SEC Adm. Case No. 08-07-111 Clearwater Country Club, Inc.

Department of Trade and Industry Secu. ities and Exchange Commissivn

SEC Bldg. EDSA, Greenhills, Mandaluyong City

IN THE MATTER OF:

SEC EN BANC CASE NO. 08-07-111 For: Review of CFD's Imposition of CLEARWATER COUNTRY CLUB. INC. Penalty for Violation of Section 54 of the SRC

DECISION

For consideration is the: Appeal dated 8 August 2007 filed by Clearwater Country Club, Inc. C'appellant", for brevity) on 16 August 2007 from the imposition by our Corporation Finance Department ('CFD") of penalty for appellant's violation of Section 54 of the Securities Regulation Code ('SRC')1.

The facts are:

On 6 February 2007, CFD issued a letter ('show-cause letter'2 to appellant directing the company to show cause why it should not be held liable under Section 54 of the SRC for failure to submit the 'required sworn certifications on the attendance of its directors during its 2006 Board meetings and on the extent of its compliance with its Manual on Corporate Governance ('Manual'.

In its 20 February 2007 letter-response to the show-cause letter, appellant alleged that its failure to file the certification on the extent of its compliance with the Manual was neither willful nor deliberate. It explained that its Compliance Officer, who was also its Vice-President for Corporate Affairs, gave birth by caesarian section on 21 December 2006 and that her maternity leave lasted for a period of sixty (60) days, or until 20 February 2007. It averred that as of 31 January 2007, the deadline for compliance, its compliance officer was not yet in a perfect condition to do her regular tasks.

On 13 March 2007, CFD, finding the above explanation to be unmeritorious. assessed appellant and directed it to pay the total penalty of One Hundred Six Thousand Five Hundred Pesos (P106,500.00), considering that this was already appellant's 2nd violation of the same 'requirements. The breakdown of such total penalty is as follows:

'Republic Act No. 8799 (2000).

In the Matter of: Clearwater Cou Club, inc. SEC En Banc Case No. 08-07-111 Page 5 of 5

Nature Penalty No. of Days Late Amount

[of directors during 2006:boardl meetings. Certification on the attendance P500.00 per day P25.000.00 plus of delay 7 P61,000.00

Certification on the extent compliance with Manual Of of P25.000.00 plus P500.00 per day 4 P45.500.00

Corporate Governancel of delay

Total P106.500.00

reconsideration of the 13 March 2007 assessment. It put in issue the computation Appellant then filed with the CFD a letter dated 12 April 2007 requesting a

made by CFD and essentially questioned the ruling as to the number of days late, on the ground that it had filed the certifications earlier than what the CFD found. Aside from reiterating its earlier explanation(s), i.e. that the omission was neither

huge penalties imposed on it "2 intentional nor deliberate and that the same was due to its Compliance Officer's maternity leave, appellant likewise invoked its "virtual incapacity to shoulder the

read: On 30 April 2007, CFD issued a letter-ruling, the pertinent portions of which

a reconsideration of the assessed penalties. Reporting companies are strictly mandated to comply with their reportorial obligations and with the representations contained in their respective . Manuals on Corporate Governance. "Please be informed that we find no justifiable reason to warrant

February 21, 2007, the assessed penalties are recomputed as follows: However, in view of the company's filing of said certifications on

Certification on the attendance of directors during 2006 board meetings Nature P25.000.00 plus P500.00 per day of delay Penaity No. of Days Late 52 P51,000 Amount

ICorporate Governance Certification on the :extent compliance with Manual Of Of P25,000.00 plus P500.00 per day of delay 2 35.500

Total P86.500

(5) business days from receipt of this letter, by way of cash or Manager's The company is directed to pay the aforesaid penalty within five

Appellant's ietter to CFD dated 12 April 2007, Annex "D" of , the Appeal.

In the Matter of: Clearwater Co: Club, Inc. SEC En Banc Case No, 08-07-111 Page 5 of 5

check. Otherwise, the matter shall be referred to our Legal officer for appropriate action."

Hence, this Appeal

SEc Memorandum Circular No. 2, Series of 20o2, or the Code of Corporate

registered or listed, corporations which are grantees of permits/licenses and secondary franchises from the Commission and public companies. Governance ('the Code"), which was the governing rule at the time of subject develop the capital market and help achieve high sustained growth for the corporate sector and the economy. It is applicable to corporations whose securities are violation, was promulgated by the Commission to impiement the State's policy of actively .promoting corporate governance reforms aimed to raise investor confidence,

company's business.4 its compliance with the Code taking into account the size and nature of the governance rules and principles in accordance with the Code. Said rules shall be in manual form, to be submitted to the Commission, which shall evaluate the same and Every covered corporation is mandated to promulgate and adopt its corporate

its Manual5 on 2 August 2002, with its Board of Directors and Management committing themselves to the principles and best practices contained in said Manual. Without question, appellant is a covered corporation. Accordingly, it submitted

to the attendance of the directors during Board meetings." Compliance Officer who is duty bound to, among others, "issue a certification every January 30h of the year on the extent of the corporation's compliance with this "submit to the Commission, at, the end of every fiscal year, an annual certification as Manual for the completed year, explaining the reason/s of the latter's deviation from the same." As to appellant's Corporate Secretary, he is required by the Manual to Under the Manual, appellant's Chairman of the Board shall designate a

administrative sanctions for violation(s) of the SRc, its rules or its orders, one of which sanctions is a " fine of no less than Ten thousand pesos (P10,000.00) nor more than One million pesos (P1,000.000.00) plus not more than Two thousand pesos (P2,000.00) for each day of continuing violation: Section 54 of the SRC gives authority to the Commission to impose

Series of 2009, or the Revised Code of Corporate Governance 3sEC Memorandum Circular No. 2, Series of 2002. This was amended by SEC Memorandum Circuiar No. 6, 'Amended in 2008 by the filing of appellant's Amended Manual on Corporate Governance on 29 February Article VIHI, SEC Memorandum Circular No. 2, Series of 2002. 2008 'Section II(A)(2), the Manual 'Section 54, SRC. 7Section II(B)(3), the Manuai.

SEC En Banc Case No. 08-07-111 In the Matter of: Clearwater Coi Club, Iinc.

Page 5 of 5

Under SEC Memorandum Circular No. 6, Series of 2005, or the Consolidated Scale of Fines, failure to submit any of the certifications on corporate governance which were represented to be submitted is a violation of Section 54 of the SRC, the second offense for which has the corresponding penalty of "P25,000 plus P500 per day of violation."

In the instant Appeal, appellant no ionger disputes the computation of the penalty -but rehashes. instead the arguments it raised before, and found unmeritorious, by the CFD.

We see no cogent reason to disturb CFD's findings.

As admitted by appellant, the maternity leave of its Compliance Officer lasted for a period of sixty (60) days from 21 December 2006, or until 20 February 2007.10 We note, however, that the date 21 December 2006 was already practically at the tail-end of appellant's fiscai year (which ends December 31) and was so near in point of time to 30 January 2007, the deadline for submission of the certification on the extent of its compliance with its Manuat. At such date, the Compliance Officer could be reasonably expected to aiready have an idea or estimation of the extent of the company's compliance with its Manual such that the issuance of the certification would then be only a formality, to be accomplished in just a matter of time. The

was actually or approximately due for birt violation by preparing the groundwork and Compliance Officer and appellant knew, 1 shouid have known, when such officer and that said, could have avoided the guirement earlier, especially in view of the fact that December 21, as earlier r intimated, was already practically the end of the year to be evaluated. Further, appellant, cognizant of the situation, ought. to have taken contingency plans, such as the designation of an assistant to, or a

such officer during her leave of absence.12 In short, it was incumbent upon appellant temporary successor of, the Compliance Officer who would perform the duties of to have a system or mechanism for succession and continuity.1

That the omission was neither intentional nor deliberate is of no moment. Good faith or bad faith hardiy comes into the picture in the enforcement of simpie rules mandating submission of reportorial requirements. To allow legal notions to intrude at every. level in the implementation of these rules would defeat their very purpose, as every penalty could be subject to question and every violation based on

11This expectation is reasonable, considering that it is the core function of the Compliance Officer to monitor Corporate Governance mandates that the Board shall appoint a Compliance Officer who shall have the rank of 12Under the Manual, the Board is expected to "identify key risk areas and key performance indicators and Management." {Article 3(F)(2)(a), the Code]. In this connection, Articie 3(F)(2)(m) of the Revised Code of PPage 5, Consolidated Scale of Fines compliance with the provisions and requirements of the Manua! vice president and that in the absence of such appointment, the Corporate Secretary, preferably a lawyer, shall monitor these factors with due diligence. 13Under the Code, it is the Board's responsibility to "adopt an effective succession planning program for act as Compliance Officer "Appeilant's ietter to CFD dated 20 February 2007.

In the Matter of: Clearwater Cou Club, Iinc. SEC En B anc Case No. 08-07-111 Page 5 of 5

faith, or the question of motive or intent.1 Hence, negligence in complying with the a clear-cut rule would be qualified by the presence or absence of good faith or bad

requirements is enough to warrant imposition of penalties.

We likewise concur with the CFD that the alleged dire financial condition of appellant is not per se sufficient reason to either erase or reduce the penalty. Strict compliance with the Commission's rules cannot and shouid not be made to depend on the financial status of the covered corporation, especially if the company, its Board and its management clearly failed, as in this case, to exercise the necessary due diligence, the very principle of good corporate governance. To hold otherwise would be to encourage every covered corporation in actuai or perceived financial distress to flout or simply disregard the rules, to the detriment of the investing public, knowing that such a defense would be available to it.

WHEREFORE, premises considered, instant Appeal is hereby DISMISSED The total penalty of Eighty-Six Thousand Five Hundred Pesos (P86,500.00) is hereby imposed upon Clearwater Country Club, Inc: for its failure to timely file, in violation of Section 54 of the Securities Regulation Code, the reguired sworn certifications on the attendance of its directors during its 2006 Board meetings and on the extent of its compliance with its Manual on Corporate Governance for the year 2006, to be paid within: ten (10) days from receipt hereof. The corporation is hereby admonished that a repetition of the same or similar offenses in the future will be dealt with more severely.

SO ORDERED.

Mandaluyong City, 25 March 2010

- B.BARIN

2 hairperson

MA. JUANITA E. CUET: Commissi ne RAUL J. PALABRICA Comrissioner

N

ManueI Commissioner ERTO B. GAITE ElAdIO M. JAlA Commissioner

14Decision dated 13 July 2006 in SEC En Banc Case No. 04-04-13 (In the Matter of: A. Brown Company. Inc.)