The Court of Appeals (CA) upheld the order of the Securities and Exchange Commission (SEC) revoking the certificate of incorporation of Kapa-Community Ministry International for its fraudulent investment-taking activities.
The CA Special 16th Division held that the SEC validly acquired exclusive jurisdiction over the petition for the revocation of KAPA’s incorporation, heard the petition with due process, and subsequently rendered the assailed decision upon solid ground and substantial evidence.
“The [SEC] has established by substantial evidence that [KAPA] was engaged in an unlawful investment activity,” the CA ruled, affirming the Commission’s finding that the supposed solicitation of donations by KAPA actually constituted a public offering of securities in the form of investment contracts.
As such, KAPA must have registered the investment contracts with the SEC and secured the corresponding permit to offer securities to the public, pursuant to Republic Act No. 8799, or the Securities Regulation Code.
The CA said KAPA Founder Joel Apolinario cannot deny that KAPA is engaged in any solicitation or investment scheme. “In one of the investigations of [the SEC], several platforms were used by [KAPA] in social media with Pastor Apolinario excessively talking about KAPA’s investment scheme and how to earn profits from it,” the CA noted.
Accordingly, the appellate court maintained that the revocation of KAPA’s certificate of incorporation was justified.
The CA dismissed KAPA’s claim that the SEC defied the temporary restraining order (TRO) from the Regional Trial Court of General Santos City, Branch 35 when it issued the order of revocation while the TRO was in force.
The SEC En Banc issued the order of revocation on April 3, 2019 after finding that KAPA had offered and sold securities in the form of investment contracts and in the guise of donations, without the necessary license from the SEC and in a manner resembling a Ponzi scheme.
Under Section 6 (i)(2) of Presidential Decree No. 902-A, the SEC can revoke an entity’s certificate of incorporation on the ground of “serious misrepresentation as to what the corporation can do or is doing to the great prejudice of or damage to the general public.”
Issued on March 19, 2019, the TRO enjoined the SEC from implementing the cease and desist order (CDO) issued against KAPA earlier on February 14, 2019.
The CA held that the issuance of the TRO lacked legal basis, as this interfered with the Commission’s exercise of powers and duties.
Section 179 of Republic Act No. 11232, or the Revised Corporation Code of the Philippines, states that no court below the CA shall have jurisdiction to issue a restraining order that directly or indirectly interferes with the exercise of the powers, duties, and responsibilities of the SEC that falls exclusively within its jurisdiction.
Further, the CA junked KAPA’s claim that the SEC violated its right to due process when it failed to consider the letters it sent prior to the implementation of the revocation order, and when it declared the CDO permanent without hearing KAPA’s side.
“It must be stressed that the SEC decision was not rendered merely to terminate the existence of petitioner as a religious institution but because it committed serious acts of misrepresentation to the prejudice of the general public by soliciting investments in the guise of a donation with a promise of a 30 percent return of profits every month,” the appellate court said.