Issuing authority, definitions, and construction
- The Rules are promulgated by the Securities and Exchange Commission.
- Section 2 defines:
- “Commission” means the Securities and Exchange Commission.
- “Commissioner” means the Chairman or any of the Associate Commissioners.
- “Hearing Officer” means any Commissioner, officer, body or panel duly designated or created by the Commission to hear and decide a particular case.
- “Order” means any directive, other than a judgment, of a Hearing Officer.
- “Corporation” means also a partnership or an association registered with the Commission.
- Section 3 requires that the Rules be liberally construed to promote public interest and enable just, speedy and inexpensive determination.
Nature, venue, and who can be parties
- Proceedings before the Commission are summary in nature, not necessarily adhering to or following the technical rules of evidence in regular courts.
- The Rules of Court may apply in a suppletory manner whenever practicable.
- All actions or claims are commenced and heard in the main office of the Commission.
- An action involving a corporation with its principal office within a region where the Commission has an extension office may be filed with and heard in such extension office.
- Only natural or juridical persons or entities authorized by law may be parties.
- All actions or claims must be prosecuted and defended in the name of the real party in interest.
Parties, representation, and joinder rules
- All persons with an interest in the subject and in obtaining the relief demanded must be joined as complainants or petitioners.
- Persons who claim an interest adverse to the complainant or petitioner, or who are necessary for a complete determination or settlement of issues, must be joined as respondents.
- A trustee of an express trust, guardian, executor or administrator, or a party authorized by statute may sue or be sued without joining the party for whose benefit the action is presented or defended, but the Hearing Officer may order the beneficiary to be made a party at any stage.
- An agent acting in his own name and for the benefit of an undisclosed principal may sue or be sued without joining the principal except when the contract involves things belonging to the principal.
- Class suit: When the subject matter is of common or general interest to many persons and joinder is impracticable, one or more may sue or defend for the benefit of all, and the Hearing Officer must ensure the parties before it are sufficiently numerous and representative to fully protect all interests concerned.
- Derivative action: A stockholder may not bring an action in the name of a corporation unless the complainant:
- was a stockholder at the time the questioned transaction occurred and at the time the action is filed, and
- remains a stockholder during the pendency of the action, and
- alleges with particularity the efforts made to obtain the action desired, or the reason for not making the effort.
- A derivative action authorized under these Rules shall not be discontinued, compromised, or settled without approval of the Hearing Officer; if the Hearing Officer finds that the interest of stockholders or any class thereof will be substantially affected, the Hearing Officer may direct notice by publication or otherwise to the affected stockholders or class.
- Parties in interest without whom no final determination can be had must be joined as complainant, petitioner, or respondent.
- Transfer of interest: In case of transfer, the action may be continued by or against the original party unless the Hearing Officer orders substitution or joinder of the transferee upon motion.
- Intervention: A person may intervene at any stage in the Hearing Officer’s discretion if the person has legal interest in the matter or in the success of either party, or an interest adverse to both, or is adversely affected by distribution or other disposition of property in the custody of the Commission.
- A person seeking intervention must file a motion for leave with notice on all parties.
- In allowing or disallowing intervention, the Hearing Officer must consider whether intervention will unduly delay or prejudice adjudication and whether the intervenor’s right may be fully protected in a separate proceeding.
- Intervention pleading: Intervention is made by complaint/petition in regular form served, and may be answered as if original; if the intervenor unites with the respondent in resisting the claims, intervention may be made as an answer to the complaint/petition.
- The complaint/petition or answer in intervention must be filed within ten (10) days from notice of the order permitting intervention unless a shorter period is fixed by the Hearing Officer.
Pleadings, verification, fees, and summons
- Only the following pleadings are allowed:
- complaint/petition,
- compulsory counterclaim pleaded in the answer,
- answer,
- reply, and
- rejoinder.
- Verification: All pleadings must be verified by affidavit that the affiant has read the pleading and that allegations are true and correct of the affiant’s own knowledge and belief.
- A pleading containing verification based on information and belief, or lacking proper verification, is treated as an unsigned pleading and is not considered as filed.
- Certification against forum shopping: The complainant/petitioner or principal party must certify under oath in the complaint or other initiatory pleading, or in a sworn certification annexed and simultaneously filed, that:
- no action or claim involving the same issues has been commenced or filed in any court, tribunal or agency,
- if any other pending action or claim exists, a complete statement of its present status is disclosed, and
- if subsequently learned that the same or similar action or claim is filed or pending, the fact is reported to the Commission within five (5) days from such learning.
- Failure to comply with the certification requirements results in dismissal of the petition without prejudice and cannot be cured merely by amendment of the complaint or initiatory pleading.
- False certification or non-compliance with undertakings constitutes indirect contempt of court, without prejudice to corresponding administrative and criminal actions.
- Willful and deliberate forum shopping by the party or counsel is ground for summary dismissal with prejudice, constitutes direct contempt, and is a cause for administrative sanctions.
- The following are prohibited pleadings in cases covered by these Rules:
- motion to dismiss complaint,
- motion for a bill of particulars,
- motion for new trial or reconsideration of judgment or order, or for reopening of trial,
- petition for relief from judgment,
- motion for extension of time to file pleadings, affidavits, or any other paper,
- memoranda,
- motion to declare defendant in default,
- motion for postponement,
- supplemental pleadings, and
- motion for leave to amend pleadings.
- Hearing Officer duty on sufficiency: The Hearing Officer must dismiss the complaint/petition if not sufficient in form and substance after examination of allegations and evidence attached thereto; otherwise, summons must be issued within five (5) days from filing.
- Pleadings must be printed, mimeographed, or typewritten on legal size bond papers and be in English or Filipino.
- Each pleading must contain:
- a caption showing the Commission name, case title, case number, and designation of the pleading.
- The original and two (2) signed copies must be filed, except when a complaint/petition/petition in intervention has more than one respondent, in which case additional signed copies must be filed equal to the number of additional respondents.
- Complaint/petition contents must include:
- names and residences of parties,
- concise statement of ultimate facts constituting the cause(s) of action,
- brief statement of the right(s) sought to be enforced,
- the law/rule/regulation under which the complaint/petition is based,
- summary of claims,
- statement of issues to be determined,
- affidavits of witnesses,
- copies of documentary and other evidence, and
- relief/s sought.
- Capacity and authority facts must be averred; issues on legal existence or representative capacity must be raised by specific denial with supporting particulars peculiarly within the pleader’s knowledge.
- Answer timeline: Within twenty (20) days from service of summons, the defendant must file and serve an answer on the plaintiff.
- The answer must include affidavits of witnesses and copies of documentary and other evidence, if any.
- Affirmative and negative defenses not pleaded are waived, except for lack of jurisdiction and failure to state a cause of action.
- Cross-claims and compulsory counterclaims not asserted in the answer are considered barred.
- Answer to counterclaims: Must be filed within fifteen (15) days from service of the answer in which counterclaims are pleaded.
- Default for failure to answer: If the defendant fails to answer within the period, the defendant is considered in default, and the Hearing Officer must proceed to render judgment granting the plaintiff such relief as the pleading warrants, unless the Hearing Officer requires evidence to be submitted ex parte.
- Reply timeline: Within fifteen (15) days from service of the answer, the plaintiff may file a reply rebutting matters raised.
- Rejoinder timeline: Respondent may submit rejoinder within fifteen (15) days from receipt of reply.
- Replies and rejoinders must include affidavits and documentary/other evidence in support, if any.
- Affidavits, documents, and evidence must be attached to the appropriate pleading.
- A witness without the required affidavit is not allowed to testify except for an adverse party or hostile witness.
- Documents not attached to pleadings are inadmissible; the Hearing Officer may allow submission of necessary affidavits/documents during pre-trial for compelling reasons, but submission must be made not later than five (5) days prior to commencement of trial.
- Supporting affidavits must be on personal knowledge, must state only facts admissible in evidence, and must show the affiant’s competence to testify.
- When an action or defense is based on a written instrument/document, the substance must be set forth in the pleading and the original or a copy must be attached as an exhibit/part of the pleading.
- The genuineness and due execution of documents attached under the instrument rule are deemed admitted unless the adverse party, under oath, specifically denies and states claimed facts; this does not apply when the adverse party is not a party to the instrument and refuses inspection of the original.
- Specific denial: Respondent must specify each material allegation of fact not admitted and, when practicable, state the substance supporting the qualification/averment; partial denials must deny only the remainder; if without knowledge or information sufficient to form belief, respondent must so state—otherwise the averment is deemed admitted.
- A party may amend once as a matter of right:
- at any time before a responsive pleading is served, or
- within ten (10) days after service of the reply.
- Docket fees:
- Docket fee is one-tenth (1/10) of one percent (1%) of the amount claimed or prayed for plus twenty percent (20%) of such amount, exclusive of interest, but not less than PHP 1,000.00.
- If there is no claim for money, docket fee is PHP 1,000.00.
- In cases for suspension of payments, rehabilitation, and involuntary dissolution, docket fee is not less than PHP 5,000.00.
- A complaint/petition is deemed filed only after payment of required docket fees and all other fees payable by law.
- Process service fee: PHP 100.00 for every respondent named.
- Summons issuance: Upon filing of a complaint/petition, summons to the respondent must be issued within five (5) days from date of filing.
- The summons must direct the respondent to answer within the time fixed by the Rules and warn that failure to answer will permit plaintiff to take judgment by default and may be granted relief under Rule III, Section 10.
- Alias summons may be issued if summons returned unserved or lost, upon demand of petitioner/complainant, in the same form as the original.
- Summons may be served by the Commission’s process server, or by another specially authorized person.
- Personal service: Summons is served by handing a copy to the respondent or tendering if refused; for corporations/partnerships/associations registered in the Philippines, service must be made on the President, Manager, Corporate Secretary, Cashier, Agent, or any director.
- Substituted service is allowed when personal service cannot be effected for justifiable causes by:
- leaving copies at the respondent’s dwelling house/residence with a person of suitable age and discretion residing therein, or
- leaving copies at respondent’s principal office or regular place of business with a competent person in charge.
- Service on private foreign entities: If respondent is a foreign corporation/partnership/association doing business in the Philippines, service may be made on its resident agent designated by law, or if none, on government officials designated by law, or on any of its officers or agents within the Philippines.
- Service by publication may be authorized when address is unknown or whereabouts cannot be ascertained by diligent inquiry; publication is once in a newspaper of general circulation and in places ordered by the Commission, with publication expenses defrayed by petitioner/complainant.
- For respondents not residing or not found in the Philippines, service by leave may be by personal service through the Department of Foreign Affairs or by publication once in a newspaper of general circulation and in places ordered by the Commission.
- When service by publication is authorized, a copy of the complaint/petition and the order must be sent by registered mail to the last known address of the respondent.
- An order authorizing publication specifies the answer period:
- at least thirty (30) days from the date of last publication for a resident respondent whose address is unknown or whereabouts cannot be ascertained, and
- at least sixty (60) days from the date of last publication for a non-resident respondent.
- Applications for leave to serve by publication must be made by written motion supported by affidavit setting forth grounds.
- Service by publication in franchise suspension/revocation cases brought by the Prosecution and Enforcement Department upon the relation of another person uses publication once in a newspaper of general circulation, and publication expenses are defrayed by the person at whose request and upon whose relation it is brought.
- Proof of service must be written, stating manner, place, and date; must specify papers served and who received them; proof must be sworn when made by someone other than the Commission server.
- Publication service proof for resident respondents with unknown address/whereabouts is proved by affidavit of printer/editor/business or advertising manager with a copy of the publication attached.
- Publication service proof for non-resident respondents may be proved by affidavits of the printer/editor/business or advertising manager and by affidavit of the server that the complaint/petition copy and Commission order were sent by registered mail to last known address.
- Voluntary appearance before the Commission is equivalent to service for purposes of acquiring jurisdiction over the person, unless an explicit reservation is made.
Case management: conferences, evidence, decisions, finality
- Preliminary conference: The Hearing Officer must set the case for preliminary conference within ten (10) days after the last pleading is filed, and direct parties and their attorneys to appear on the date set to consider, based on submitted affidavits, documents and evidence:
- possibility of amicable settlement,
- simplification of issues,
- scheduling of continuous hearings until completed and terminated, and
- other matters aiding just and speedy disposition.
- The preliminary conference must end ten (10) days after its commencement, whether or not settlement occurs.
- Amicable settlement: During the preliminary conference, the Hearing Officer must take initiative so parties exhaust available means to arrive at a fair and reasonable settlement; parties must be ready with specific proposals/counter-proposals.
- Amicable settlement must always be encouraged as long as it is not prejudicial to public interest or third parties, not contrary to law/rules/regulations, and not against good morals or public policy.
- Where practicable, amicable settlement must be reduced in writing and signed by the parties and/or counsels, forming the basis of the corresponding order or decision.
- Failure to appear at preliminary conference:
- If plaintiff fails to appear, the petition is dismissed.
- If defendant appears in plaintiff’s absence, the defendant is entitled to judgment on counterclaim based on facts alleged and limited to what is prayed for in the answer.
- The Hearing Officer may reduce claimed damages and attorney’s fees for being excessive or unconscionable.
- If a sole defendant fails to appear, plaintiff is entitled to judgment as above, with an exception when multiple defendants suing under a common cause of action pleaded a common defense and those defendants appear.
- Preliminary conference order: After the conference, the Hearing Officer issues an Order reciting actions taken; stipulations; agreed evidence; witnesses to be presented by all parties; and scheduled hearing dates for witness presentation.
- Hearings must commence not later than fifteen (15) days from termination of preliminary conference and must be completed within twenty (20) days from the date of the first hearing.
- Failure to present witnesses on a scheduled date is a waiver of that hearing date; witnesses may be presented within remaining hearing dates.
- Position papers and draft decisions: Within fifteen (15) days after the case is submitted for resolution, parties must submit position papers with law and facts relied upon and must submit a draft decision/resolution clearly and distinctly stating facts and law; the Hearing Officer may adopt whole or part of a party’s draft or reject both.
- Decision timeline: The Hearing Officer must render a decision within twenty (20) days from submission of the case for resolution.
- Finality: Absent appeal, the decision becomes final and executory fifteen (15) days from the date of receipt by the parties.
Contempt, subpoenas, production, and injunctions
- Direct contempt: A person guilty of misbehavior in presence of or so near the Hearing Officer as to obstruct or interrupt proceedings, including disrespect to the Hearing Officer, offensive personalities, refusal to be sworn or answer as witness, or refusal to subscribe affidavits/depositions when required, may be summarily adjudged in contempt.
- For direct contempt, the Hearing Officer may impose a fine not exceeding PHP 1,000.00, imprisonment not exceeding ten (10) days, or both.
- The Hearing Officer may require the Sheriff or local police agencies to assist in enforcement.
- Indirect contempt: Failure or refusal to comply with a promulgated decision, order, or writ without justifiable cause after being required to do so is punished as contempt under the applicable provisions of the New Rules of Court.
- Subpoena/subpoena duces tecum: A party may request issuance before or during preliminary conference if attendance/production of clearly specified documents is necessary.
- A subpoena may only be issued if the witness or document has been previously referred to or stated in the petition/complaint, answer, or subsequent pleadings.
- Production/inspection of documents/things: Upon motion showing good cause, the Hearing Officer may order production and permit inspection/copying/photographing of designated non-privileged evidence material to the case, in the possession/custody/control of the ordered party.
- The Hearing Officer may also order entry upon designated land or property under a party’s possession/control for inspection, measuring, surveying, or photographing relevant objects or operations.
- The inspection order must specify time, place, and manner and may prescribe just terms and conditions.
- Requests for production/inspection must be made before or during the preliminary conference and must be limited to documents/things previously referred to in the complaint/petition, answer, reply, or rejoinder.
- Preliminary injunction—issuance: A preliminary injunction may be granted by the Hearing Officer upon bond filed with the Commission fixed by the Hearing Officer any time after commencement and before judgment when, after notice and hearing, it is established that:
- the applicant is entitled to the relief demanded and the relief consists in restraining acts complained of or requiring performance of acts for limited period or perpetually, or
- commission/continuance/non-performance during litigation would probably work injustice to applicant, or
- a party/court/agency/person is doing, threatening, or procuring/suffering to be done some act probably violating the applicant’s rights over the subject and tending to render judgment ineffectual.
- Injunction—objection/dissolution: The application may be denied for insufficiency and may be denied or dissolved on grounds supported by affidavit of the enjoined party, opposed by applicant via affidavits.
- If issuance/continuance would cause irreparable damage to the enjoined party while applicant can be fully compensated for damages, the injunction may be denied or dissolved if the former files a bond in an amount fixed by the Hearing Officer conditioned to pay all damages the applicant may suffer by refusal/dissolution.
- If the preliminary injunction granted is too great, it must be modified.
- Final injunction: After trial, if applicant is entitled to permanently enjoin, the Hearing Officer must grant a final injunction perpetually restraining acts or confirming a preliminary mandatory injunction.
- Temporary restraining order (TRO): Any complaint/initiatory pleading praying for a TRO is referred to the Chairman or, in his absence, the most senior Associate Commissioner.
- TRO ex parte: If the Chairman (or most senior Associate Commissioner in his absence), in discretion, finds extreme urgency such that grave injustice and irreparable injury will arise unless a TRO issues, a TRO effective only for seventy-two (72) hours from issuance may be issued.
- Upon ex parte TRO issuance, parties are immediately summoned for raffle of the case to a Hearing Officer/Panel in their presence.
- Summary hearing: Before expiry of the seventy-two (72) hours, the raffled Hearing Officer/Panel must conduct a summary hearing to determine whether TRO extends for the remaining seventeen (17) days.
- If no seventy-two (72) hour TRO has been issued, action on TRO application must be taken by the Hearing Officer/Panel only after all parties are heard within twenty-four (24) hours from transmission after raffle.
- A summary hearing is deemed conducted when the adverse party or counsel is given opportunity to oppose orally or in writing; failure to oppose is treated as waiver and the application is deemed submitted for resolution.
- During TRO effectivity, the application for writ of preliminary injunction is heard and resolved by the assigned Hearing Officer/Panel.
- If hearings on the preliminary injunction are not completed within TRO effectivity for any reason, resolution is based on whatever evidence is available from the case records.
- TRO applications after commencement: Any application for TRO after commencement but before judgment is referred to the office of the SICD Director/Head for appropriate action, and the same procedure applies.
- Prohibitions: Any motion that would delay resolution of the TRO application is prohibited, and a petition for certiorari regarding issuance of a seventy-two (72) hour TRO is prohibited.
Provisional remedies and management measures
- Preliminary attachment—when and how: At commencement or any time before entry of judgment, a complainant/petitioner or proper party may have adverse party’s property attached as security for satisfaction of judgment in cases analogous to those under Rule 57 (Preliminary Attachment) of the Rules of Court.
- An attachment order may issue on motion with notice and hearing by the Hearing Officer where the action is pending.
- The order must require the Commission’s sheriff to attach so much of the adverse party’s property in the Philippines not exempt from execution as suffices to satisfy the applicant’s demand unless the adverse party makes deposit or gives a bond equal to the amount fixed in the order.
- The bond or deposit amount may be the amount sufficient to satisfy demand or the value of property stated by the applicant, exclusive of costs.
- The applicant must file a bond executed to the adverse party in an amount fixed by the Hearing Officer, conditioned to pay:
- all costs adjudged to the adverse party, and
- all damages sustained by reason of attachment if applicant is finally not entitled.
- Receivers—appointment grounds: Upon verified petition, one or more receivers may be appointed by the Hearing Officer for property (real or personal) that is the subject of the action/claim in cases where:
- a corporation has been dissolved, is insolvent, is in imminent danger of insolvency, or has forfeited its corporate rights, or
- applicant has an interest in the property/fund and the property/fund is in danger of being lost, removed, or materially injured unless a receiver is appointed to guard and preserve it, or
- appointment is the most convenient and feasible means of preserving, administering, or disposing of the property in litigation.
- Receiver bond: Before issuing the order appointing a receiver, the Hearing Officer must require applicant to file a bond executed to the adverse party in an amount fixed by the Hearing Officer, conditioned to pay damages the adverse party may sustain because the applicant procured the appointment without sufficient cause.
- The Hearing Officer may require an additional bond anytime after appointment.
- Denial/discharge of receivers: The Hearing Officer may deny the application or discharge a receiver when the adverse party files a bond executed to the applicant in an amount fixed by the Hearing Officer to pay damages the applicant may suffer because of the acts/omissions or matters specified as grounds for appointment.
- The receiver may also be discharged if shown that the receiver’s appointment was obtained without sufficient cause.
- Management committee: The Hearing Officer may create and appoint a management committee upon verified petition or motu proprio to manage corporations, partnerships, or other associations where there is imminent danger of:
- dissipation,
- loss,
- wastage or destruction of assets or other properties, or
- paralysis of business operations,
- in a way prejudicial to the interest of minority stockholders, parties-litigants, or the general public.
Election cases: special pleading and timelines
- Election-case rules apply to disputes involving election of directors or trustees in stock or non-stock corporations, respectively.
- Only the following pleadings are allowed in election cases: complaint or petition, answer, and compulsory counterclaim.
- Counterclaims or cross-claims must be asserted in the answer or they are considered barred.
- All pleadings must be verified.
- Upon filing of the complaint/petition, the Hearing Officer may:
- dismiss outright due to failure to file within fifteen (15) days from the date of the election if the by-laws do not provide a procedure for resolution, or within fifteen (15) days from resolution by the corporation as provided in the by-laws; or
- dismiss due to failure to exhaust intra-corporate remedies in election protests as provided in the corporation’s by-laws; or
- order issuance of summons.
- Respondent must answer within ten (10) days from service of summons, including all available grounds for a motion