MANILA - The Court of Appeals (CA) has cleared business tycoon Roberto V. Ongpin of insider trading charges involving Philex Mining shares in 2009.
In a 29-page decision, dated December 1, 2017, the appellate court, through its Former Special 13th Division, granted Ongpin's petition and reversed a ruling of the Securities and Exchange Commission (SEC) finding him liable for 174 counts of insider trading.
"[T]he decision dated July 8, 2016 of respondent (SEC), finding petitioner (Ongpin) liable for committing 174 counts of insider trading under Section 27.1 of the Securities Regulation Code is hereby reversed and set aside.
"The administrative charge against petitioner is accordingly dismissed," the decision, penned by Associate Justice Ma. Luisa Quijano-Padilla, read.
Ongpin went to the appellate court after the SEC, in its July 8, 2016 ruling, penalized him for alleged insider trading involving Philex Mining shares on Dec. 2, 2009. The SEC found Ongpin to have benefited and profited from insider or material non-public information, stemming from his purchase of additional Philex shares ahead of a Dec. 1, 2009 deal with Hong Kong-based First Pacific Co. Ltd. for the latter's buying into Philex.
The SEC fined Ongpin P174 million or P1-million for each count of insider trading.
Ongpin "was able to consolidate the required number of shares, supplementing his block of shares with the shares brought from the open market, sold them to the subsidiary of First Pacific at the privately agreed price of P21 per share, thereafter giving the First Pacific group control over Philex," SEC said.
Ongpin however maintained that the 3-year prescriptive period to charge him for the offense already lapsed.
The appellate court halted the implementation of the fine through a 60-day temporary restraining order (TRO) in favor of Ongpin, taking into consideration another penalty imposed by the corporate regulator disqualifying him from being an officer or member of the Board of Directors of any publicly listed firm.
The CA subsequently issued a writ of preliminary injunction (WPI) which stayed the implementation of the fine until the petition is resolved.
NO CLEAR AND INDIRECT INDICATION OF INSIDER TRADING
In its decision absolving Ongpin, the appellate court said the SEC's arguments, through the Office of the Solicitor General (OSG), did not merit a "clear and direct indication that there was indeed insider trading."
The SEC argued that the dip in Philex's price per share then from P19 on December 2, 2009 to P17.75, representing a 25.5% drop two days after the firm's sale to First Pacific, was an "unusual occurrence" or a "red flag," but the appellate court said the SEC failed to substantiate this conclusion vis a vis a "usual or regular" fluctuation in stock market prices.
"[T]he public disclosure of the December 2, 2009 sale in favor of First Pacific simply ended all aggressive speculation, and this inevitably led to the drop in the market price of Philex shares. Yet, all these incidents cannot be taken as clear and direct indication that there was indeed insider trading," the decision read.
As to the P174-million fine, the CA ruled "there is no legal basis" for the fine and it "went beyond the confines of the law."
"For insider trading violations, the SRC itself clearly provided for the minimum amount of fine which is P10,000 and the maximum amount which is P1,000,000 and the penalty to be imposed could not exceed that stated in the law."
Associate Justices Samuel Gaerlan and Marie Christine Azcarraga-Jacob concurred with the decision.