G.R. No. 125469 October 27, 1997
PHILIPPINE STOCK EXCHANGE, INC., petitioner, vs. THE HONORABLE COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and PUERTO AZUL LAND, INC., respondents.

FACTS

Private respondent Puerto Azul Land, Inc. (PALI), a domestic real estate corporation, obtained a Permit to Sell its shares to the public from the Securities and Exchange Commission (SEC) in January 1995. To facilitate trading, PALI applied to list its shares with petitioner Philippine Stock Exchange, Inc. (PSE). The PSE Listing Committee recommended approval on February 8, 1996. Before the PSE Board of Governors could act, it received a letter dated February 14, 1996, from the heirs of Ferdinand E. Marcos claiming legal and beneficial ownership over certain properties forming part of the Puerto Azul Beach Hotel and Resort Complex, which PALI claims as assets, and alleging that a stockholder of PALI, Ternate Development Corporation, was held in trust for the Marcos estate. PALI responded that the resort complex was owned by other distinct entities and that Ternate owned only 1.20% of PALI. The Marcos heirs implied their claim extended to other PALI-titled properties. The PSE sought comments from the PCGG. On March 4, 1996, the PSE was informed the Marcoses were enjoined by a Temporary Restraining Order from impeding PALI’s listing. On March 27, 1996, the PSE Board rejected PALI’s application, citing serious claims affecting the suitability of listing. PALI sought SEC review. On April 24, 1996, the SEC issued an Order setting aside the PSE’s decision and ordering the immediate listing of PALI shares. The PSE’s motion for reconsideration was denied on May 9, 1996. The PSE filed a Petition for Review with the Court of Appeals, which dismissed it on June 27, 1996. Hence, this petition.

ISSUE

Whether the Securities and Exchange Commission has the jurisdiction and authority to review, reverse, and order the Philippine Stock Exchange to list the shares of Puerto Azul Land, Inc.

RULING

Yes. The Supreme Court affirmed the Court of Appeals and held that the SEC has both jurisdiction and authority to review the PSE’s decision. The SEC’s plenary authority is derived from Section 3 of the Revised Securities Act in relation to Sections 6(j) and 6(m) of P.D. No. 902-A, and Section 38(b) of the Revised Securities Act. As a corporation and a stock exchange, the PSE is subject to the SEC’s jurisdiction, regulation, and control. The SEC’s power to supervise and regulate includes the authority to alter or supplement exchange rules concerning the listing of securities to ensure investor protection and fair dealing. The Court found the PSE acted arbitrarily in disapproving PALI’s application as PALI complied with all listing requirements and disclosure rules, the Marcoses’ unsubstantiated claims did not overcome the Torrens titles held by PALI, no court action had been filed to nullify PALI’s ownership, and the PSE failed to justify treating PALI differently from other similarly situated companies it allowed to list. The SEC’s order for listing, with a directive for full disclosure of material facts, was a valid exercise of its regulatory power.