Philippines: 14 Years Later, SEC Insider Trading Investigation Reinstated

Think the judicial system in your country is moving too slowly?  The Supreme Court in the Philippines has remanded to that country’s Securities and Exchange Commission an insider-trading case related to a stock swap deal for a power generation venture in 1994.  The case had been appealed to the Supreme Court in 1998.

According to the Philippine News, the SEC started investigating certain Interport directors in 1995 for allegedly failing to disclose details of Interport’s stock swap deal with the Malaysian firm Ganda Holdings Berhad.  The SEC ordered the officers and directors of Interport to explain why they failed to disclose the details of their negotiations with Ganda while allegedly trading Interport shares in violation of the Revised Securities Act.

In 1995, the SEC had created a special panel to investigate the charges against the directors, but the company convinced the Court of Appeals to stop the investigation.  The Court of Appeals held in August 1998 that no civil, criminal or administrative action could be taken against the directors because there were no implementing rules governing the provisions of the Revised Securities Act, under which the company officials were being charged, according to the Philippine News.

The SEC appealed the decision, but it took 10 full years for the Supreme Court to finally reverse the appellate court’s decision and find “that no implementing rules were needed to render [provisions of the Revised Securities Act] effective.”

Associate Justice Dante Tinga said in a concurring opinion that

“it is heartening that our decision today affirms the viability for prosecutions against insider trading, an offense that assaults the integrity of our vital securities market….the arguments raised by [petitioners] essentially assail the validity of our laws against insider trading….“Since we deny certiorari and debunk the challenge, our ruling will embolden our securities regulators to investigate and prosecute insider-trading cases, thereby ensuring a more stable, mature and investor-friendly stock market.”