CA junks insider trading raps vs. Ongpin

The ruling was penned by Justice Ma. Luisa Quijano-Padilla and concurred in by Justices Samuel Gaerlan and Marie Christine Azcarraga-Jacob (Pixabay photo)

MANILA — The Court of Appeals (CA) has dismissed insider trading charges against businessman and former trade minister Roberto V. Ongpin that involved shares of Philex Mining Corp. in 2009.

In a 29-page decision dated Dec. 1, the CA’s Former Special 13th Division nullified the July 8, 2016 ruling of the Securities and Exchange Commission (SEC) that found Ongpin liable for 174 counts of insider trading under Section 27.1 of the Securities Regulation Code.

The ruling was penned by Justice Ma. Luisa Quijano-Padilla and concurred in by Justices Samuel Gaerlan and Marie Christine Azcarraga-Jacob.

“Wherefore, in view of all the foregoing, the Decision July 8, 2016 of respondent, finding petitioner liable for committing 174 counts of insider trading under Section 27.1 of the Securities Regulation Code is hereby Reversed and Set Aside. The administrative charge against petitioner [Ongpin] is accordingly dismissed,” the ruling stated.

In its ruling, the CA junked the Office of the Solicitor General’s (OSG) contention that the price of PHP21 per share and the date of the intended block sale are material since the price of Philex shares went down from PHP19 on Dec. 2, 2009 to PHP17.75 or about 20.5 percent within two days after the sale in favor of First Pacific.

“While it was alleged that the drop in the price of Philex shares after the information was made public was seen as an ‘unusual occurrence’ or a ‘red flag’, thereby suggesting that any reasonable investor would have considered the subject information material, the OSG however failed to specifically identify what is ‘unusual’ as opposed to a usual or regular fluctuation in stock market prices,” the CA said.

The court cited the OSG’s admission that the reason why the price of Philex shares went up was because of the ongoing bid war between Manny V. Pangilinan’s First Pacific and Ramon Ang of diversifying conglomerate San Miguel Corp.

“Based on the premise that it was the active speculation of the investing public, which triggered the steady increase in the price of Philex shares, we reckon that the public disclosure of the Dec. 2, 2009 sale in favor of First Pacific simply ended all aggressive speculation, and this inevitably led to the drop in the market price of Philex shares. Yet, all these incidents cannot be taken as clear and direct indication that there was indeed insider trading,” it added.

The appellate court added the PHP21 per share and the date of intended block sale were not “properties” of Philex as these were all part of negotiations between Pangilinan and Ongpin.

“Hence, it is apparent that such information was not attributable to Philex and it could not be considered to have been acquired by petitioner from his insider relationship with Philex. There being no material information involved, petitioner can be said to be trading only upon his own intentions,” the decision read.

The CA also found no legal basis for the PHP174-million fine imposed by the SEC considering that the “penalty went beyond the confines of the law”.

“For insider trading violations, the SRC itself clearly provided for the minimum amount of fine which is PHP10,000 and the maximum amount, which is PHP1,000,000 and the penalty to be imposed could not exceed that stated in the law,” the decision stated.

On decision dated July 8, 2016, Ongpin meted a penalty by the SEC en banc over 174 counts of alleged insider trading involving Philex Mining shares on Dec. 2, 2009.

The Commission ruled that Ongpin benefited and profited from insider or material non-public information. It was learned that the SEC en banc ruling was 10 times higher that the PHP17.4-million penalty suggested by the SEC’s Enforcement and Investor Protection Department .

The SEC has stated that Ongpin’s purchase of additional Philex shares ahead of a Dec. 1, 2009 deal between the firm and Hong Kong-based First Pacific Co. Ltd. for the latter’s buying into Philex.

The Commission ruled that Ongpin “was able to consolidate the required number of shares, supplementing his block of shares with the shares brought from the open market, sold them to the subsidiary of First Pacific at the privately agreed price of PHP21 per share, thereafter giving the First Pacific group control over Philex.”