Hon. Alberto G. Romulo

October 10, 1991 Hon. Alberto G. Romulo Chairman, Committee on Banks, Financial Institution and Currencies Senate, Manila S i r : This refers to your letter of September 5, 1991 requesting comments on P.S. Resolution No. 1251, entitled: "Resolution directing the Committee on Banks, Financial Institutions and Currencies to investigate, in aid of legislation, into the reported business operation of Century Bank, reputedly owned by the Philippine National Bank and doing business in California ,USA and its alleged merging with California Overseas Bank, an alleged government sequestered bank, with the end in view of determining whether it is necessary to continue its operation, and for other purposes".(Emphasis supplied) The primary jurisdiction of the Securities and Exchange Commission which is that of supervision and control over corporations, emanates from its authority to enforce and implement the Corporation Code. However, in cases where a government agency regulates the operation of a certain type of corporation by virtue of a special law, that agency has the primary jurisdiction over the same. The Philippine National Bank was created by virtue of a special law and is not registered with the Commission. Thus, in line with the previous SEC ruling in Alfredo C. Gray Sr., et al. versus Agustin Marketing, et al., SEC Case No. 2102, dated March 9, 1982 stating that the Commission has no jurisdiction over corporations created by a special law, we regret to inform you that the Commission has no jurisdiction over the alleged PNB's business operation in California thru its subsidiary, the Century Bank. Under the General Banking Act, it is the general duty and function of the Central Bank to regulate and supervise business transactions of banking institutions so as to protect the interest of the public, to execute the provisions thereon and to see to it that violations thereof are properly dealt with or punished. Likewise, the Commission has no jurisdiction on the alleged merger of Century Bank and California Overseas Bank, both companies not being registered or licensed by the Commission to engage in offshore banking, either as domestic or foreign corporation. The Commission has jurisdiction on merger of foreign corporations only if they are licensed to do business in the Philippines pursuant to the provisions of the Corporation Code. The latter corporation, however, was issued on November 19, 1980 a license to establish regional headquarters in the Philippines pursuant to PD 218, whose activities were limited only to acting as supervision, communication and coordination center for its affiliates, subsidiaries or branches in the Asia-Pacific Region and is not authorized to derive any income from sources within the Philippines. On January 16, 1987, said Bank filed with the Commission a petition for cancellation of its license as a regional headquarters, which petition was indorsed to the Board of Investments (BOI) for comments/recommendations. To date the petition for cancellation remains pending for failure of the BOI to reply to our indorsement letter. Please be advised further that while the SEC has no jurisdiction over the business operations of PNB and while its securities are exempt from registration requirements under the Revised Securities Act, the Commission has jurisdiction to intervene on matters pertaining to the listing of its securities in the stock exchanges. The Commission, therefore, may look into any possible violation of the "SEC Rules Requiring Disclosure of Material Facts by Corporation whose Securities are Listed in any Stock Exchanges or Registered/Licensed Under the Revised Securities Act, as amended." LexLib Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman