Case Summary (G.R. No. L-23004)
SEC’s Double‐Listing Rule and Statutory Framework
SEC Rule (Sec. 28b-13) states that securities listed on one exchange “shall not” be listed anew on another. Under Sec. 17(a) and (d), failure to abide by SEC rules may justify denial of registration. MakSE complied with all statutory prerequisites except it refused to accept the non‐listing requirement. The SEC invoked its general regulatory powers, asserting the rule was “necessary for the execution of its functions.”
Monopolistic Implications and Legislative Intent
All major securities were already listed on MSE, so SEC’s condition effectively barred MakSE from meaningful operation. The rule would perpetuate MSE’s de facto monopoly, contradicting market competition and Congress’s recognition of multiple exchanges (Sec. 28b-13). Historically, five exchanges operated prewar, and dual listing was commonplace under earlier amendments. No amendment subsequently prohibited multiple exchanges.
Absence of Statutory Authority for Prohibition
Administrative power must be expressly or impliedly granted by statute. Sec. 28 authorizes ten‐day suspension of trading “if the public interest so requires,” not indefinite prohibition. Sec. 33’s general “regulate” clause does not imply a power to bar new exchanges or double listing. The SEC cited no explicit enabling provision for its non‐listing rule. Prior departmental approval before World War II adds no judicial weight absent statutory backing.
Public Interest and Investor Protection Rationales
The SEC argued that dual trading fragments the market, undermines auction pricing, and potentially confuses investors. The Court held those premises inconclusive. Price variance across exchanges can benefit buyers and sellers by fostering competitive rates and brokerage fees. Concentration on a single market is neither necessary nor shown to prevent fraud or deceptive practices as envisioned by the Securities Act.
Constitutional and Libertarian Objections
By restricting MakSE’s right to operate, the SEC violated:
• Equality before the law (Art. III, sec. 1, 1935 Constitution) by discriminatorily favoring MSE
• Liberty to pursue lawful trade or occupation (Art. III, sec. 2)
• Investors’ freedom to choose brokers and trading venues
Moreover, the SEC’s indefinite prohibition amounted to legislative rule‐making, an undelegated power, rather than proper exercise of administrative authority.
Case Syllabus (G.R. No. L-23004)
Facts of the Case
- Makati Stock Exchange, Inc. filed a petition seeking registration and license to operate a stock exchange under the Securities Act (Commonwealth Act No. 83, as amended).
- The Securities and Exchange Commission (Commission) conditioned registration on Makati’s agreement not to list for trading any security already listed on the Manila Stock Exchange.
- Makati challenged this “rule against double listing” as beyond the Commission’s power and as illegal, discriminatory, and unjust.
- Under Section 17 of the Securities Act, a stock exchange must file a statement of organization and other information with the Commission; compliance ordinarily entitles it to registration.
- The Commission defended its rule as necessary for the public interest and investor protection.
Procedural History
- May 27, 1963: The Commission issued an order granting Makati its certificate of incorporation but imposed the condition against double listing if and when Makati applied for registration.
- Makati did not appeal that order, secured its corporate existence, and later applied for license.
- May 7, 1964: The Commission denied Makati’s request to dispense with the double-listing condition.
- Makati sought judicial review of the May 7, 1964 resolution in the Supreme Court under G.R. No. L-23004.
Statutory Provisions Involved
- Section 17(a)(1) & (d), Securities Act (requirements for registration of exchanges).
- Section 17-a-1, Securities Act (agreement to comply with Act and rules without waiving right to contest validity).
- Section 28(3), Securities Act (power to suspend trading in any registered security for up to ten days if public interest so requires).
- Section 28b-13, Securities Act (uniform trading regulations where two or more exchanges exist).
- Section 33, Securities Act (general power to “regulate” exchanges and securities).
Petitioner’s Contentions
- The Commission lacks express or implied statutory authority to prohibit double listing.
- The condition effectively compelled Makati to trade only unlisted securities, making it impossible to operate where one exchange already lists all worthwhile securities.
- The rule creates a monopoly for the Manila Stock Exchange and denies investors the benefits of price competition and broker choice.
- The condition infringes on Makati’s constitutional right to equal protection, liberty to pursue lawful trade, and investors’ right to buy