Hon. Ramon S. Bagatsing

October 9, 1989 Hon. Ramon S. Bagatsing SubCommittee on Finance Intelligence and Revenue Matters Relating to Bilateral Trade Agreements 3rd Floor, Main Building Batasang Pambansa Complex Constitution Hills Quezon City Sir : This refers to your letter dated September 26, 1989, requesting comments on House Resolution No. 1367, relative to the accumulated unpaid accounts of various surety companies on due and demandable bonds to the Bureau of Customs. The primary jurisdiction of the Securities and Exchange Commission (SEC) 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 business by virtue of a special law, that agency has the primary jurisdiction over the same while the SEC assumes only secondary jurisdiction, particularly on intra-corporate matters. Under Presidential Decree No. 1460, otherwise known as the Insurance Code of 1978, it is the general duty and function of the Insurance Commissioner to regulate and supervise the transactions of surety companies so as to protect the interest of the public, to execute the provisions thereon relative to bonding and to see that violations thereof are properly dealt with or punished. Undeniably therefore, the SEC has no jurisdiction over matters relating to the implementation of the provisions of the Insurance Code. Thus, while the SEC can impose sanction on violations of the provisions of the Corporation Code, it has no power to go after erring corporations for violation of the Insurance Code. From the facts presented in the above-mentioned resolution, subject matter treated therein does not involve any question arising out of intra-corporate affairs of corporations as to make it fall within the jurisdiction of the SEC. Since the issue raised therein involves implementation of the Insurance Code particularly Chapter II, Title 4 thereof, obviously the jurisdiction over the same pertains to the Office of the Insurance Commissioner (OIC). llcd The OIC, however, may seek the cooperation of the SEC to effectively carry out its functions. If upon investigation into the affairs of a bonding or surety company by the OIC, it shall appear that it has violated an existing law, it may recommend to the SEC for the revocation or suspension of the certificate of registration of the offending company. Involuntary dissolution may be effected by the SEC "upon the filing of verified complaint and after proper notice and hearing on grounds provided by existing laws, rules and regulations. (Sec. 121, Corporation Code). P.D. 902-A, as amended provides, thus: "SECTION 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers: xxx xxx xxx (i) 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 2. Serious misrepresentation as to what the corporation can do or is doing to the great prejudice or damage to the general public. xxx xxx xxx". On the strength, therefore, of the aforequoted provision, the SEC, after proper notice and hearing, may suspend or revoke the franchise or certificate of registration of bonding or surety companies who issue surety bonds inspite of their financial incapability, as the same would constitute serious misrepresentation as to what they could do to the great prejudice or damage to the public. Likewise, in line with its policy to coordinate with other government agencies to protect and serve the best interest of the government and the public in general, the SEC is willing to coordinate with the OIC in determining the present solvency status of surety companies. cdlex Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman