISION
XII of the CMIC Rules, are controlling. sanction for each count of violation prescribed under Section 4, Article erring Trading Participant, the nature/classification of the violation provided under Section 3,Article XII of the CMIC Rules,and the specific In determining the appropriate sanction(s) to be imposed upon an
each count72 of grave and/or major violation committed, to wit: use or disposition of funds/securities entrusted by a client to a Trading while violations of the Ethical Standards Rule,and the Code of Conduct are classified as major violations.71 Section 4, Article XII of the CMIC Rules Participant in the course of its trading business as a grave violation;7o on the other hand, provides for the specific sanction to be imposed for Section 3, Article XII of the CMIC Rules classifies the unauthorized
The CMIC or the CMIC Board may impose the following disciplinary sanctions for violations of the Securities Laws by a Trading Participant in accordance with the following:
(a Grave Violations
(h) (ii) association with the Exchange or other Trading Participant. First violation - Written reprimand and fine in the Trading Right and (2) access to the facilities and systems of the Exchange; Third and subsequent violations - Bar the erring Trading Participant from entry to or the amount of at least PhP25,000.00 but not exceeding employment in or any kind of commercial PhP200,000.00; Second violation - Denial of (1) the exercise of the
b Major Violations
(iii () ( (i Second violation -- Fine of at least PhP30,000.00 but Third violation - Fine of at least PhP50,000.00 but Fourth and subsequent violations -- Fine of at least First violation - Fine of at least PhP10,000.00 but not more that PhP30,000.00 not more that PhP50,000.00; not more that PhP75,000.00; PhP75,000.00.
that were established earlier warrant the imposition of the following On account thereof, the violations committed by the IGC Securities
71 Section 3(b)(ii) and (iii) of the CMIC Rules. 72 Section 5, Article XII of the CMIC Rules requires the CMIC Board to treat each count of violation as one and separate violation. 70 Section 3(a)(ii) of the CMIC Rules
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC Securities,Inc.vs.CMIC Page 28 of 30 DECISION
sanctions which this Commission finds to be the correct appropriate penalties:
Rules, which is classified as a major violation; seventh (7th) violation of the Ethical Standards Rule, First, a fine of PhP425,000.00 should be imposed upon IGC specifically of Section 1(b)(i)(ii)(a), Article VI of the CMIC Securities for its first (1st), second (2nd), and third (3rd to
which is classified as a major violation; Second, a fine of PhP225,000.00 should be imposed upon IGC Ethical Standards Rule, specifically Section 1(b)(v), Article VI of the CMIC Rules in relation to Section 52.1.8 of the SRC-IRR, Securities for its eighth (8th) to tenth (10th) violation of the
the CMIC Rules, which is classified as a major violation; Third, a fine of PhP375,000.00 should be imposed upon IGC Securities for its eleventh (11th) to fifteenth (15th) violation of the Ethical Standards Rule, specifically Section 2, Article VI of
Article VI of the CMIC Rules,which is classified as a major violation; Securities for its sixteenth (16th) to twenty-first (21st) violation of the Ethical Standards Rule, specifically Section 1(b)(vi)(c) Fourth,a fine of PhP450,000.00 should be imposed upon IGC
seventh (7th) violation of the Code of Conduct and Professional and (f), Article V of the CMIC Rules,which is classified as a major violation; Securities for its first (1st), second (2nd), and third (3rd) to Ethics for traders and Salesmen, specifically Section 1(), (e) Fifth, a fine of PhP425,000.00 should be imposed upon IGC
Securities for its eighth (8th) to fourteenth (14th) violation of Salesmen, specifically Section 2, Article V of the CMIC Rules, which is classified as a major violation; and Sixth, a fine of PhP525,000.00 should be imposed upon IGC the Code of Conduct and Professional Ethics for traders and
first violation of Section 1(B)(h) of the CMIC Rules, a trading related irregularity which is classified as a grave violation. Seventh, written reprimand and fine of PhP200,000.00 for its
SEC En Banc Ca os.10-20-476 and 12-20-479 IGC Securities,Inc.vs.CMIC Page 29 of 30 DECISION
however, MODIFIED with the imposition of the aggregate fine of Pesos: Two Million Six Hundred Eighty-Five Thousand (PhP2,685,000.00), dated 17 November 2020 are hereby DISMISSED for lack of merit and basis. The CMIC Resolutions dated 19 July 2018, 18 August 2020, 25 August 2020 and 15 September 2020 are hereby AFFIRMED insofar as they found IGC Securities, Inc. to have violated the relevant provisions of without prejudice to possible criminal charges, broken down as follows: (In re: Decision dated 18 August 2020) dated 25 September 2020,and the CMIC Rules. The sanctions imposed in the CMIC Resolutions dated 19 July 2018, 18 August 2020, 25 August 2020 and 15 September 2020 are, the Memorandum of Appeal (In re: Decision dated 5 December 2020) WHEREFORE, premises considered, the Memorandum of Appeal
First, for IGC Securities' first (1st) to seventh (7th) violation of the Ethical Standards Rule, specifically
Securities is hereby assessed a fine of PhP455,000.00; Section 1(b)(i)(ii)(a),Article VI of the CMIC Rules,IGC
Section 1(b)(v),Article VI of the CMIC Rules in relation to Section 52.1.8 of the SRC-IRR, IGC Securities is hereby Second, for IGC Securities' eighth (8th) to tenth (10th) violation of the Ethical Standards Rule, specifically
assessed a fine of PhP225,000.00;
hereby assessed a fine of PhP375,000.00; Third, for IGC Securities' eleventh (11th) to fifteenth Section 2,Article VI of the CMIC RulesIGC Securities is (15th) violation of the Ethical Standards Rule, specifically
Rules, IGC Securities is hereby assessed a fine of Fourth, for IGC Securities' sixteenth (16th) to twenty-first (21st) violation of the Ethical Standards Rule PhP450,000.00; specifically, Section 1(b)(vi)c),Article VI of the CMIC
Fifth, for IGC Securities' first (1st to seventh (7th)
hereby assessed a fine of PhP455,000.00; for traders and Salesmen, specifically Section 1(a),(e) and (f), Article V of the CMIC Rules, IGC Securities is violation of the Code of Conduct and Professional Ethics
Sixth, for IGC Securities' eighth (8th) to fourteenth (14th)
SEC En Banc Case Nos. 10-20-476 and 12-20-479 IGC Securities,Inc.vs.CMIC Page 30 of 30 DECISION
violation of the Code of Conduct and Professional Ethics for traders and Salesmen specifically Section 2,Article V of the CMIC Rules,IGC Securities is hereby assessed a fine of PhP525,000.00; and
Seventh, for IGC Securities' first violation of Section
reprimanded and assessed a fine of PhP200,000.00. 1(B)(h) of the CMIC Rules, IGC Securities is hereby
violation will be dealt with more severely. IGC Securities, Inc. is hereby sternly warned that any similar
exercising its disciplinary authority. This includes the consistent and and deterring misconduct among trading participants, the CMIC is reminded of the expectation that it will remain firm, fair, and resolute in Finally, in line with the twin objectives of ensuring market integrity
imperative that the sanctions imposed reflect both the seriousness of the objective implementation of its duly approved Rules. In this context, it is
infractions and the broader mandate of maintaining trust in the capital markets.
SO ORDERED.
Makati City, Philippines.
FRANCISCO ED. LIM Chainperson
JAVEY PAUL D.FRANCISCO Commissioner KARLO S.BELLO Comhissioner
MCJILLBRYANT T.FERNANDEZ Commissioner ROGELIO V.QUEVEDO Commissioner
*On official business
Want an analysis of this document?
Ask ASG Legal AI to summarize it, compare it with other rulings, or explain how it applies to your situation — it researches from this same library.