The enactment of Republic Act 8799, or the Securities Regulation Code (SRC) of 2000, marked a transformative shift in the Philippines’ corporate and securities regulatory framework.

Among its most significant reforms was the transfer of jurisdiction over intra-corporate disputes from the Securities and Exchange Commission (SEC) to the Regional Trial Courts (RTC) designated as Special Commercial Courts (SCC). This move aims to streamline regulatory functions and enhance judicial efficiency.

Prior to the SRC, the SEC exercised quasi-judicial powers in intra-corporate disputes, derivative suits and election contests.

However, this raised concerns about the SEC’s ability to effectively regulate the capital markets and enhance investor protection, while simultaneously acting as a quasi-judicial body.

Recognizing this challenge, lawmakers sought to remove the adjudicatory role of the SEC.

Former Senator Raul S. Roco, one of the key framers of the SRC, explained that removing the SEC’s quasi-judicial powers and transferring intra-corporate disputes to the SCCs would strengthen the SEC as an administrative agency.

The SCCs are granted full judicial powers, including the authority to issue subpoenas and contempt orders, ensuring a more efficient judicial process and improving case disposition and resolution.

However, this move has weakened the effectiveness of intra-corporate dispute resolution by taking jurisdiction away from the SEC — the administrative agency with the most expertise in corporate law.

In fact, the Revised Corporation Code, a law that came almost two decades after the SRC, allows an arbitration agreement to be placed in the articles of incorporation. This provision was introduced to help unclog dockets of SCCs and expedite case resolution.

As the corporate registrar, the SEC is the repository of all corporate documents, including articles of incorporation, bylaws, and financial disclosures.

This wealth of information gives the SEC a distinct advantage in resolving intra-corporate disputes quickly and accurately, without the need for extensive document discovery or lengthy litigation.

SCCs, on the other hand, must rely on the parties to produce these records, which not only delays proceedings but increases the risk of incomplete or manipulated corporate information.

The transfer of jurisdiction has also burdened the already clogged dockets of regular courts. Regular courts are tasked to handle a wide array of civil and criminal litigation.

If intra-corporate disputes were returned to the SEC, the regular courts could focus on other cases, improving judicial efficiency while allowing the SEC to fulfill its mandate as the expert corporate regulator.

Further, maintaining the SEC’s jurisdiction over intra-corporate disputes does not eliminate judicial recourse.

Parties dissatisfied with the SEC’s rulings may still appeal an adverse decision to the Court of Appeals and Supreme Court.

However, by allowing the SEC to resolve these disputes in the first instance, cases would be decided more efficiently, reducing court backlogs, protecting investors, and strengthening corporate governance.

In sum, reinstating the SEC’s jurisdiction over intra-corporate disputes would not only accelerate case resolution but also enhance corporate governance and investor confidence, ensuring that regulatory oversight remains with the institution best equipped for the task.

Reevaluating this jurisdictional shift through legislative amendments or policy reforms would be a crucial step in ensuring a more effective corporate regulatory framework.

Until such reforms are enacted, however, the SEC must continue to defer to the SCCs on all intra-corporate disputes.