The Securities and Exchange Commission (SEC) has denied the appeal of NOW Corp. and its chairman, Mel V. Velarde, and affirmed P1 million fines each for violations of securities law arising from a disclosure the regulator found misleading.

In a 23-page decision, the Commission ruled the appeal was “bereft of merit,” upholding two earlier orders by its Enforcement and Investor Protection Department (EIPD) and ordering NOW Corp. and Velarde to pay the penalties.

The SEC also directed the EIPD to investigate the potential liability of other members of NOW Corp.’s board “to determine if they could be held accountable in their personal capacities,” emphasizing that the sanctions were “without prejudice to any subsequent findings of liability against said directors.”

The decision was issued by Commissioners Javey Paul D. Francisco, Karlos Bello, Mcjill Bryant T. Fernandez, and Rogelio V. Quevedo.

The case stemmed from a November 2021 disclosure after an ABS-CBN News report said the government, through the National Telecommunications Commission (NTC), was seeking resolution of NOW Telecom’s alleged P2.6-billion unpaid fees.

In response to the Philippine Stock Exchange, NOW Corp. said it was not a party to the Supreme Court case and that the company “has no knowledge of the specific details surrounding the alleged motion,” invoking the sub judice rule.

The SEC rejected that defense, calling it “a semantic evasion and collapses upon scrutiny,” and ruled the disclosure was “untenable and completely misleading.”

“Certainly, the public was not concerned with the procedural filing of the NTC Motion; but was concerned with the alleged P2.6 billion liability,” it noted.

The SEC said disclosure under the Securities Regulation Code is about substance, not just form, and ruled that NOW Corp.’s November 2021 statement was misleading. 

The reported P2.6-billion claim was “undeniably a material fact,” given that NOW Telecom accounts for nearly all of NOW Corp.’s assets, making the filing “a classic material omission.”

The Commission also dismissed the company’s reliance on the sub judice rule, noting that NOW Corp. later acknowledged there was no P2.6-billion debt and no final fees due. 

According to the SEC, the information was always disclosable, and a later correction does not undo a violation, especially since the market traded on misleading information for over a month.

In Velarde’s case, the SEC said that enforcing corporate officers’ statutory duties does not require piercing the corporate veil. 

Despite the ongoing development, NOW Corp. said in a separate stock exchange disclosure on Monday that the incident “has no impact on the financial condition and business operations of the Company” and that it intends to further appeal the decision.