SEC asserts power over Meralco dispute

MANILA, Philippines - Corporate regulators has asserted their authority to rule on the validity of Manila Electric Co.’s (Meralco) board elections last month, denying that they had abused their powers by stepping in the dispute between the utility’s biggest shareholders. Speaking through the Solicitor General in a 45-page comment, the Securities and Exchange Commission (SEC) asked the Court of Appeals to lift the restraining order that had prevented it from hearing the case. "The SEC issued the disputed cease and desist order in the valid exercise of its regulatory jurisdiction under the Securities Regulation Code," it told the court. On May 27, regulators stopped the Lopez-controlled management of Meralco from counting proxy votes in their favor following a complaint from Winston F. Garcia, president and general manager of state-owned Government Service Insurance System (GSIS). The GSIS, together with several agencies, own 35% of the power utility. Mr. Garcia, who wanted to wrestle control of the board from the Lopez family, claimed the latter had violated rules on proxy solicitation. But the board voted to ignore the SEC order, which it said was void, having been signed by only one commissioner. At the meeting, the Lopezes, which has a 33% stake in Meralco, managed to retain control of the 11-man board. It did this by voting in behalf of smaller shareholders, who own about a third of the utility. Regulators then ordered Meralco to explain its defiance, forcing the company to elevate the case to the appellate court. In its comment, the SEC argued that Jesus Martinez, the lone commissioner who signed the cease order, had been authorized to run the commission in the absence of the SEC Chairman Fe B. Barin. It also cited the Securities Code, which allows the body to delegate its powers to a commissioner or staff member as long as a decision does not alter an existing rule. The SEC also said three of its five commissioners had consulted with each other before the cease order was issued. The commission also dismissed Meralco’s charge of bias against Mr. Martinez, saying it could not have voided the proxies of the GSIS on its own. "[Mr.] Martinez signed the [cease order] for the commission," it said, adding that the law does not require all members to sign a decision. In a phone interview, Mr. Martinez said he and two other commissioners — Raul Palabrica and Thaddeus Venturanza — had discussed the case in a teleconference before issuing the order. Mr. Martinez also insists the cease order was valid even without a docket number, since one is only needed following an investigation. He also said a cease order might be issued without an investigation as long as the complaint is verified. In a separate interview, SEC Secretary Gerard M. Lukban said Meralco’s claim that the commission had no jurisdiction over the intracorporate dispute is irrelevant since the SEC only wanted to validate the proxies, something nobody else is empowered to do. The Lopezes earlier said intra-corporate disputes must be resolved in regional trial courts. They also criticized regulators for failing to notify them about the GSIS complaint ahead of the stockholders’ meeting. But Mr. Martinez noted that under the law, a cease order must be kept confidential until it is issued. He added that the board should have just allowed them to validate the proxies, which would not have taken more than a few hours. Meanwhile, Makati Business Club President Albert Lim urged Mr. Martinez to resign, saying the SEC has lost its credibility. "It’s pretty obvious that [Mr.] Martinez acted improperly" by allegedly issuing a defective order. But Mr. Martinez rejected the appeal, saying the businessman knows nothing about the SEC’s mandate. - BusinessWorld