SEC v. Astra

SECURITIES OF EXCHANGE COMMISSION v.
ASTRA SECURITIES
CORPORATION
October 22, 2014
FACTS:
Omico Corporation (Omico) is a company whose shares of stock are listed and traded in the
Philippine Stock Exchange, Inc.Astra Securities Corporation (Astra) is one of the stockholders of
Omico owning about 18% of the latter's outstanding capital stock.
Omico scheduled its annual stockholders' meeting. It set the deadline for submission of proxies
and the validation of proxies.
Astra objected to the validation of the proxies issued in favor of Tommy Kin Hing Tia (Tia),
representing about 38% of the outstanding capital stock of Omico. Astra also objected to the
inclusion of the proxies issued in favor of Tia and/or Martin Buncio, representing about 2% of
the outstanding capital stock of Omico.
Astra maintained that the proxy issuers, who were brokers, did not obtain the required express
written authorization of their clients when they issued the proxies in favor of Tia. In so doing, the
issuers were allegedly in violation of SRC Rule 20(11) (b)(xviii) of the Amended SEC (SRC or
Republic Act No. 8799) Rules. Furthermore, the proxies issued in favor of Tia exceeded 19,
thereby giving rise to the presumption of solicitation thereof under SRC Rule 20(2)(B)(ii)(b) of
the Amended SRC Rules. Tia did not comply with the rules on proxy solicitation, in violation of
Section 20.1 of the SRC.
Despite the objections of Astra, Omico's Board of Inspectors declared that the proxies issued in
favor of the Tia were valid. Astra filed a Complaint before the SEC praying for the invalidation
of the proxies issued in favor of Tia. Astra also prayed for the issuance of a cease and desist
order (CDO) enjoining the holding of Omico's annual stockholders' meeting until the SEC had
resolved the issues pertaining to the validation of proxies.
The SEC issued the CDO enjoining Omico from accepting and including the questioned proxies
in determining a quorum and in electing the members of the board of directors during the annual
stockholders’ meeting.
Attempts to serve the CDO on 3 November 2008 failed, and the stockholders' meeting proceeded
as scheduled with 52.3% of the outstanding capital stock of Omico present in person or by proxy.
The nominees for the board of directors were elected upon motion.
Astra instituted before the SEC a Complaint for indirect contempt against Omico for
disobedience of the CDO. On the other hand, Omico filed before the CA a Petition for Certiorari
and Prohibition imputing grave abuse of discretion on the part of the SEC for issuing the CDO.
The CA held that the controversy was an intra-corporate dispute. The SRC expressly transferred
the jurisdiction over actions involving intra-corporate controversies from the SEC to the RTC.
Furthermore, Section 2, Rule 6 of the Interim Rules of Procedure Governing Intra-Corporate
Disputes provides that any controversy or dispute involving the validation of proxies is an
election contest, the jurisdiction over which has also been transferred by the SRC to the regular
court.
Thus, according to the CA, the SEC committed grave abuse of discretion in taking cognizance of
Astra's complaint. The CDO was a patent nullity, for an order issued without jurisdiction is no
order at all.
Aggrieved by the CA Decision, the SEC filed before us the instant Petition for Certiorari
docketed as G.R. No. 187702. Meanwhile, Astra filed a Motion for Reconsideration before the
CA, which subsequently denied the motion in the assailed Resolution
Astra filed the instant Petition for Review on Certiorari . The Court consolidated the two
petitions.
ISSUE:
Whether the SEC has jurisdiction over controversies arising from the validation of proxies for
the election of the directors of a corporation.
RULING:
The Court held that when proxies are solicited in relation to the election of corporate directors,
the resulting controversy, even if it ostensibly raised the violation of the SEC rules on proxy
solicitation, should be properly seen as an election controversy within the original and exclusive
jurisdiction of the trial courts by virtue of Section 5.2 of the SRC. Hence, the jurisdiction is still
with the Special Commercial Courts.
An election contest covers any controversy or dispute involving the validation of proxies, in

general. Thus, it can only refer to all the beneficial purposes that validation of proxies can bring
about when made in connection with a forthcoming election of directors. Thus, there is no point
in making distinctions between who has jurisdiction before and who has jurisdiction after
the election of directors, as all controversies related thereto – whether before, during or after –
shall be passed upon by regular courts as provided by law.

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SECURITIES OF EXCHANGE COMMISSION v.

An election contest covers any controversy or dispute involving the validation of proxies, in

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