Powers and functions of the SEC

Pursuant to the Securities Regulation Code, P.D. 902-A, the Corporation Code, the Investment
House Law, the Financing Company Act and other existing laws, the SEC shal have the following powers
and functions:

a) Have jurisdiction and supervision over all corporations, partnerships, associations who are
grantees of primary franchises and/ or a license or permit issued by the government;
b) Formulate policies and recommendations on issues concerning the securities market, advise
congress and government agencies, on all aspects of the securities market and propose
legislation and amendment thereto;
c) Approve, reject, suspend, revoke or require amendments to the registration statements, and
registration and licensing applications;
d) Regulate, investigate or supervise the activities of persons to ensure compliance;
e) Supervise, monitor, suspend or take over the activities of exchanges, clearing agencies and other
self-regulating organizations;
f) Impose sanctions for the violation of the laws and the rules, regulations and orders issued
pursuant thereto;
g) Prepare, approve, amend or repeal rules, regulations and orders, and issue opinions and provide
guidance on and supervise compliance with such rules, regulations and orders;
h) Enlist the aid and support of and/ or deputize any and all enforcement agencies of the
government, civil or military as well as any private institution, corporation, firm, association or
person in the implementation of its powers and functions;
i) Issue cease and desist orders to prevent fraud or injury to the investing public;
j) Punish for contempt of the Commission, both direct and indirect, in accordance with the
pertinent provisions of and penalties prescribed by the Rules of Court;
k) Compel the officers of any registered corporation or association to call meetings of stockholders
or members thereof under it supervision;
l) Issue subpoena duces tecum and summon witnesses to appear in any proceedings of the
Commission and in appropriate cases, order the examination, search and seizure of all
documents, papers, files and records, tax returns, and books of accounts of any entity or person
under investigation as may be necessary for the proper disposition of the cases before it, subject
to the provision of existing laws;
m) Suspend, or revoke, after proper notice and hearing the franchise or certificate of registration of
corporations, partnerships or associations, upon any grounds provided by law;
n) Exercise such powers as may be provided by law as well as those which may be implied from, or
which are necessary or incidental to the carrying out of, the express powers granted the
Commission to achieve the objectives and purposes of these laws.

(Reviewer on Commercial Law, Sundiang & Aquino, 2013 p277-279)

Features Intended to Protect the Investing Public

a) All securities are required to be registered before they can be sold to the public (SRC, Sec. 8);
b) Rejection and revocation of the registration of securities (SRC, Sec. 13);
c) Regulation of pre-need plans (SRC, Sec. 16);
d) Protection of shareholders interests via rules on tender offers and proxy solicitations (SRC, Secs.
19-20);
e) Prohibition on fraud, manipulation and insider trading (SRC, Secs. 24, 25, 26 & 27);
f) Regulations of Securities Market Professionals (SRC, Sec. 28);
g) Revocation, refusal or suspension of registration of brokers, dealers and salesmen, and
associated persons (SRC, Sec. 29);
h) Restriction of over-the-counter markets (SRC, Sec. 32);
i) Self-regulation of associations of securities brokers, dealers and other securities related
organizations (SRC, Sec. 29);
j) Registration of clearing agencies (SRC, Sec. 42);
k) Limitations on margin trading or amount of credit that may be extended on any security (SRC,
Sec. 49);
l) Civil liabilities arising from false statement in the registration statement (SRC, Sec. 56);
m) Civil liabilities arising from false statements or omissions in the prospectus, communications and
reports (SRC, Sec. 57);
n) Protection against manipulation of security prices, manipulative and deceptive devices, fraud in
pre-need plans and commodities future contracts, fraudulent transactions and insider trading
(SRC, Secs. 58, 59, 60 & 61);
o) Establishment of trust funds to compensate investors for extraordinary losses or damage they
may suffer due to business failure or fraud or mismanagement of the presons with whom they
transact (SRC, Sec. 36 5(a)).

Unfair Competition

Unfair Competition is the employment by a person of deception or any other means contrary to good
faith by which he passes of the goods manufactured by him or in which he deals, or his business or
services for those of another person who has established good will in the goods such person
manufactures or deals in, or his business services, or who shall commit any acts calculated to produce
said result, whether or not registered mark is employed (Intellectual Property Code, Sec. 168.2).

It is the act of passing off or attempting to pass off upon the public the goods, businesses or services of
one and for the goods, businesses or services of another. Passing off takes place where a person, by
imitative devise on the general appearance of the goods, misleads prospective purchasers into buying
his merchandise under the impression that they are buying that of his competitors.

In Mcdonalds Corporation v. L.c. Big mak Burger (G.R. No. 143993, August 18, 2004), the Supreme Court
discussed that the essential elements of an action for unfair competition are (1) confusing similarity in
the general appearance of the goods, and (2) intent to deceive the public and defraud a competitor. The
confusing similarity may or may not result from similarity in the marks, but may result from other
external factors in the packaging or presentation of the goods. The intent to deceive and defraud may
be inferred from the similarity of the appearance of the goods as offered for sale to the public. Actual
fraudulent intent need not be shown. Unfair competition is broader than trademark infringement and
includes passing off goods with or without trademark infringement. Trademark infringement is a form of
unfair competition. Trademark infringement constitutes unfair competition when there is not merely
likelihood of confusion, but also actual or probable deception on the public because of the general
appearance of the goods. There can be trademark infringement without unfair competition as when the
infringer discloses on the labels containing the mark that he manufactures the goods, thus preventing
the public from being deceived that the goods originate from the trademark owner.

Here, petitioner McDonald’s, an American corporation operating a global chain of fast-food restaurants,
is the owner of the ‘Big Mac’ mark for its double-decker hamburger sandwich here and in the US.
Meanwhile, respondent L.C., a domestic corporation which operates fast-food outlets and snack vans
applied for the registration of the ‘Big Mak’ mark for its hamburger sandwiches. Petitioner opposed on
the ground that ‘Big Mak’ was a colorable imitation of its registered ‘Big Mac’ mark for the same food
products. Respondents denied there is colorable imitation and argued that petitioner cannot exclusively
appropriate the mark ‘Big Mac’ because the word ‘Big’ is a generic and descriptive term. Petitioner filed
a complaint for trademark infringement and unfair competition. The trial court found for petitioners. CA
held otherwise.

The Court finds that respondents’ use of the “Big Mak” mark results in likelihood of confusion. Aurally,
the two marks are the same, with the first word of both marks phonetically the same, and the second
word of both marks also phonetically the same. Visually, the two marks have both two words and six
letters, with the first word of both marks having the same letters and the second word having the same
first two letters. In spelling, considering the Filipino language, even the last letters of both marks are the
same. Clearly, respondents have adopted in “Big Mak” not only the dominant but also almost all the
features of “Big Mac.” Applied to the same food product of hamburgers, the two marks will likely result
in confusion in the public mind. Certainly, “Big Mac” and “Big Mak” for hamburgers create even greater
confusion, not only aurally but also visually. Indeed, a person cannot distinguish “Big Mac” from “Big
Mak” by their sound. When one hears a “Big Mac” or “Big Mak” hamburger advertisement over the
radio, one would not know whether the “Mac” or “Mak” ends with a “c” or a “k.”

Respondents’ goods are hamburgers which are also the goods of petitioners. Since respondents chose to
apply the “Big Mak” mark on hamburgers, just like petitioner’s use of the “Big Mac” mark on
hamburgers, respondents have obviously clothed their goods with the general appearance of
petitioners’ goods. There is actually no notice to the public that the “Big Mak” hamburgers are products
of “L.C. Big Mak Burger, Inc.” and not those of petitioners who have the exclusive right to the “Big Mac”
mark. This clearly shows respondents’ intent to deceive the public. Hence, the hold that as found by the
RTC, respondent corporation is liable for unfair competition.