CA clears Ongpin of insider trading raps

The Court of Appeals (CA) has cleared businessman and former trade minister Roberto V. Ongpin of insider trading charges involving the shares of Philex Mining Corp. in 2009, reversing a finding made by corporate regulators last year.

Penned by Associate Justice Ma. Luisa Quijano-Padilla, the decision of the CA 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 administrative charge against petitioner [Ongpin] is accordingly dismissed," the December 1 ruling stated.

The SEC had alleged that Ongpin, then a minority shareholder of Philex Mining, bought additional shares while holding information that the Hong Kong-based First Pacific group led by Manuel V. Pangilinan was bidding for a controlling stake in the mining firm.

Ongpin allegedly engaged in insider trading because he bought these shares in the morning of December 2, 2009 for P19.25-P19.50 apiece despite having previous knowledge of the selling price of P21 per share in relation to the intended block sale in favor of First Pacific, which was set to take place in the evening of the same day.

For the SEC, the P21 per share and the actual date of the block sale are material information which Ongpin failed to disclose when he traded and bought stocks involving 174 transactions in the morning of De. 2, 2009.

Ongpin eventually sold his shares to the subsidiary of First Pacific for P21 per share, thus giving the First Pacific group control over Philex.

The SEC ordered the businessman to pay P174 million in fines, which is 10 times higher than the P17.4 million recommended by the SEC Enforcement and Investor Protection Department (EIPD) which investigated the matter.

Ongpin was also directed to resign from any public company or publicly listed company where he was an officer or a member of the board of directors.

The businessman then questioned the SEC ruling before the CA, arguing there was lack of evidence and that the administrative case had already gone beyond the prescriptive period of two years after discovery of the facts constituting the cause of action and within five years after such cause of action accrued.

He pointed out that the SEC EIPD only issued a show cause order against him in November 2014.

Ongpin secured a temporary restraining order and later a writ of preliminary injunction that stopped the enforcement of the penalties until the case is resolved.

In its ruling, the CA junked the Office of the Solicitor General’s (OSG) contention that the price of P21 per share and the date of the intended block sale are material since the price of Philex shares went down from P19 on December 2, 2009 to P17.75 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 CA cited the OSG’s admission that the reason why the price of Philex shares went up was because of the ongoing bid war between 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 December 2, 2009 sale in favor of First Pacific simply ended all aggressive speculation, and this inevitably lead 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 that the P21 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 P174-million fine imposed by the SEC “considering that said 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 P10,000 and the maximum amount which is P1,000,000 and the penalty to be imposed could not exceed that stated in the law,” the decision stated.

Associate Justices Samuel Gaerlan and Marie Christine Azcarraga-Jacob concurred with the ruling. —ALG/MDM, GMA News