SEC Adm. Case No. 01-10-194 Casino De Espanol De Cebu, Inc.

Department of Trade and Industry Republic of the Philippines

Securities and Exchange Commission SEC Bldg. EDSA, Greenhills, Mandaluyong City

CASINO ESPANOL DE CEBU, INC In THE MATtEr oF

SEC EN BANC CASE NO.: 01-10-194 CASINO ESPANOL DE CEBU, INC. Petitioner.

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DECISION

brevity). Pesos (Php105,00.00) against Casino Espanol De Cebu, Inc. ('Casino Espanoi," for dated 06 February 2007 and 19 March 2007 of the Corporation Finance Department ('CFD') of the Commission assessing a penalty of One Hundred Five Thousand For consideration of the Commission En Banc is the appeal from the letters

The relevant facts of the case are narrated below.

harmony among [its] members." Registration No. PW00000762 "to provide its members, social, recreationai, sports and cultural facilities proper for a good organization promoting unity and the spirit of Casino Espanol is a corporation registered with the Commission with SEC Casino Espanol .is also a registered issuer of securities.

Casino Espafol, was late in submitting its certifications on the (1) attendance of its board of directors in the 2006 board meetings; and (2) extent of its compliance Securities Regulation Code ('SRC"?. In another letter dated 19 March 2007, the CFD with its Manual on Corporate Governance. In a letter dated 06 February 2007, the CFD directed Casino Espanol to file the two certifications and to show cause why it should not be held liable under Section 54 of R.A. No. 8799, also known as the

the same violation. Casino Espanol sought reconsideration? but the same was assessed a penalty considering that this is the second time Casino Espanol incurred Circuiar No. 6, series of 2005: denied, and the following penalties were assessed pursuant to SEC Memorandum

Certification on 1. 2006 Report 31, 2006 Date Due December February Date Filed 15, 2007 (basic penalty) Php25,000.00 Imposable Penalty Php48,000.00 Amount

1 Articles of Incorporation of Casino, Second Article. http://www.sec.gov.ph Letter dated 02 April 2007 attached to the Notice of Appeal and Memorandum Appeal dated 27 September 2007 +(632) 726 09 31 to 39

In the Matter of Casino Espaniol De Cebu, Inc. SEC En Banc Case No. 01-10-194, Page 2 of 4 Casino Espanol De Cebu, Inc., Petitioner

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the attendance 2. 2006 TOTAL of the directors Certification on compliance with its Manual of Governance the extent of Corporate January 30, 2007 April 2007 plus Php500.00) Php23,000.00 (46 days x Php500.00) Php25,000.00 (basic penalty) plus Php32,000.00 (64 days x Php105,000.003 Php57,000.00

Hence, the instant appeal.

that will warrant the condonation or reduction of penialties imposed against Casino The only issue involved in this case is whether there are valid justifications

Espanol.

The appeal is partly meritorious.

Casino Espanol's request for waiver or reduction of penalties is anchored on two grounds, namely:

(1) That the request for reconsideration is justifiable based on the factual

situation that caused delay in the filing of the reports.

(2) That the amount of the penalty imposed is not proportionate to the

potential harm that the late submission could have caused.

To support its first argument, Casino Espanol claims that the late submission was a mere oversight brought about by the conversion of its ownership structure from non-proprietary to proprietary, and began only its operations in January 2005. Casino Espanol also submits that the mistake was made in good faith, and there was no intent on its part or its officers to disregard the rules of the Commission. Further, Casino Espanol also argues that its mistake caused no prejudice to third persons or any of its members.

merit a condonation of the imposed penalties. Such an oversight due to changes in Casino Espanol's structure is not a fortuitous event or an exempting circumstance The CFD found such justifications insufficient and unsatisfactory that will

that will exonerate the company from its liability.

3 Letter dated 09 May 2007 addressed to Atty. Hidelito Pascual, Compliance Officer of Casino Espanol.

Casino Espariol De Cebu, Inc. In the Matter of SEC En Banc Case No. 01-10-194. Page 3 of Casino Espafiol De Cebu, Inc., Petitioner

mandated and expected to be vigilant in complying with the provisions of its Manual to monitor the level of compliance by public companies with the Code of Corporate of Corporate Governance.4 As a.public company, it has the duty to submit the required certifications within the prescribed period. The certifications serve as tools Governance.5 In the case under consideration, a delay of more than forty (40) days We agree with the CFD. As a registered issuer of securities, Casino Espanol is

in the submission of the certifications is tantamount to a violation of' Casino Espanol's Manual of Corporate Governance, and shows a lapse in the internal control system of the company.

As for the second ground, petitioner submits that as a non-stock, non-profit company, its operating funds are limited to the monthly dues paid by its members. Its audited financial statements will also show that the corporation has been losing since the start of its operations under the new ownership structure. Moreover, the imposed penalty is disproportionate to the mistake committed.

Suffice to say that the penalties meted out are within the allowabie limit that may be imposed by the Commission pursuant to the SRC, to wit:

and hearing, the Commission finds that: xxx (c) Any registrant or other state any material fact required to be stated therein or necessary to make the sanctions as may be appropriate in light of the facts and circumstances: accounts, records or documents required by law or rules to be filed with the Commission, :made any untrue statement of a material fact, or omitted to statements therein not misleading; xxx impose any or all of the following person has, in a registration statement or in other reports, applications "SECTION 54. Administrative Sanctions. --- 54.1. If, after due notice

XXX

than One million pesos .(P1,000,000.00) plus not more than Two thousand pesos (P2,000.00) for each day of continuing violation; xxx" (ii) A fine of no less than Ten thousand pesos (P10,000.00) nor more

imposed against Casino Espanol is inappropriate or disproportionate to its infraction. reporting obligation and to deter non-submission or late filing of reports and certifications by covered companies. Thus, it is incorrect to say that the penalty The range of penalties ' is designed to ensure strict compliance with the

The CFD noted, however, that Casino Espanol has been realizing net losses for the previous years as follows:

September 2009 Year 2008 Net Income (Loss) Php(8,165,105.00) (7,312,655.00)

5 Now the "Revised Code of Corporate Governance. 4 Casino's Manual of Corporate Governance was submitted with the Commission on 28 June 2002.

In the Matter of Casino Espaniol De Cebu, Inc. SEC En Baric Case No. 01-10-194, Page 4 of 4 Casino Espafiol De Cebu, Inc., Petitioner

2007 2006 (10,081,631.00) (9,216,392.00)

Considering its financial losses for the previous years, Casino Espanol may be given a fifty percent (50%) reduction of the assessed penalty.

WHEREFORE, the appeal is partially GRANTED. The assessed penalty in the amount of ONE HUNDRED`FIVE THOUSAND PESOS (Php105,000.00) is hereby reduced to FIFTY-TWO THOUSAND FIVE HUNDRED PESOS (Php52,500.00). Consequently, Casino Espanol De Cebu, Inc. is hereby directed to pay the reduced fine within ten (10) days from receipt of this Decision. Failure to settle the obligation of the company will merit a stiffer penalty.

SO ORDERED

Mandaluyong City, 04 March 2010.

EE B. BARIN 23.8 Chairperson

9ula Ga

MA. JUANITA E. CUE#O Commis issioner RAUL J. PALABRICA Commissioner

A

MANueL HUBeRTO B. GaIte Commissioner EVADIO M JALA Commissioner

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