The Court of Appeals (CA) has upheld the Securities and Exchange Commission’s issuance of a cease and desist order against Planpromatrix Online Co. to bar it from soliciting investments from the public without the necessary license.
In its decision, the CA Special 10th Division affirmed the SEC’s order against Planpromatrix for perpetrating fraud and causing grave injury to the investing public.
The Commission En Banc issued the CDO against Planpromatrix on July 16, 2019, after finding that the partnership offered and sold to the public securities in the form of investment contracts under the guise of an electronic loading business, without first securing the requisite license from the SEC.
The investment scheme involved the solicitation of investments of P600 to P1,850 from the public, from which one can supposedly earn through an e-loading business, data entry job, and advertising package.
Planpromatrix filed a motion to lift the CDO, but the SEC denied the motion and declared the order permanent in a resolution dated November 11, 2019.
Subsequently, Planpromatrix filed a petition for review before the CA, assailing the validity of the CDO and resolution issued by the SEC, as well as the finding of the Commission that the partnership’s operations required a secondary license and registration statement, among others.
“[T]here is wisdom in the issuance and continuance of the CDO against petitioner,” the CA held, as it affirmed the findings of the SEC that the business activities of Planpromatrix involved the offer for sale of regulated securities.
Thus, this activities required a secondary license and registration statement pursuant to Sections 8 and 12 of Republic Act No. 8799, or The Securities Regulation Code (SRC).
The SEC found that the business activities of Planpromatrix were in the nature of an investment contract, where there is placement of money in a common enterprise with an expectation of profits derived primarily through the effort of others.
The CA took note of the implied admission made by Planpromatrix President and Chief Executive Officer George Naval, who did not dispute the contents of the advisory issued by the SEC on February 9, 2018 during a meeting with the Commission’s Enforcement and Investor Protection Department (EIPD) on February 13, 2018.
“There can be no debate on the authority of the SEC to issue the subject CDO, provided that the conditions therefor, i.e., that fraud has been perpetrated and grave injury is likely to be caused to the public, are extant,” the CA further noted.
The court cited Section 64.1 of the SRC, which provides that “[t]he Commission, after proper investigation or verification, motu proprio or upon verified complaint by any aggrieved party, may issue a cease and desist order without the necessity of a prior hearing if in its judgment the act or practice, unless restrained, will operate as a fraud on investors or is otherwise likely to cause grave or irreparable injury or prejudice to the investing public.”
The CA noted that the SEC issued the CDO only after receiving complaints against Planpromatrix and conducting an investigation into the partnership’s activities.
The SEC Markets and Securities Regulation Department, Corporate Governance and Finance Department, and Company Registration and Monitoring Department issued certifications that Planpromatrix had neither a secondary license to solicit investments from the public nor the requisite registration statement.
An investigation conducted by the EIPD, together with the SEC Legazpi Extension Office, also revealed that PPM did not have the required business permit.
“Those considerations and their supporting documents muster more than a mere scintilla of proof, and satisfy the required substantial evidence of fraud and grave injury committed against the investing public which are precisely the conditions sine qua non for the issuance by the SEC of the subject ex-parte CDO,” the CA held.
Accordingly, the appellate court ruled that the SEC did not violate due process with the issuance of the CDO, noting the order was not permanent or final and could have been refuted by evidence.
“[T]he subject CDO was not cast in stone that its efficacy and application are beyond challenge… Petitioner had the opportunity to cause the recall of the CDO; it availed of the opportunity; and with that, it was accorded due process,” the CA further noted.