Cajucom, Katrina Monica T.

Insider Trading, Short Swing Transactions and

Manipulation of Security Prices and other Fraudulent Acts
098253 #8119
SECURITIES AND EXCHANGE COMMISSION VS. INTERPORT RESOURCES
CORPORATION
G.R. No. 135808. October 6, 2008.
Chico, Nazario, J.

FACTS:
 The Board of Directors of IRC approved a Memorandum of Agreement with GHB (Ganda
Holdings Berhad). Under said memorandum of agreement, IRC acquired100% of the entire
capital stock of GEHI (Ganda Energy Holdings Inc.) which would own and operate a 102
megawatt gas turbine power generating barge.
 IRC would acquire 67% of the entire capital of PRCI (Philippine Racing Club).- It is
alleged herein that a press release announcing the approval of the agreement was sent to
the Philippine Stock Exchange through facsimile and the SEC, but the facsimile machine
of the SEC could not receive it.
 SEC received reports that the IRC failed to make timely public disclosures of its
negotiations with GHB and that some of its directors, heavily traded IRC shares utilizing
this material insider information.
 SEC thus required the directors to explain the alleged failure to disclose material
information as required by the Rules on Disclosure of Material Facts.
 Unsatisfied with the explanation, the SEC issued an order finding that the IRC violated the
Rules in connection with the then Old Securities Act when it failed to make timely
disclosures of its negotiations with GHB.
 Respondents, however, questioned the authority of the SEC to investigate on said matter
 CA and said court ruled in favor of the respondents and effectively enjoined the SEC from
filing any criminal, civil or administrative cases against respondents since there are no rules
and regulations implementing the rules regarding DISCLOSURE, INSIDERTRADING
OR ANY OF THE PROVISIONS OF THE REVISED SECURITIES ACT
 The CA, therefore, prohibited the SEC from taking cognizance or initiating any action
against the respondents for the alleged violations of the Revised Securities Act

ISSUE: Whether the SEC has statutory authority to file any suit against corporations with respect
to Sec. 30 of the Revised Securities Act.

RULING: No. Section 30 of the Revised Securities Act explains in simple terms that the insider’s
misuse of nonpublic and undisclosed information is the gravamen of illegal conduct the intent of
the law is the protection of investors against fraud, committed when an insider, using secret
information, takes advantage of an uninformed investor. The provision explains in simple terms
that the insider’s misuse of nonpublic and undisclosed information is the gravamen of illegal
conduct. The intent of the law is the protection of investors against fraud, committed when an
insider, using secret information, takes advantage of an uninformed investor. Insiders are obligated
to disclose material information to the other party or abstain from trading the shares of his
corporation. This duty to disclose or abstain is based on two factors: first, the existence of a
relationship giving access, directly or indirectly, to information intended to be available only for a
corporate purpose and not for the personal benefit of anyone; and second, the inherent unfairness
involved when a party takes advantage of such information knowing it is unavailable to those with
whom he is dealing.