Securities and Exchange Commission vs.

Oudine Santos
GR 195542, March 19, 2014 | Second Division, Perez J
Sometime in 2007, an investment scam was exposed with the disappearance of its primary
perpetrator Michael H.K. Liew, a self-styled financial guru and Chairman of the BOD of Performance
Investment Products Corporation (PIPC-BVI), a foreign corporation registered in British Virgin Islands.
PIPC-BVI incorporated in PH as PIPC Corporation. SEC was flooded with complaints from 31 individuals
against PIPC and its officers for alleged violations of certain provisions in SRC. On the whole, Private
complainants Lorenzo and SY charged Santos in her capacity as investment consultant of PIPC
Corporation who actively engaged in the solicitation and recruitment of investors. She acted as PIPCs
agent and made representations regarding its investment products facilitating Lorenzo and Sys
investment. And so, SEC filed a complaint affidavit for violation of Secs. 8, 26, and 28 or SRC before
the DOJ:
This case stems from the act of fraud and chicanery masterfully orchestrated and
executed by the officers and agents of PIPC Corp. against their unsuspecting investors. The
deception is founded on the basic fact that neither PIPC Corp. nor its officers, employees and
agents are registered brokers/dealers, making their numerous transactions of buying and
selling securities to the public a blatant violation of the provisions of the SRC, specifically
Sections 8 and 28 thereof. As per their AOI, PIPC was only authorized to act as a research arm
of their foreign clients.
Santos defense consisted in:
1) denying participation in the conspiracy and fraud perpetrated against the investorcomplainants of PIPC;
2) claiming that she was initially and merely an employee, and subsequently, an independent
information provider for PIPCl
3) PIPC being a separate entity from PIPC-BVI of which Santos has never been a part of in any
capacity;
4) she did not receive money from Sy and Lorenz because they directly invested with PIPC-BVI
5) PIPC-BVI as the other party in the contract, was the only corporation liable to Sy and Lorenzo
and other complainants.
The DOJ panel found probable cause on the collective acts of the majority of the respondents including
respondent Santos, which consisted in their acting as employees-agent and/or investor-agents of PIPC
Corporation or PIPC-BVI. Specifically alluding to Santos as Investment consultant of PIPC Corporation,
DOJ found probable cause to indict her for violation of Sec 28 of SEC for engaging in the business of
selling or offering for sale securities without the necessary registration from SEC. Santos filed a
petition for review before the Sec of DOJ claiming that she was a mere employee who did not solicit
investors. Accordingly, the Sec of DOJ excluded Santos from prosecution of violation of Sec 28 of SRC.
Hence, this appeal by certiorari raising the issue: Whether Santos should be excluded from the
information for violation of Section 28 of the SRC.
Held:
Generally, at the prelim investigation, the investigating prosecutor and the DOJ is afforded wide
latitude of discretion in the exercise of its power to determine probable cause to warrant criminal
prosecution. The determination of probable cause is an executive function where the prosecutor
determined merely that a crime has been committed and that the accused has committed the same.
However, the authority of the prosecutor and DOJ is not absolute, it cannot be exercised arbitrarily or
capriciously. While it is the Courts policy not to interfere, it has in more than once occasion, admitted
some exceptions.
In excluding Santos from the prosecution, the Secretary of DOJ debunked the finding of the DOJ panel
and ruled that there was no evidence showing Santos actual participation in the final sale of
unregistered securities since Santos never signed nor was ever mentioned in the investment
documents. Such conclusions are a myopic view of the investment solicitations made by Santos on

behald of PIPC while she was not a licenses broker or dealer. Hence, the Court sustains the DOJ
Panels findings that PIPC was an issuer of securities without the necessary registration of
license with SEC and engaged in the business of buying and selling securities. Under Sec 3 of
SRC:

Broker a person engaged in the business of buying and selling securities for the account of
others

Dealer means any person who buys and sells securities for his or her own account in the
ordinary course of business

Associated person of a broker or dealer an employee whom directly exercises control of

supervisory authority but does not include a salesman or an agent or a person whose
functions are solely clerical

Salesman a natural person, employed as such as an agent by a dealer, issuer or broker to

buy and sell securities.
To determine whether the DOJ Secretarys resolution was tainted with GAD we pass upon the lements
for violation of Sec 28 of SRC:
a) Engaging in the business of buying or selling securities in the PH as broker or dealer OR
b) Acting as a salesmen OR
c) Acting as an associated person of any broker or dealer, unless registered as such with the SEC.
Santos, by the very nature of her function as what she now unaffectedly calls an information provider,
brought about the sale of securities made by PIPC Corporation and/or PIPC-BVI to certain individuals,
specifically private complainants Sy and Lorenzo by providing information on the investment products
of PIPC Corporation and/or PIPC-BVI with the end in view of PIPC Corporation closing a sale.
While Santos was not a signatory to the contracts on Sy's or Lorenzo's investments, Santos procured
the sale of these unregistered securities to the two (2) complainants by providing information on the
investment products being offered for sale by PIPC Corporation and/or PIPC-BVI and convincing them
to invest therein.
No matter Santos' strenuous objections, it is apparent that she connected the probable investors, Sy
and Lorenzo, to PIPC Corporation and/or PIPC-BVI, acting as an ostensible agent of the latter on the
viability of PIPC Corporation as an investment company. At each point of Sy's and Lorenzo's
investment, Santos' participation thereon, even if not shown strictly on paper, was prima facie
established. The very information provided by Santos locked the deal on unregistered securities with
Sy and Lorenzo.
Sy and Lorenzo did not go directly to Liew or any of PIPC Corporation's and/or PIPC-BVI's principal of
cers before making their investment or renewing their prior investment. However, undeniably, Santos
actively recruited and referred possible investors to PIPC Corporation and/or PIPC-BVI and acted as
the go-between on behalf of PIPC Corporation and/or PIPC-BVI.
When the investor is relatively uninformed and turns over his money to others, essentially depending
upon their representations and their honesty and skill in managing it, the transaction generally is
considered to be an investment contract. The touchstone is the presence of an investment in a
common venture premised on a reasonable expectation of profits to be derived from the
entrepreneurial or managerial efforts of others.
At bottom, the exculpation of Santos cannot be preliminarily established simply by asserting that she
did not sign the investment contracts, as the facts alleged in this case constitute fraud perpetrated on
the public. Specially so because the absence of Santos' signature in the contract is, likewise, indicative
of a scheme to circumvent and evade liability should the pyramid fall apart.
PETITION GRANTED.