G.R. No. 197032 - Securities and Exchange Commission vs. Price Richardson Corp.

The Securities and Exchange Commission (SEC), petitioner, sought to file criminal charges against Price Richardson Corporation (Price Richardson), a Philippine corporation incorporated on December 7, 2000, and respondents Consuelo Velarde-Albert and Gordon Resnick for violations of Sections 26.3 and 28 of the Securities Regulation Code (SRC).
Price Richardson's stated business purpose was to provide administrative services, including clerical, bookkeeping, mailing, and billing.
Price Richardson was accused of engaging in illegal "boiler room" operations, selling non-existent stocks to investors abroad through high-pressure sales tactics. Allegedly, when discovered, the corporation would close and reemerge under a new name.

Michelle S. Avelino, a former employee (telemarketer) of Price Richardson, executed a sworn affidavit detailing how the company operated a boiler room scheme: telemarketers made high volumes of calls to foreign prospects, using scripts and forwarding interested clients’ information to foreign salesmen who sold non-existent stocks. No legitimate certificates were ever issued, and payments were obtained through telegraphic transfers.
Janet C. Rillo, a former employee of Capital International Consultants, Inc., which allegedly merged with Price Richardson, corroborated these claims. She described the process of obtaining "leads," sending newsletters, and facilitating sales by foreign salesmen, who were unlicensed stockbrokers acting under aliases.
Search warrants were issued and served on Price Richardson and Capital International, resulting in the seizure of office equipment and documents connected with the alleged violations.

On December 4, 2001, the SEC filed a complaint with the Department of Justice (DOJ) against Price Richardson, its incorporators and directors, Velarde-Albert (Director for Operations), Resnick (Associated Person), and other individuals for violation of Article 315(1)(b) of the Revised Penal Code (estafa with abuse of confidence) and Sections 26.3 and 28 of the SRC.
SEC alleged Price Richardson operated without licenses, engaged in unauthorized securities trading, and deceived investors by posing as legitimate brokers.
The incorporators and directors denied involvement, asserting they transferred their shares prior to the offenses. Velarde-Albert denied the charges, while Resnick did not actively contest.

State Prosecutor Aristotle M. Reyes dismissed the complaint on March 13, 2002, for lack of probable cause, citing insufficient proof that Price Richardson engaged in securities trading or that Velarde-Albert and Resnick acted as brokers or salesmen without registration.
The prosecutor also absolved incorporators and directors due to lack of evidence linking them to the offenses.
The SEC's motions for reconsideration were denied by State Prosecutor Reyes and subsequently by Secretary of Justice Raul M. Gonzalez in Resolutions dated April 12, 2005, and July 5, 2006.

The SEC filed a Petition for Certiorari before the Court of Appeals (CA), which affirmed the DOJ Secretary's Resolutions on May 26, 2011, finding no grave abuse of discretion in dismissing the case for lack of probable cause.
CA noted the employees’ affidavits were insufficient as personal knowledge was lacking, and that transactions occurred outside Philippine jurisdiction, involving foreign securities and investors.
The absence of specific acts attributable to Velarde-Albert and Resnick precluded their liability.

The SEC filed a Petition for Review on Certiorari with the Supreme Court, contesting the CA and DOJ Resolutions and praying for the filing of information against Price Richardson and respondents for violating the SRC.
Price Richardson and respondents filed comments opposing the petition, asserting the prosecutor's determination of probable cause is an executive function and arguing that transactions and investors involved were outside Philippine jurisdiction.

Whether courts may review the prosecutor’s determination of probable cause to file a criminal information.
Whether probable cause exists to file an information against Price Richardson, Velarde-Albert, and Resnick for violation of Sections 26.3 and 28 of the Securities Regulation Code and Article 315(1)(b) of the Revised Penal Code.