SEC reprimands EPCIB for code violation

Equitable PCI Bank received a mere slap on the wrist from the Securities and Exchange Commission (SEC) despite findings it violated the independent director provision of the Securities Regulation Code (SRC).

This as the SEC approved the recommendation of its Compliance and Enforcement Department (CED) to not impose criminal and administrative sanctions against EPCIBank and its nomination committee.

The CED opted to just impose the penalty of reprimand on EPCIBank with a stern warning that any future violations will be severely dealt with in accordance with law.

The case stemmed from the investigation conducted by the CED which found the appointments of Presidential adviser Roberto Romulo and former Trade Secretary Cesar Bautista as independent directors of EPCIBank in violation of the SRC.

Under Sec. 38 of the SRC, an independent director must not be an officer or employee of the corporation they serve, as well as any affiliate, subsidiary or related company thereof which would interfere with the exercise of an independent judgement in carrying out the responsibilities of a director.

The CED noted that Romulo’s concurrent membership in Equitable Card Network Inc. (ECNI) as chairman of the board and as regular director even while he sat as an independent director of EPCIBank from July 16, 2002 to July 19, 2005 was in violation of Sec.38 of the SRC.

The CED said Romulo’s affiliation with ECNI for seven consecutive years from 1997 to 2004 created a strong relationship as to interfere with the exercise of his independent judgement and therefore "could or could reasonably be perceived to materially interfere with his exercise as independent judgement in carrying out his responsibilities as an independent director for EPCIBank."

With respect to Bautista, the CED said his appointment as independent director for EPCIBank from April 20 to July 19, 2005 is in violation of the SEC’s independent director rule because of his being a regular director since 2004 of ECNI and Equitable Savings Bank, a wholly-owned subsidiary of EPCIBank.

The SEC also said the members of EPCIBank’s nominations committee, composed of Romulo, Antonio Go, Anthony Conway and Peter Go Pailian, may be held liable for failure to disclose such facts surrounding Romulo and Bautista’s appointment as independent directors for EPCIBank.

EPCIBank’s former corporate secretary Nilo Divina was also cited by the SEC for failure to disclose material facts in relation to SRC Rule 20 which requires that management report be furnished to stockholders relating to an annual meeting of stockholders at which directors shall be elected.