G.R. No. 208379 , March 29, 2022
LUIS R. VILLAFUERTE, CARIDAD R. VALDEHUESA, AND NORMA L. LASALA, PETITIONERS, VS. SECURITIES AND EXCHANGE COMMISSION, BANGKO SENTRAL NG PILIPINAS, SECRETARY OF FINANCE, THE NATIONAL TREASURER, BANKERS ASSOCIATION OF THE PHILIPPINES, PHILIPPINE DEALING & EXCHANGE CORPORATION, PHILIPPINE DEPOSITORY & TRUST CORP., PHILIPPINE SECURITIES SETTLEMENT CORPORATION, PHILIPPINE DEALING SYSTEM HOLDINGS CORPORATION, AND VICENTE B. CASTILLO, RESPONDENTS.

FACTS

Petitioners filed a Petition for Certiorari and Prohibition seeking to nullify various rules, orders, issuances, and acts of the public respondents (SEC, BSP, Secretary of Finance, and National Treasurer) and to prohibit specific actions related to the operations of the PDS Group (composed of PDEx, PDTC, PSSC, and PDSHC). The petition alleges that through assailed regulations, and with the help of the Bankers Association of the Philippines (BAP), the public respondents enabled the PDS Group to establish and maintain a monopoly and impose unlawful restraint of trade and unfair competition in the market for fixed-income securities and the over-the-counter (OTC) market for government securities.
Petitioners trace the alleged monopoly to the early 2000s with the establishment of the Fixed-Income Exchange (FIE) and the PDS Group. They claim the FIE failed financially, leading its proponents to intrude upon the OTC market for government securities, unlawfully easing out the Money Market Association of the Philippines (MART). Petitioners enumerate thirteen (13) specific rules, orders, issuances, and acts by the public respondents that allegedly facilitated this monopoly. Their substantive arguments include: that government securities are outside the SEC’s regulatory power under the Securities Regulation Code (SRC); that the SEC committed grave abuse of discretion in licensing PDEx as a Self-Regulatory Organization (SRO) for the OTC market; that the SEC’s OTC Rules effectively preclude other SROs; that the BSP committed grave abuse in granting licenses to PDTC; and that the Secretary of Finance and BSP committed grave abuse in allowing PDTC and PSSC to electronically connect with government systems (ROSS and PhilPaSS).

ISSUE

Whether the petition for certiorari and prohibition should be granted to nullify the assailed rules, orders, issuances, and acts of the public respondents and to prohibit the related actions concerning the PDS Group’s operations.

RULING

The Supreme Court DISMISSED the petition. The Court found that the petitioners failed to establish any grave abuse of discretion on the part of the public respondents. The Court held that the Securities Regulation Code (SRC) grants the SEC jurisdiction over the secondary market for securities, which includes government securities traded in the over-the-counter market. The SEC’s issuance of the OTC Rules and its accreditation of PDEx as an SRO were within its statutory mandate to promote a transparent, fair, and efficient market. The Court also found that the petitioners failed to substantiate their claim of an illegal monopoly, noting that the regulatory framework allows for other entities to apply and qualify as SROs, and that the requirement for trading participants to be members of a registered SRO is a reasonable regulation to ensure an orderly market. The actions of the BSP and the Department of Finance in allowing connectivity with the PDS Group’s systems were deemed to be within their regulatory powers to enhance the safety and efficiency of the financial market infrastructure. Furthermore, the Court noted that several of the petitioners’ claims had been rendered moot by subsequent events, including amendments to the challenged OTC Rules. The petition was dismissed for lack of merit.