"It has been a long time since the SEC has put out a strongly-worded order."
The Securities and Exchange Commission has been making important and precedent-setting moves on the shareholder conflict hounding Medical City. If the SEC maintains this direction, it will be raising investor confidence to levels that augur well for several major initial public offerings planned for next year.
The SEC recently formally charged a group of shareholders linked to a foreign investment company with fraud. Based on media reports, the regulatory body charged the Singaporean firm Viva Holding, its local partner Fountel and several entities identified with the latter of violating key provisions of the country’s Securities Regulation Code.
The SEC said the group “misrepresented their independence from each other” as they went on a buying binge for Medical City shares, eventually acquiring a majority stake in the decades-old medical institution.
The SEC said the misrepresentation prejudiced “the unsuspecting stockholders whose share value and voting power have declined.” The “misrepresentation” referred to by the SEC was a “funding scheme” used by the group where foreign money were channeled from the Singaporean firm to several local companies owned by former Medical City Treasurer, now Chairman Jose Xavier Gonzales.
The SEC said the group violated provisions of the SRC which prohibit any “fraudulent, manipulative and deceptive act or practice in connection with any tender offer.” It also charged the group with violating SRC provisions which make mandatory for “groups of persons acting in concert who intend to acquire 35 percent or more of equity shares in a public company to disclose such intention and contemporaneously make a tender offer for the percent sought to all shareholders.”
It has been a long time since the SEC has put out a strongly-worded order.
Observers are now watching to see if the strongly-worded order is a signal that the SEC is set to impose a penalty that matches the crime, so to speak. Specifically, that could mean that the SEC may declare the acquisition of the Medical City shares by the Singaporean group and their Philippine partners invalid, null and void.
Sources inside Medical City have revealed that current management has played down the SEC charges, assuring employees and doctors that at worst, the SEC would simply impose a fine.
Business community observers, however, believe it is remote that the SEC would simply impose a fine on a group which it has charged with committing fraud involving billions of pesos worth of corporate shares.
The prevailing view is that the SEC may decide to flex its regulatory muscle. If this view holds water, the move will certainly earn the body kudos from the business sector. If the SEC metes out the appropriate penalties which it certainly has the power to do, the regulatory agency would be making a strong statement that investment rules in this country are to be followed by all, both by the small players and the big, moneyed groups. The playing field is level, the rules are clear and the SEC is determined to make sure they are complied with.
Recall that the attention of the business sector and healthcare industry was caught by these developments because of the apparent dare thrown to the SEC by this Singaporean-backed group.
Earlier media reports bared that the group had apparently ignored an order by the SEC for all the protagonists in the corporate intramural to respect the status quo. The move raised questions regarding the ability and resolve of the SEC to uphold the law and impose its will in the face of a challenge posed by an international investment giant. We watched with bated breath the next move by the SEC and wondered whether or not it would let itself be intimidated by a powerful global business interest.
With its latest moves on this issue, the SEC has clearly vindicated itself.
It has sent signals to all that, in the face of a challenge to the rules, the SEC will not blink.
That clear SEC judgment on the Medical City row should put all doubts to rest and enhance investor confidence in the country. After all, legitimate investors prefer an investment destination where the rules are clear, where the playing field is level, and where the government ensures both.
Another major hospital group is planning a big IPO next year. The offering planned by the healthcare group of tycoon Manuel V. Pangilinan is expected to create excitement in the market and bring in fresh funds into the industry, both from local and foreign investors.
The SEC move on the Medical City row, therefore, could not have been more timely.