The Securities and Exchange Commission said Monday it revoked the license of Venture Securities Inc., a brokerage owned by businessman Eusebio Tanco, for allegedly committing fraud that led to R&L Investments’ collapse.
It said a special hearing panel, in a decision dated June 11, also imposed penalties amounting to P32 million against the brokerage and its officers.
The panel said it found acts and omissions on the part of VSI and its officers that “indispensably contributed to, if they had not been the proximate cause of, the losses incurred by the clients of R&L.”
Records show the SEC in November 2019 ordered Capital Markets Integrity Corp. to take over the operations of R&L following the discovery of unauthorized transfers of shares to the account of a certain Julieto Sulapas in VSI.
The transactions—facilitated by one Marlo Moron on behalf of Sulapas while acting as a trading floor assistant and settlement clerk of R&L through EQ trades or transfers of shares from one broker to another—resulted in the loss of P700 million worth of client shares in R&L, one of the oldest brokerages in the Philippines, according to the panel.
VSI and its president Wilfred Racadio, associated person Adora Aguilar, salesman Loreto Balabis and settlement head Teresita Mosenabre failed to observe know-your-client procedures and other controls under Republic Act No. 8799, or the Securities Regulation Code and its implementing rules and regulations, the panel concluded.
“We cannot tolerate and ignore any act or omission on the part of those involved in the capital market which would violate the norm set by the securities law especially on the transactions and responsibilities of Broker Dealers and that would diminish or even just tend to diminish the faith of the investors on the integrity of the capital market,” the SHP said.
“Likewise, the practice of installing undiscerning persons in entities involved in the capital market cannot be tolerated, let alone allowed to perpetuate. This must be curbed by holding accountable those who consciously and willfully commit wrongful acts in the performance of their duties as officers, registered persons or employees,” it said.
The panel said the concerned officers of VSI were not present when Sulapas opened an account and failed to verify the authority of Moron to transact on behalf of Sulapas.
Separate investigations conducted by CMIC and the SEC Markets and Securities Regulation Department also revealed that Sulapas’ transactions under his VSI account amounting to P9,905,454,333.20 were “grossly disproportionate” to his declared total net worth, liquid net worth and annual income of less than P1 million, as reflected in his Customer Account Information Form as of October 2017.
The panel said Sulapas’ account ledger with VSI further showed that he made about 2,800 buy transactions from 2012 to 2019, even though he only made five cash payments during the same period.
It said despite the discrepancies, Balabis, Aguilar and Mosenabre did not inquire, verify or review the transactions made by Sulapas.
The panel said VSI and its officers failed to report suspicious transactions to the Anti-Money Laundering Council and somehow even helped Sulapas evade the reporting threshold by issuing multiple checks for amounts lower than P500,000.
The panel noted that VSI failed to maintain and keep a current and complete set of its books and records in violation of the SRC and its IRR, and lacked clear customer acceptance policies and procedures, among others.