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    Power Homes Unlimited Corp

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    Raymart Salamida
    The Supreme Court of the Philippines ruled that Power Homes Unlimited Corporation's business constitutes an investment contract that qualifies as a security under the Securities Regulation Code. The SEC properly investigated Power Homes' operations before issuing a cease and desist order for failing to register its securities. The Court applied the Howey Test and found Power Homes' scheme involved investors providing money to a common enterprise with the expectation of profits derived from the efforts of others. As an unregistered security, the SEC was justified in enjoining Power Homes' offering to the public to protect investors, even without a finding of fraud. The petition was denied.

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    Power Homes Unlimited Corp

    Uploaded by

    Raymart Salamida
    58 views2 pages
    The Supreme Court of the Philippines ruled that Power Homes Unlimited Corporation's business constitutes an investment contract that qualifies as a security under the Securities Regulation Code. The SEC properly investigated Power Homes' operations before issuing a cease and desist order for failing to register its securities. The Court applied the Howey Test and found Power Homes' scheme involved investors providing money to a common enterprise with the expectation of profits derived from the efforts of others. As an unregistered security, the SEC was justified in enjoining Power Homes' offering to the public to protect investors, even without a finding of fraud. The petition was denied.

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    Corpo Law

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    220. Power Homes Unlimited Corp

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    The Supreme Court of the Philippines ruled that Power Homes Unlimited Corporation's business constitutes an investment contract that qualifies as a security under the Securities Regulation Code. The SEC properly investigated Power Homes' operations before issuing a cease and desist order for failing to register its securities. The Court applied the Howey Test and found Power Homes' scheme involved investors providing money to a common enterprise with the expectation of profits derived from the efforts of others. As an unregistered security, the SEC was justified in enjoining Power Homes' offering to the public to protect investors, even without a finding of fraud. The petition was denied.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    58 views2 pages

    Power Homes Unlimited Corp

    Uploaded by

    Raymart Salamida
    The Supreme Court of the Philippines ruled that Power Homes Unlimited Corporation's business constitutes an investment contract that qualifies as a security under the Securities Regulation Code. The SEC properly investigated Power Homes' operations before issuing a cease and desist order for failing to register its securities. The Court applied the Howey Test and found Power Homes' scheme involved investors providing money to a common enterprise with the expectation of profits derived from the efforts of others. As an unregistered security, the SEC was justified in enjoining Power Homes' offering to the public to protect investors, even without a finding of fraud. The petition was denied.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    of 2

    Power Homes Unlimited Corp. vs SEC (GR No.

    164182, 26 February 2008)

    FIRST DIVISION
    G.R. No. 164182 February 26, 2008
    POWER HOMES UNLIMITED CORPORATION, petitioner,
    vs. SECURITIES AND EXCHANGE COMMISSION AND NOEL MANERO,
    respondents.

    D E C I S I O N PUNO, C.J.:

    FACTS: Petitioner is a domestic corporation duly registered with Public Respondent


    SEC, and is engaged in the transaction of promoting, acquiring, managing, leasing,
    obtaining options on, development, and improvement of real estate properties for
    subdivision and allied purposes, and in the purchase, sale and/or exchange of said
    subdivision and properties through network marketing. Public Respondent SEC acted
    on the letters of Respondent Noel Manero and a certain Romulo Munsayac, Jr.

    Manero alleged that in a seminar he attended, Petitioner claimed that it sells properties
    that were inexistent and without any broker’s license. Munsayac on the other hand,
    inquired whether Petitioner’s business is legitimate or not.

    After investigation, Public Respondent SEC found out that Petitioner is engaged in the
    sale or offer for sale or distribution of investment contracts, which are considered
    securities under Sec. 3.1 (b) of Republic Act (R.A.) No. 8799 (The Securities Regulation
    Code), but failed to register them in violation of Sec. 8.1 of the same Act,Public
    Respondent SEC issued a Cease and Desist Order against Petitioner.

    Petitioner filed this petition for review after the Court of Appeals denied its petition for
    lack of merit and affirmed in toto Public Respondent’s Cease and Desist Order.

    ISSUES:
    1. Whether Public Respondent SEC followed due process in the issuance of the
    assailed Cease and Desist Order;
    2. Whether Petitioner’s business constitutes an investment contract which should be
    registered with Public Respondent SEC before its sale or offer for sale or distribution to
    the public.

    HELD:

    1. YES. The Court held that Petitioner was not denied of due process. The records
    reveal that Public Respondent SEC properly examined petitioner’s business operations
    when it (1) called into conference three of petitioners incorporators, (2) requested
    information from the incorporators regarding the nature of petitioners business
    operations, (3) asked them to submit documents pertinent thereto, and (4) visited
    petitioners business premises and gathered information thereat. All these were done
    before the CDO was issued by the Public Respondent SEC.
    2. The Court ruled that Petitioner’s business constitutes an investment contract, thus,
    should be registered with Public Respondent SEC before its sale or offer for sale of
    distribution to the public. To determine whether a transaction falls within the scope of an
    investment contract, the Court made use of the Howey Test which provides that an
    investment contract requires a transaction, contract, or scheme whereby a person: (1)
    makes an investment of money, (2) in a common enterprise, (3) with the expectation of
    profits, (4) to be derived solely from the efforts of others.

    Ciiting SEC v. Glenn W. Turner Enterprises, Inc. et al., the Court therefore ruled that the
    business operation or the scheme of Petitioner constitutes an investment contract that is
    a security under R.A. No. 8799. Thus, it must be registered with Public Respondent
    SEC before its sale or offer for sale or distribution to the public. As petitioner failed to
    register the same, its offering to the public was rightfully enjoined by Public Respondent
    SEC. The CDO was proper even without a finding of fraud.

    As an investment contract that is security under R.A. No. 8799, it must be registered
    with public respondent SEC, otherwise the SEC cannot protect the investing public from
    fraudulent securities. The strict regulation of securities is founded on the premise that
    the capital markets depend on the investing public’s level of confidence in the system.

    PETITION IS DENIED.

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