In the Matter of Southwaters Marina, Country Club and Farm, Inc.

January 19, 2012 SEC EN BANC CASE NO. 09-08-143 IN THE MATTER OF SOUTHWATERS MARINA, COUNTRY CLUB AND FARM, INC. (SEC REG. NO. A1997-15379) , appellant . FOR : Appeal DECISION For resolution of the Commission En Banc is a letter of appeal dated 29 September 2008 by SOUTHWATERS MARINA, COUNTRY CLUB AND FARM, INC. ("Appellant" for brevity) from the letter-ruling dated 25 June 2008 of the Commission's Corporation Finance Department ("CFD" for brevity), assessing a penalty on the appellant, and from another CFD letter-ruling dated 18 July 2008 denying appellant's request for waiver and reconsideration of the penalty assessed for late filing of Annual Report (SEC Form 17-A). HCDAcE The facts of the case are narrated below. Appellant is a stock corporation registered with the Commission on 17 September 1999. It was organized to construct, maintain and operate a clubhouse, marina, sports and other recreational facilities with the main objective of promoting the social, educational and athletic well-being of its stockholders and members. On 30 May 2008, the CFD issued a letter directing appellant to show cause why it should not be held liable for filing its Annual Report beyond the prescribed filing period. In its letter-reply dated 12 June 2008, appellant explained that the delay was due mainly to its oversight and not for any intention to evade its obligation. Appellant further explained that all along, it thought that it submitted its 2007 Annual Report together with its Audited Financial Statements ("AFS") on 30 April 2008. Later on, however, it discovered that the Annual Report was not attached to the AFS. Finding appellant's explanation without merit, the CFD issued an assessment letter dated 25 June 2008 imposing the penalty for late filing of the Annual Report in the amount of One Hundred Eighteen Thousand Pesos (Php118,000.00) against the appellant. In its 15 July 2008 letter, the appellant requested a waiver of the imposed penalty stating among others that the delay in filing its Annual Report was not intentional and the imposition of the fine would adversely affect its precarious financial condition. The CFD denied appellant's request for waiver of penalty in a letter dated 18 July 2008. In this letter, CFD directed the appellant to pay the assessed penalty within five (5) business days from receipt thereof. Instead of complying with the letter dated 18 July 2008 of the CFD, appellant filed another letter dated 30 July 2008 reiterating its request for a waiver of the penalty imposed against its late filing of annual report. The said letter was treated as an appeal of the CFD letters-rulings and was elevated to the Commission En Banc. In a letter dated 01 September 2008, the Commission Secretary required the appellant to file a Memorandum on Appeal and to pay the appropriate docket fee. Appellant responded with a letter dated 29 September 2008 which is now the matter for resolution. The issue now is whether there is a valid ground to grant the appeal for a waiver of penalty. IcSADC We deny the instant appeal. Section 17 of the Securities Regulation Code 1 ("SRC") mandates that: "Sec. 117. Periodic and Other Reports of Issuers. 17.1. Every issuer satisfying the requirements in Subsection 17.1 hereof shall file with the Commission: (a) Within one hundred thirty-five (135) days, after the end of the issuer's fiscal year, or such other time as the Commission may prescribe, an annual report which shall include, among others, a balance sheet, profit and loss statement and statement of cash flows, for such last fiscal year by an independent certified public accountant, and a management discussion and analysis of results of operations; . . ." The above-quoted provision was clarified in SRC Rule 17 of the Implementing Rules and Regulations, sub-paragraph 1 (A) (i) of which states: "A. Every issuer set forth in paragraph 1 hereof, shall file with the Commission: i. An annual report on SEC Form 17-A for the fiscal year in which the registration statement was rendered effective by the Commission, and for each fiscal year thereafter, within one hundred five (105) days after the end of the fiscal year. " (Emphasis supplied) SRC Rule 17 clarifies the obligation of the issuer to render a full, fair and accurate disclosure to the public of every material fact or event that occurs which would reasonably affect investors' decision in relation to securities. In other words, issuers are enjoined to comply strictly with the reportorial requirements to enable the investors to make an informed investment decision. Thus, in the instant case, appellant's oversight is not sufficient justification for the late filing of its Annual Report. Likewise, the allegation that appellant has not been earning since 1999 is not sufficient to condone the penalties imposed against it. It is incumbent upon the officers of the appellant to ensure that its reports are accurate and complete before they are submitted to the concerned agency, the Commission in this instance. Based on SRC Rule 17, the pertinent portion of which is quoted above, appellant had until 15 April 2008 to file its Annual Report. Appellant, however, filed its Annual Report only on 21 May 2008, or thirty-six (36) days beyond the prescribed period. In view thereof, an additional Five Hundred Pesos (Php500) fine for every day of delay, aside from the basic penalty of One Hundred Thousand Pesos (Php100,000.00), or a total of One Hundred Eighteen Thousand Pesos (Php118,000.00) shall be imposed against the appellant. DAEcIS WHEREFORE, the letters-rulings dated 25 June 2008 and 18 July 2008 issued by the Corporation Finance Department directing SOUTHWATERS MARINA, COUNTRY CLUB AND FARM, INC. to pay a fine are hereby AFFIRMED and the instant appeal is DENIED for lack of merit. Consequently, SOUTHWATERS MARINA, COUNTRY CLUB AND FARM, INC. is hereby directed to pay the assessed penalty for belatedly filing its Annual Report the amount of ONE HUNDRED EIGHTEEN THOUSAND PESOS (Php118,000.00), within ten (10) days from receipt of this Decision. SO ORDERED. Mandaluyong City, January 19, 2012. (SGD.) TERESITA J. HERBOSA Chairperson (SGD.) MA. JUANITA E. CUETO Commissioner (SGD.) RAUL J. PALABRICA Commissioner (SGD.) MANUEL HUBERTO B. GAITE Commissioner (SGD.) ELADIO M. JALA Commissioner Footnotes 1. Republic Act No. 8799 (2000).