SEC vs.

Interport Resources Corporation

GR No. 135808
October 6, 2008

FACTS:

In 1994, an investigative proceeding was conducted by the SEC against

respondent Interport Resources Corporation for failure to make timely
disclosures of their negotiations with Ganda Energy Holdings, a violation against
the Revised Securities Act. However, the proceeding was interrupted by a writ of
preliminary injunction issued by the Court of Appeals, which became permanent
in 1998.

During the pendency of this case, the Securities Regulations Code repealed the
Revised Securities Act, which give SEC of its jurisdiction to continue investigating
the case, or the Regional Trial Court to hear any case which may later be filed
against herein respondent.

As a defense, respondents averred that the case is already deemed moot and
academic, since any criminal complaint that may be filed against them resulting
from the SEC investigation has already prescribed. They point out the
prescriptive period of 12 years from the time of the commission of the crime,
under Sec. 1 of Act No. 3326 (An Act to Establish Period of Prescription for
Violations Penalized by Special Acts). Since the offense was committed in 1994,
prescription has already set in as early as 2006.

ISSUE:
Whether or not the filing of complaint by SEC against respondent has already
prescribed, in pursuant to Sec. 1 Act 3326.

HELD:
No. It is an established doctrine that a preliminary investigation interrupts the
period of prescription.

As defined, a preliminary investigation is essentially a determination whether an

offense has been committed, and whether there is probable cause for the
accused to have committed the offense.

Under Sec. 45 of the Revised Securities Act, the SEC has the authority to make
such investigations as may deem necessary to determine whether a person has
violated any provisions of this Act. Thereafter, the SEC may refer the case to the
DOJ for preliminary investigation and prosecution.

Only after a finding of probable cause is made by the SEC can the DOJ instigate a
preliminary investigation. Thus, the investigation that was commenced by the
SEC in 1995, soon after it discovered the questionable acts of the respondents,
effectively interrupted the prescription period. Given the nature and purpose of
the investigation conducted by the SEC, which is equivalent to the preliminary
investigation conducted by the DOJ in criminal cases, such investigation would
surely interrupt the prescription period.

ADDITIONAL NOTES:
The Court further held that a criminal complaint for violation of any law or rule
administered by SEC must first be filed with the latter. If the Commission finds
that there is probable cause, it shall refer the case to the DOJ.

The said case puts in perspective the nature of the investigation undertaken by
the SEC, which is a requisite before a criminal case may be referred to the DOJ.

In this case, it should be noted that SEC started the investigative proceeding as
early as 1994. This investigation effectively interrupted the prescription period.
However, said proceedings were disrupted by a preliminary injunction issued by
the Court of Appeals on 5 May 1995, which effectively enjoined the SEC from
filing any criminal, civil, or administrative case against the respondents herein.
The prescription period is interrupted by commencing the proceeding for the
prosecution of the accused. In criminal cases, this is accomplished by initiating a
preliminary investigation. The prosecution of offenses punishable under the
Revised Securities Act and Securities Regulations Code is initiated by the filing of
a complaint with the SEC or by an investigation conducted by SEC motu propio.