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MANILA, Philippines — The Securities and Exchange Commission (SEC) fined NOW Corp and its CEO Mike Velarde P1 million each for what the regulator said, in an order, were misleading disclosures relating to P2.6 billion in unpaid fees to the government.
The case stemmed from the Nov. 10, 2021 disclosure made by the IT firm and its CEO that they have no knowledge of details surrounding motions filed by the National Telecommunications Commission (NTC) at the Supreme Court seeking resolution on NOW Telecom’s P2.6 billion liability representing unpaid supervision and regulation fees (SRF) and spectrum user fees (SUF).
In a seven-page order dated June 15, 2023, the country’s corporate regulator found no merit in claims made by NOW Corp. and Velarde that their disclosure contained truthful and accurate statements.
The SEC—through its Enforcement and Investment Protection Department—did not buy their argument that they have no knowledge of details surrounding the NTC motion, noting that Velarde is also the chairman of the board of NOW Telecom.
“Such disclosure is misleading as NOW and Mr. Velarde are fully aware of the specific details surrounding the motion, that is, the unpaid SUF and SRF of [NOW Telecom] with NTC,” the SEC said.
“Accordingly, in this case, there is a failure to make a full, accurate and timely disclosure of a material fact or information about securities as mandated compliance prescribed to a listed company constitute a violation of Section 24.1(d) of the SRC,” it added.
“Considering the magnitude of the unpaid fees of [NOW Telecom] vis-a-vis the investment of [NOW Corp. in NOW Telecom], it is logical to say that said unpaid fees were factored in by NOW in entering into the Memorandum of Agreement (MOA) and in valuation of the shares as consideration for the agreement,” the SEC said.
The SEC order was referring to the MOA entered into by NOW Corp and then Next Mobile Inc. (now NOW Telecom) with five other companies involving share swapping which NOW Corp. reported as “investment in shares of stocks” reflected in its 2006 financial statement.
“Mr. Velarde holding the position of Chairman/CEO of Now Telecom and at the same time, being the Chairman of the Board of NOW Corp., can be personally liable for the obligations incurred by the company,” the SEC said.
As regulator of securities transactions, the SEC explained that it was “duty-bound to ensure that full and fair disclosure about securities is steadfastly complied with by listed companies.”
“This is to protect the interest of the investing public to whom listed companies owes their continued existence. Thus, the duty to disclose must always be complied with by putting the interest of investing public over the interest of the company,” it added.
The SEC order came five months after NOW Telecom secured a $2.15-million grant from the United States Trade and Development Agency to fund a financial assistance for its 5G pilot network launch.