Union Bank v. SEC [June 6, 2001]

Facts:

·         Union Bank sought the opinion of SEC as to the applicability and coverage of the Full Material Disclosure Rule on banks, contending that said rules, in effect, amend Section 5 (a) (3) of the Revised Securities Act which exempts securities issued or guaranteed by banking institutions from the registration requirement.

·         Because its securities are exempt from the registration requirements under Section 5(a)(3) of the Revised Securities Act, petitioner argues that it is not covered by RSA Implementing Rulels:

o    Rule 11(a)-1, which requires the filing of annual, quarterly, current predecessor and successor reports;

o    Rule 34(a)-1, which mandates the filing of proxy statements and forms of proxy;

o    Rule 34(c)-1, which obligates the submission of information statements.

·         SEC’s reply: While the requirements of registration do not apply to securities of banks, banks with a class of securities listed for trading on the Philippine Stock Exchange, Inc. are covered by certain Revised Securities Act Rules governing the filing of various reports.

·         Unionbank was fined for failure for failure to file SEC Form 11-A.

·         CA affirmed the decision of SEC. #fluffypeaches

Issues:

·         WON the RSA Implementing Rules 11(a)-1, 34(a)-1 and 34(c)-1 applies to Union Bank (YES)

Ruling:

·         NO, petitioner is not exempted from the RSA implementing rules.

·         Section 5(a)(3) of RSA exempts from registration the securities issued by banking or financial institutions.  Nowhere does it state or even imply that petitioner, as a listed corporation, is exempt from complying with the reports required by the assailed RSA Implementing Rules.  

·         The exemption from the registration requirement enjoyed by petitioner does not necessarily connote that [it is] exempted from the other reportorial requirements.  

·         The full disclosure Rules do not amend Section 5(a)(3) of the Revised Securities Act, because they do not revoke or amend the exemption from registration of the securities enumerated. They are reasonable regulations imposed upon petitioner as a banking corporation trading its securities in the stock market. #fluffypeaches

·         The mere fact that in regard to its banking functions, petitioner is already subject to the supervision of the BSP does not exempt the former from reasonable disclosure regulations issued by the SEC.  These regulations are meant to assure full, fair and accurate disclosure of information for the protection of investors in the stock market.  Imposing such regulations is a function within the jurisdiction of the SEC.