The Securities and Exchange Commission (SEC) has fined NOW Corp. and its chief executive Mel Velarde P1 million each for their misleading disclosures relating to the P2.6 billion in unpaid obligation of affiliate company NOW Telecom to the Philippine government.
According to SEC, NOW Corp. and Velarde were administratively liable for violation of Section 24.1(d) in relation to Section 54.1 of the Securities Regulation Code (SRC) for disclosing misleading information to the public.
The case arose from a 21 November 2021 disclosure made by the IT firm and its CEO stating they have no knowledge of the details surrounding the motions filed by the National Telecommunications Commission (NTC) with the Supreme Court on NOW Telecom’s P2.6 billion unpaid supervision and regulation and spectrum user fees.
In a seven-page order dated 15 June 2023, the SEC found no merit in justifications 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 the argument, 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.
The SEC said that as one of concurrent officials of both NOW Corp. and NOW Telecom, Velarde is “considered having ipso facto participated in the transactions” relating to the unpaid SRF and SUF liability of NOW Telecom.
“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 MOA was entered into by NOW Corp. with then Next Mobile Inc., now NOW Telecom, with five other companies involving a swap or exchange of shares of stocks that NOW Corp. reported as “investment in shares of stocks” as 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.
The SEC said it is “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 for its pilot 5G network launch.
NOW declined to comment.
