The Department of Justice (DoJ) had upheld the criminal prosecution of eight foreigners accused by the Security and Exchange Commission (SEC) of illegally selling membership shares of the Nomad Sports Club (NSC).
This developed after the DoJ denied for lack of merit the motion a reconsideration filed by foreign-members of NSC — one of the country’s oldest sports clubs — who were earlier recommended for indictment before the Parañaque City Regional Trial Court (RTC) for engaging in unlawful offering and sale of securities, in the form of membership shares.
Charged were British and Australian nationals Jonathan Thorp, Thomas Whitwell, Alfonso Cervero, Matthew Freeston, Andrew Yates, Ian Sinclair, Keith Warne and Faisal Durrani-Khan, all officers of NSC, criminally liable for violation of the provision of Securities Regulation Code. They had already been charged before the lower court for illegal selling of membership shares of NSC, an exclusive sports club in Merville Park, Parañaque City.
In a three-page resolution, the DoJ’s investigating prosecutors junked the appeal of the officials of NSC and ruled that “having considered the positions taken by the parties in their respective pleadings, we find respondents-movants’ argument as mere rehash of the matters and issues that had been exhaustively discussed and ruled upon in the subject resolution.”
“No new matter was presented that would warrant or justify the reconsideration or reversal of the subject resolution,” the Assistant State Prosecutor Christine  Perolino said, in the resolution which was approved by Senior Deputy State Prosecutor Pedrito Rances Chairman, of the Task Force on Business Scam and Prosecutor General Claro Arellano.
The Parañaque City RTC can now proceed with its trial proceedings against the indicted NSC officials.
The SEC through Enforcement and Prosecution Department officer-in-charge Leila Laureta-Agustin and Securities Counsel Jonathan Pancracius Paguirigan earlier stressed that the appeal of the NSC officials should be denied “for utter lack of merit” for failure “to raise any new and substantial argument that would merit a reconsideration of the resolution” of the DoJ’s investigating prosecutor.
NSC, whose membership consists mostly of foreigners, was first put up in the 1940s as a successor to another all expat organization known as the Manila Club based in Makati City in the 1920s. The club’s present site is a venue for international amateur and professional soccer and cricket events.
Instead, the SEC lawyers strongly urged the DoJ to proceed with the criminal cases against the club officers because the DoJ’s earlier resolution “finding probable cause to hold all of the respondents for trial for violation of the Securities Regulation Code duly conforms with the evidences submitted, to applicable laws and jurisprudence.”
In 2009, the SEC, finding sufficient basis to the complaint initiated by club members — Cebu-based businessman Eduardo Du and lawyer Roland Beltran — sought the indictment of the NSC directors and officers led by Thorp for violation of Section 8, Paragraph 8.1 of Republic Act 8799, otherwise known as the Securities Regulation Code for unlawfully offering and selling securities in the form of membership certificates or shares to the general public through flyers, its Web site and at its office.
After conducting preliminary investigation, the DoJ investigating fiscal on Oct. 26, 2011 found probable cause to charge Thorp and other NSC officers with violations of the SRC, in connection with the unauthorized sale of securities in the form of membership shares.
In opposing the appeal of Thorp and other NSC officials, the SEC stressed that “there is evidence to prove that respondent Nomad (and officers) offered and sold non-proprietary membership shares to the public” in violation of the securities regulation law, which also penalizes even “mere offering for sale or distribution of securities within the Philippines without a registration statement duly filed with and approved by the Commission.”
“Being securities, the membership shares are required to be registered with the SEC before they may be sold or offered for sale to the public,” the SEC said, in its opposition.
The SEC argued that “contrary to the claims of respondents, securities defined under the SRC are not limited to stock corporations, commercial enterprises or profit making ventures but pertains to all forms of corporations whether stock or non-stock or non-profit.”
The regulatory body also pointed out that the SRC does not provide that if membership shares are issued by non-stock and non-profit corporations, registration of the same is no longer required.
“Respondents cannot claim that Nomad’s membership shares cannot and should not be considered as securities which require prior registration before they can be sold to the general public on the ground that Nomad is a non-stock and non-profit corporation and not in any way engaged in profit making activities,” the SEC lawyers said.
Members of the Nomad Sports Club are entitled to the use and enjoyment of the club facilities as listed in the Club House Rules, in consideration of the payment of a joining fee, the amount of which varies depending on the kind of membership applied for.
“Hence, Nomad’s ‘club membership’ falls squarely within the definition of non-proprietary shares as defined under SRC Rule 3 (k),” the SEC noted.
A non-proprietary share or certificate as defined under SRC Rule 3 is “an evidence of interest or privilege over a certain property of a corporation in view of the amount paid by the holder for the said share/certificate. While the holder is entitled to the use of the property, he has no right over dividends or of the assets of the company upon liquidation thereof.”
SEC also debunked the foreigners’ argument that they are not covered by the SRC since they do not issue a certificate for the membership share or security but only require a membership application form after which the club then issues a member’s identification card.
“Security is not only evidenced by a certificate, but also by a contract or instrument, whether written or electronic in character,” the SEC said, noting that the law covers so-called “uncertificated securities, hence, there is no restriction as to the form in which the existence of a non-proprietary share may be established, as long as that form constitutes evidence of its existence.”
SEC lawyers asserted that since NSC has 513 members as of November 2008, this “amounts to 513 membership shares sold by Nomad.”
The foreigners are being charged for violation of Sections 8 and 12 of RA 8799 otherwise known as the SRC following a complaint by Beltran, a former director, and a member Edward Du.
The original recommendation for the charges was signed by the Securities and Exchange Commission represented by its Compliance and Enforcement Department director Hubert Dominic Guevarra and CED Evaluation and Prosecution Division officer-in-charge Leila Laureta-Agustin and Jonathan Paguirigan.
They accused club officers “offered and sold securities to the public as its club membership which falls squarely within the definition of non-proprietary shares type of securities that require registration before the same can be offered and sold to the general public.”