In the Matter of BSMC Lending Investors Corporation

April 8, 2013 SEC ADMINISTRATIVE CASE NO. 11-12-163 IN THE MATTER OF BSMC LENDING INVESTORS CORPORATION ENFORCEMENT AND PROSECUTION DEPARTMENT , petitioner . ORDER Pending before this Commission is a Petition for Revocation of the Certificate of Incorporation filed by the Enforcement and Prosecution Department (hereinafter, EPD) on 25 October 2012 against the Respondent, BSMC Lending Investors Corporation (hereinafter, BSMC) for violation of Presidential Decree No. 902-A in relation to Republic Act No. 9474, "the Lending Company Regulation Act of 2007" (RA 9474). FACTS OF THE CASE BSMC is a domestic corporation duly organized and existing under Philippine laws with office address at No. 516 Shaw Boulevard, Mandaluyong City. The respondent-corporation obtained SEC Registration No. AS091-197790 issued on 08 November 1991 with its primary purpose as provided in its Articles of Incorporation as follows: "To extend or grant loans and other credit accommodation by way of lending directly to persons, entities, partnership or corporations; to act for itself or for others in negotiating, securing, arranging, or obtaining from third parties loans or credit accommodation without engaging in financing, insurance or pawnbroking business." aEIcHA On 03 August 2009, the Corporation Finance Department ("CFD") informed BSMC that the records of the Securities and Exchange Commission (hereinafter, the Commission) show that BSMC has failed to comply with the requirements under the Implementing Rules of R.A. No. 9474 as it was operating without the required Certificate of Authority (CA) from the Commission, as provided by law. 1 In its 03 August 2009 letter, 2 the CFD required BSMC to obtain the CA, however, the latter failed to do so. A subsequent Order requiring the same was issued by the CFD on 20 January 2010. Due to the continued failure of BSMC to obtain the required CA from the Commission, the CFD endorsed the said case to the EPD for appropriate action on 24 November 2010. The EPD, after its findings that BSMC was still operational, conducted a conference with the respondent-corporation on 30 May 2011, giving it until 20 June 2011 to obtain the CA. 3 BSMC informed the EPD on 21 June 2011 that it only needed the NBI clearance of two (2) of its directors before it may obtain the required CA. On 17 February 2012, another conference was held wherein BSMC was granted another month to secure the CA. 4 However, BSMC still failed to obtain the necessary CA from the Commission. On 04 April 2012, the Company Registration and Monitoring Department ("CRMD") issued a Certification upon request of the EPD, stating that, based on the records of the department, no CA has been issued to BSMC nor was there any pending application by BSMC for the issuance of the same. 5 BSMC requested several times for an extension of the period in which to comply with the said requirement, which were denied. CHaDIT On 18 July 2012, the EPD ordered the BSMC to pay the penalty of Fifty Thousand Pesos (P50,000.00) and again required the latter to obtain the CA from the Commission. 6 On 08 November 2012, the Commission issued Summonses to BSMC to file its Answer . BSMC filed its Answer on 28 November 2012 alleging compliance with the requirements of R.A. No. 9474: that it has also complied with the orders of the CRMD as discussed in a 06 November 2012 conference 7 with respondent corporation; namely, the submission of the Audited Financial Statements ending 31 December 2011 8 and Interim Financial Statements as of 31 October 2012, 9 and the clearances of the members of the board of directors and officers of BSMC with the NBI. 10 Moreover, the respondent-corporation stated that it had already paid on 03 October 2012 the amount of Fifty Thousand Pesos (Php50,000.00) assessed against it in the Payment Assessment Form 11 as evidenced by the Official Receipt 12 issued by the Commission. However, in its Reply dated 04 February 2013, the EPD correctly points out that "the mere allegation of respondent BSMC that it has in its possession of (sic) all the documents in full compliance with the necessary requirements for the issuance of CA does not ipso facto complete the processes or legal procedure for the conferment of CA." The EPD, once more, presented a Memorandum dated 21 January 2013 issued by the CRMD stating that BSMC does not have a pending application for the issuance of a CA with the Commission. DISCUSSION Under R.A. No. 9474, all companies engaged in lending activities must obtain a CA from the Commission to continue their operations. 13 Both the CFD and EPD repeatedly required respondent BSMC to obtain the required CA, however, the BSMC failed to do so thereby rendering its lending activities outside the bounds of law for lack of the requisite authorization from the Commission. AHCETa Thus, the EPD argues herein that such failure to comply with both the law and the Orders of the CFD and EPD is tantamount to an unreasonable refusal to comply with or defiance of the lawful orders of the Commission, which necessitates the revocation of the Certificate of Incorporation of BSMC pursuant to Section 6 (l) (3) 14 of P.D. No. 902-A. We agree. Considering that, based on the records, the respondent BSMC has up to the present failed to secure a CA from the Commission and, in fact, has not submitted any application for the issuance of the same, the Commission is constrained to resolve the present petition against the respondent. WHEREFORE, the instant Petition is hereby GRANTED. The Certificate of Registration of the respondent BSMC LENDING INVESTORS CORPORATION is hereby REVOKED. SO ORDERED. Mandaluyong City, April 4, 2013. ** (SGD.) TERESITA J. HERBOSA Chairperson (SGD.) MA. JUANITA E. CUETO Commissioner on official leave MANUEL HUBERTO B. GAITE Commissioner on official leave ELADIO M. JALA Commissioner (SGD.) ANTONIETA F. IBE Commissioner Footnotes 1. Annex "C" of the Enforcement and Prosecution Department's Petition for Revocation of Certificate of Incorporation dated 25 October 2012 (EPD's Petition ). 2. Ibid. , Annex "D ", EPD's Petition . 3. Annex "F-1", EPD's Petition . 4. Annex "F", EPD's Petition . 5. Annexes "G" and "G-1" of EPD's Petition . 6. Annex "H" of EPD's Petition . 7. Annex "5" of BSMC's Answer . 8. Annex "6" of BSMC's Answer . 9. Annex "7" of BSMC's Answer . 10. Annexes "10", "11", "12", "13", "14" and "15" of BSMC's Answer . 11. Annex "16" of BSMC's Answer . 12. Annex "17" of BSMC's Answer. 13. "SEC. 4. Form of Organization. A lending company shall be established only as a corporation: Provided That existing lending investors organized as single proprietorships or partnerships shall be disallowed from engaging in the business of granting loans to the public one year after the date of effectivity of this Act. No lending company shall conduct business unless granted an authority to operate by the SEC." 14. "Sec. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers: xxx xxx xxx (l) To suspend, or revoke, after proper notice and hearing, the franchise or certificate of registration of corporations, partnerships or associations, upon any of the grounds provided by law, including the following: xxx xxx xxx [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; xxx xxx xxx." ** Presented and signed by the Commission En Banc on 08 April 2013.