Rules of Practice and Procedure Before the Prosecution and Enforcement Department (PED), Securities and Exchange Commission

April 10, 1990 RULES OF PRACTICE AND PROCEDURE BEFORE THE PROSECUTION AND ENFORCEMENT DEPARTMENT (PED), SECURITIES AND EXCHANGE COMMISSION Pursuant to the provisions of Presidential Decree No. 902-A, as amended by Presidential Decree No. 1758, the following rules on the practice and procedure before the Prosecution and Enforcement Department of the Securities and Exchange Commission are hereby adopted and promulgated. RULE I Title SECTION 1. Title . These rules shall be known as the Rules of Practice and Procedure Before the Prosecution and Enforcement Department of the Securities and Exchange Commission. SECTION 2. Applicability . These rules shall apply to all matters brought before the Prosecution and Enforcement Department of the Securities and Exchange Commission herein referred to as the "PED"; in the exercise of the powers and functions under Presidential Decree No. 902-A, as amended by Presidential Decree No. 1758. SECTION 3. Construction . These rules shall be liberally construed in order to promote public interest and to assist the parties in obtaining just, speedy and inexpensive determination of every action brought before the Prosecution and Enforcement Department. Formal requirements may not affect the intrinsic validity of the proceedings, provided that the information and facts alleged therein are clearly indicated for the judicious disposition of the case. SECTION 4. Nature of Proceedings . Subject to the requirements of due process, proceedings before the "PED" shall be summary in nature not necessarily adhering to or following the technical rules of evidence obtaining in the courts of law. The Rules of Court may apply in said proceedings in suppletory character whenever practicable. SECTION 5. Prohibited Pleadings and Motions . The following pleadings, motions, petition shall not be allowed: a. Motion to Dismiss or Quash; b. Motion for a Bill of Particulars; c. Motion for Reconsideration and/or Reopening of Hearing; d. Motion for Extension of time to file Pleadings, affidavits or any other paper when intended to cause delay ; e. Petition for certiorari, mandamus , or prohibition against any interlocutory order issued by the Hearing Officer; f. Dilatory Motions for Postponement. SECTION 6. Verification of Pleadings . All pleadings filed under these rules must be verified. RULE II Authority Of The Prosecution And Enforcement Department SECTION 1. Authority of the Prosecution and Enforcement Department . Pursuant to Presidential Decree No. 902-A, as amended by Presidential Decree No. 1758, the Prosecution and Enforcement Department is primarily charged with the following: a. Receives complaints on violations of laws enforced by the Commission and the rules and regulations promulgated pursuant thereto; b. Initiates proper investigation of corporations and partnerships or persons, their books, records and other properties and assets, involving their business transactions, in coordination with the operating department involved; c. Conducts investigations as well as gathers data from intelligence agencies of the government on the business background of officers and directors of corporations, stock brokers, dealers, salesmen, commodity future merchants, floor brokers, pool operators, advisors and such other persons involved in infraction of laws, decrees, rules and regulations being enforced and administered by the Commission; d. Reports and recommends appropriate actions and measures thereon; e. Files and prosecutes civil or criminal cases before the Commission and other courts of justice involving violations of laws and decrees enforced by the Commission and the rules and regulations promulgated thereunder; f. Prosecutes erring directors, officers and stockholders of corporations and partnerships, commercial paper issuers or persons in accordance with the pertinent rules on procedures; g. Issues subpoena duces tecum and summons witnesses to appear in any proceedings of the Department; h. Suspends or revokes, after proper notice and hearing in accordance with these Rules, the franchise or certificate of registration of corporations, partnerships or associations, upon any of the following grounds: 1. Fraud in procuring its certificate of registration; 2. Serious misrepresentation as to what the corporation can do or is doing to the great prejudice of or damage to the general public; prcd 3. Refusal to comply or defiance of any lawful order of the Commission restraining commission of acts which would amount to a grave violation of its franchise; i. Coordinates with and aids other government agencies in the effective prosecution of cases wherein coordinated efforts are called for. j. Imposes charges, fines and fees, which by law, it is authorized to collect; k. Exercises such other powers as may be implied, necessary or incidental to the carrying out of the express powers granted to the Prosecution and Enforcement Department or to achieve the objective and purposes of the Rules. RULE III Parties SECTION 1. Complaint and Respondent . In all cases filed with the Commission, or with the "PED", the party initiating the action shall be called the complainant and the party/entity against whom an action is made shall be called the respondent. RULE IV Commencement Of Action SECTION 1. Caption and Title . In all complaints filed with the Commission, the full name of all parties, as far as they are known, shall be stated in the caption, motion, resolution, or order and in all summons, notices and processes to be served upon them. If the action is initiated by any other person other than the "PED", the caption shall be as follows : Republic of the Philippines SECURITIES AND EXCHANGE COMMISSION Prosecution and Enforcement Department SEC Bldg., EDSA, Greenhills Mandaluyong, Metro Manila ______________________ PED CASE NO. _____ Complainant -versus- For: _______________ (State the nature of action) ______________________ Respondent/s SECTION 2. When Action is Deemed Commenced . An action is deemed commenced upon the filing of a verified complaint/affidavit in accordance with these Rules or on the basis of a referral indorsement from other Departments of the Commission or other government agencies. SECTION 3. Form and contents of Complaint . For purposes of seeking criminal prosecution, the complaint shall be in writing, under oath and drawn in clear and concise language, specifying the names and addresses of complainant/s, respondent/s and witnesses, if any. It shall state the ultimate facts constituting the cause of action or specific violation of law or rules and regulations as well as information pertinent thereto. It shall also specify the remedies/relief sought. SECTION 4. Docket Numbers and Calendar of Cases . All cases cognizable by the "PED" shall be numbered and docketed consecutively and entered into an appropriate docket book. Corresponding code numbers and/or abbreviations may be used for ready reference. SECTION 5. Effect of withdrawal of Complaint . The withdrawal of a complaint shall not have the effect of automatically dismissing it or terminating the proceedings thereon. The PED may motu proprio continue the same if it deems it necessary in the interest of public welfare. SECTION 6. Summons and Notice of Hearing . Upon docketing of the complaint, the PED shall issue summons requiring respondent/s to file its Answer/Counter-Affidavit within fifteen (15) days from receipt thereof, and to appear for preliminary conference/hearing on the date specified thereon, copy furnished the complainant. Copy of the complaint shall be sent to the respondent together with the summons. LLjur SECTION 7. Contents of Summons . The summons shall be addressed to the respondent/s and shall contain the following: a. The names and address of the parties to the action; b. The date, nature and place of proceedings; c. Directive that respondent/s answer the complaint within fifteen (15) days from receipt of summons together with a copy of the complaint. SECTION 8. To Whom Addressed . Summons shall be addressed to the Manager or managing head or any responsible official thereof if the respondent is a partnership or association; or to anyone of the following: to the Corporate President, General Manager, Treasurer, Secretary, Cashier, Agent or any of the directors of the corporation if the respondent is a corporation. SECTION 9. Service of Summons, Writs and Process . All summons, writs and processes shall be served either by registered mail or personally to the complainant and the respondent/s and any interested party prior to the proceedings. Personal services of summons shall be made by handing a copy thereof to the respondent in person or to his authorized representative or, if the latter refuses it, by tendering it in his presence, provided that where a party is represented by counsel or authorized representative, service shall be made on the latter. SECTION 10. Service of Summon To An Unknown Respondent . Whenever the address of a respondent is unknown and cannot be ascertained by diligent inquiry, service may, by leave of the PED, be effected upon him by publication in a newspaper of general circulation and in such places and for such time as the PED may order in which case copy of the summons and order of the Commission shall be sent by registered mail to the last known address of the respondent. Charges and fees for said publication shall be borne by complainant or the interested party. SECTION 11. Default . Should the respondent fail to answer the complaint within the reglementary period as provided for in the summons, he shall be declared in default and the PED shall proceed with the hearing ex parte, and shall decide the case on the evidence presented. However, respondent who filed his answer but failed to appear in person or by counsel on the preliminary hearing shall be declared as in default and the proceedings shall proceed ex parte. RULE V Proceedings Before The Designated Hearing Officer SECTION 1. Hearing Officer, Meaning . For purposes of this Rule, a Hearing Officer is one designated to carry on certain business of the Commission, as authority to investigate possible violations of laws enforced by the Commission and the rules and regulations promulgated pursuant thereto; files and prosecutes civil or criminal cases before the Commission or other courts of civil or criminal violations of the statutes administered by the SEC and its rules and regulations; coordinates with and aids other government agencies in the effective prosecution of other cases wherein coordinated efforts are called for; and enforces all SEC laws by prosecuting erring corporations, partnerships and associations in accordance with the pertinent rules on procedures. SECTION 2. Powers of the Hearing Officer . The Hearing Officer shall have the following powers: 1. To hear and decide cases brought before the Commission consistent with these Rules and exercise full and active control of the proceedings at any stage thereof; 2. To issue subpoena and subpoena duces tecum or other legal processes; 3. To hear and resolve all motions; 4. To cite and/or declare any person in direct or indirect contempt in accordance with pertinent provisions of the Rules of Court. 5. To recommend the issuance of a Cease and Desist Order or other appropriate incidental orders. SECTION 3. Preliminary Conference/Hearing . The PED or its duly authorized officer shall, not later than twenty (20) days after the answer is filed, conduct a preliminary conference/hearing of the case during which the parties if they so desire, and their respective counsels shall be present for the purpose of considering the following: a. The simplification of issues and stipulation of facts and admissions of documents; b. The number and names of witnesses and a brief statement of their testimony; and c. Such other matters as may aid in the prompt disposition of the case. SECTION 4. Amicable Settlement . Amicable settlement of a case between the complainant and the respondent/s shall not bind the Commission, and, if there is prima facie violation of the law and/or its implementing rules and regulations, the legal action against the respondent will proceed. SECTION 5. Submission of Documents . During the preliminary conference/hearing, or immediately thereafter, the Hearing Officer may require the parties to simultaneously submit their respective verified position papers accompanied by all supporting documents and the affidavits of their witnesses, if any which shall take the place of their direct testimony. The parties shall furnish each other with copies of the position papers together with the supporting affidavits and documents submitted by them. SECTION 6. Determination of necessity of hearing . Immediately after the submission by the parties of their position papers and supporting documents, the Hearing Officer shall determine whether there is a need for a formal hearing. At this stage, he may, in his discretion, and for the purpose of making such determination, elicit pertinent facts or information, including documentary evidence, if any, from any party or witness to complete, as far as possible, the facts of the case. Facts or information so elicited may serve as basis for his clarification or simplification of the issues in the case. Admissions and stipulation of facts to abbreviate the proceedings shall be encouraged. cdll SECTION 7. Disposition of Case . If the Hearing Officer finds no necessity of further hearing after the parties have submitted their position papers and supporting documents, he shall so inform the parties stating the reasons therefor and shall ask them to acknowledge the fact that they were so informed by signing the minutes of the hearing and the case shall be deemed submitted for resolution. SECTION 8. Order of Investigation . The parties shall be afforded an opportunity to be present but without the right to examine or cross-examine. If the parties so desire, they may submit questions to the Hearing Officer which the latter may propound to the parties or witnesses concerned. SECTION 9. Postponement . Motion for postponement shall be filed three (3) days prior to the scheduled hearing, copy furnished/served on the adverse party by the movant, if any, except motion for continuance made in the presence of the adverse party, or those made in the course of hearing. Postponement shall be granted only in clearly meritorious cases like illness of a party or counsel. dctai SECTION 10. Admission of Evidence . The Hearing Officer shall admit all evidence relevant or material to the case. The testimonies of witnesses and manifestations of parties during the hearing shall be duly recorded. In case of doubt, he shall admit all the evidence presented, subject to the objections interposed, if there be any. All documents forming part of the records of the case and material to the issues of the case, whether marked as exhibits or not, shall be deemed admitted as evidence and may be considered in the resolution of the case. SECTION 11. Marking of Exhibits . All exhibits shall be properly and consecutively marked by alphabetical letters if presented by the complainant and by arabic numbers if presented by the respondents. All evidences introduced in the hearing shall be attached to the records of the case. SECTION 12. Submission of Memoranda . The Hearing Officer may allow the parties to submit their memoranda and/or position papers not later than ten (10) days from the submission of the case for resolution. RULE VI Orders And Resolutions SECTION 1. Order or Resolution . Upon submission of the case for resolution, the Hearing Officer shall issue the corresponding order or resolution as the final consideration upon the matters submitted to it within thirty (30) days. SECTION 2. Finality of the Order or Resolution . Any order or resolution of the hearing officer, in the absence of appeal therefrom, shall become final and executory thirty (30) days from the date of receipt thereof. RULE VII Contempt SECTION 1. Direct Contempt . The duly designated Hearing Officer may summarily punish for contempt any person committing misconduct in the presence of the Hearing Officer, or so near to him as to seriously interrupt any hearing or any proceedings, or being present at a hearing or investigation, refuses to be sworn as a witness or to answer questions when lawfully required to do so. The Hearing Officer may require the Sheriff or other police agencies of the locality where the hearing or investigation is conducted, to assist in the enforcement of this action. SECTION 2. Indirect Contempt . Any person who shall fail or refuse to comply with the promulgated decision, order or writ of the Commission without justifiable cause or any duly designated Hearing Officer after being required to do so, shall be punished for contempt. RULE VIII Subpoena And Subpoena Duces Tecum SECTION 1. When to File . If the attendance of a witness or the production of documents clearly specified is necessary, any party may request the issuance of the necessary subpoena or subpoena duces tecum at least five (5) days prior to the scheduled hearing. RULE IX Appeals SECTION 1. Appeals from the Resolution, Ruling or Order of the Hearing Officer . Any decision, ruling or order of the PED or Hearing Officer may be appealed by the aggrieved party to the Commission sitting en banc within thirty (30) days after receipt by the appellant of notice of such resolution, ruling or order, in accordance with the provisions of Section 6 of P.D. No. 902-A, as amended. The aggrieved party may appeal the order, resolution or ruling of the Commission en banc to the Court of Appeals by petition for review in accordance with the pertinent provisions of the Rules of Court. SECTION 2. Immediate Execution or Resolutions Rulings or Orders . In all cases, the resolutions, rulings, or orders of the Commission shall be immediately executory notwithstanding the appeal unless the Court of Appeals itself directs otherwise. RULE X Effectivity SECTION 1. Effectivity . These rules shall take effect FIFTEEN (15) DAYS after publication in a newspaper of general circulation. cdll (SGD.) ROSARIO N. LOPEZ Chairman (SGD.) GONZALO T. SANTOS, JR. (SGD.) RODOLFO L. SAMARISTA Associate Commissioner Associate Commissioner (SGD.) ARMANDO Z. GONZALES (SGD.) MERLE O. MANUEL Associate Commissioner Associate Commissioner