Commercial Law Review Digests | 1

(Case # 12) Frances

Feb 8,
G.R. No. 168380
Baviera v. Paglinawan 2007
1ST
SANDOVAL-GUTIERREZ, J.:
Division
Jurisdiction

DOCTRINE: A criminal charge for violation of the Securities Regulation Code is a

specialized dispute. Hence, it must first be referred to an administrative agency of
special competence, i.e., the SEC. Under the doctrine of primary jurisdiction, courts will
not determine a controversy involving a question within the jurisdiction of the
administrative tribunal, where the question demands the exercise of sound
administrative discretion requiring the specialized knowledge and expertise of said
administrative tribunal to determine technical and intricate matters of fact.
Where the complaint is criminal in nature, the SEC shall indorse the complaint to the
DOJ for preliminary investigation and prosecution as provided in Section 53.1 earlier
quoted.

FACTS: Baviera was the former head of HR Service and Delivery and Industrial Relations
of Standard Charter Bank-Philippines. SCB is a foreign banking corporation licensed to do
business in PH. BSP Monetary Board issued a resolution, the conduct of SCB was subject
to the condition that at the end of the 1 year period that SCB starts is trust functions, at
least 25% of the trust accounts must be for the account of non-residents of Ph, and that
the foreign exchange remitted to reduce the indebtedness of residents. At the end of the
2nd year, shall be raised to 50%.
SCB did not comply with the condition, but instead acted as a stock broker
soliciting foreign securities from Ph residents Global Third party Mutual Funds
denominated in US$. They were not registered with SEC and were remitted outwardly to
SCB-Hong Kong and SCB-Singapore. SCB counsel advised SCB to sell the securities under
the guise of custodian agreement and if the sale is questioned, it would invoke Sec 72
of General Banking Act. SCB was able to sell GTPMF securities worth P6B.
On July 18, 1997, Investment Capital Association of the Philippines filed before
SEC a complaint against SCB for violation of the Revised Securities Act for the sale of
unregistered securities with the SEC. SCB argued that it was offering and selling
securities, and that it was only performing purely informational function without
solicitations from any investments, that it has a trust license, that its clients were the
ones who took initiative to invest in securities, and that it was acting as an agent or
passive order taker for them.
SEC issued a cease and desist order against SCB. SEC referred ICAPs complaint to
BSP. SEC withdrew the GTPMF securities from the market and it will not sell them without
the necessary clearances. BSP directed SCB not to include investments in global mutual
funds issue abroad in its trust investment portfolios without prior registration with SEC.
SCB sent a letter confirming the directive. However, SCB still continued to sell GTPMF
securities.
Baviera entered with SCB into an Investment trust agreement wherein Baviera
 Commercial Law Review Digests | 2

purchased US$8k worth of securities, with a 40% return of investment and a guarantee
that his money was safe. After 6 months, Baviera learned that the value went down to
US$7k. Baviera tried to withdraw his investment, but SCB persuaded him to hold on to it,
promising that the market would pick it up.
BSP found that SCB failed to comply with its directive, and fined SCB of P30k.
Bavieras investment further went down to US$3k. Baviera learned that BSP
prohibited SCB from selling GTPMF securities. Baviera filed with BSP a letter complaint
demanding conpensation with his lost investment. SCB denied his demand because his
investment was regular.
Baviera filed with DOJ a complaint charging SCB BoD and officers of syndicated
estafa.
SEC lifted its cease and desist order upon P7M settlement by SCB and SCB made a
commitment not to further sell unregistered GTPMF securities.
Baviera filed with DOJ a complaint against SCB for violation of SRC. DOJ dismissed
the complaint for syndicated estafa. The complaint for violation of SEC was also denied
because it should have been filed with SEC. CA affirmed DOJ.

ISSUE/S: WON SEC had jurisdiction

RULING: Yes. A criminal charge for violation of the Securities Regulation Code is a
specialized dispute. Hence, it must first be referred to an administrative agency of
special competence, i.e., the SEC. Under the doctrine of primary jurisdiction, courts will
not determine a controversy involving a question within the jurisdiction of the
administrative tribunal, where the question demands the exercise of sound
administrative discretion requiring the specialized knowledge and expertise of said
administrative tribunal to determine technical and intricate matters of fact. The
Securities Regulation Code is a special law. Its enforcement is particularly vested in the
SEC. Hence, all complaints for any violation of the Code and its implementing rules and
regulations should be filed with the SEC. Where the complaint is criminal in nature, the
SEC shall indorse the complaint to the DOJ for preliminary investigation and prosecution
as provided in Section 53.1 SRC.

DISPOSITIVE PORTION: WHEREFORE, we DENY the petitions and AFFIRM the assailed
Decisions of the Court of Appeals in CA-G.R. SP No. 87328 and in CA-G.R. SP No. 85078.