SC clarifies SEC salary rules

THE Supreme Court (SC) has ruled that the Securities and Exchange Commission (SEC) cannot unilaterally increase salaries without executive approval but cleared the agency’s officials and 440 employees from refunding P92.74 million in disallowed payments.

In a 46-page en banc decision made public on March 18, penned by Associate Justice Amy C. Lazaro-Javier, the high court partially reversed a Commission on Audit (CoA) ruling that held former SEC Chairperson Teresita J. Herbosa and other officials liable for the 2012 disbursements.

The dispute centered on “Step 7” salary adjustments implemented by the SEC in 2012, in which it argued that Section 7.2 of the Securities Regulation Code (SRC) granted it authority to fix its own compensation system, comparable to the Bangko Sentral ng Pilipinas (BSP), and exempted it from the Salary Standardization Law.

The commission further noted that these adjustments were a condition for a $200-million loan from the Asian Development Bank intended to restructure the agency.

However, CoA issued a notice of disallowance in 2014, maintaining the SEC improperly used its P100-million retention income, legally reserved for maintenance and capital outlays, to fund personal services.

The commission also argued that such increases required prior recommendation from the Department of Budget and Management and approval from the President.

The SC sustained CoA’s finding that the SEC lacks “absolute and illimitable” authority to bypass executive oversight. It clarified that while the SRC grants the SEC independence in formulating its pay plan, it remains under the President’s power of control as mandated by the Constitution.

Despite this, the tribunal absolved the officials, citing “good faith” and a “difficult question of law,” regarding the interpretation of the SRC at the time of the 2012 payments.

“It is unfair to penalize public officials based on overly stretched and strained interpretations of rules which were not that readily capable of being understood at the time such functionaries acted in good faith,” the SC said.

The 440 passive recipients were also excused based on the principle of “immutability of judgments” and social justice considerations, noting the commission’s efforts to align staff skills with market standards. — Erika Mae P. Sinaking