SEC Commissioner bares advisory is only the first step

The modus operandi is simple. Rob Peter to pay Paul. 
Unsustainable? Yes. Illegal? Yes.

WARNING. The Securities and Exchange Commission (SEC) issues a warning to the public against investing in Davao-based Rigen Marketing, which has been soliciting investments with promises of 400 percent returns in a short time. SEC also warned those who act as salesman, broker or agents of Rigen Marketing in convincing people to invest in the company that they will be persecuted and held criminally liable and will be penalized with a fine of P5 million or imprisonment of 21 years. Lean Daval Jr

People have been warned. They don’t listen now, but they must stop.
This is the friendly but stern caution of lawyer Javey Paul Francisco, Commissioner of the Securities and Exchange Commission (SEC), on the so-called investment schemes.

The Dabawenyo SEC Commissioner told Edge Davao in an exclusive interview that those who have invested “should immediately stop and inform us of these activities.”

“Afterall, not only are they parting with their money, they may even be held liable if they also convinced others to join. As we have often emphasized: “if something seems too good to be true, it probably is,” he said.

In an advisory dated May 24, 2019, SEC warned the public against investing in the Davao-based Rigen Marketing, which has been soliciting investments with promises of high returns in a short time. Rigen, which is based in Tagum City, Davao del Norte, entices the public to invest with a guaranteed return of 400 percent in just a month or so.

“Essentially, an investment scam’s modus operandi is simple: rob Peter to pay Paul. That is the business model and is surely unsustainable not to mention illegal,” Francisco explained.

Under Rigen’s investment scheme, an investment of P5,000 and a registration fee of P150, for instance, Rigen promises a P20,000 return. Meanwhile, an investment of P50,000 and a registration fee of P1,500 could earn P200,000. Rigen describes itself on its website as a new startup company based in Tagum City that aims to “help the financial needs of individuals by providing a concrete system allowing ordinary people to have solid additional income.”

According to the May 24 SEC advisory, “the public is hereby advised to exercise caution in investing their money in these types of schemes which may also turn out to be fraudulent investment schemes, involving the sale of unregistered securities.”

The advisory was met with mixed reactions from netizens mostly from Davao. 

A post from the SEC website shared by lawyer Caesar Europa elicited massive sharing online. Some of those who reacted downplayed the SEC advisory as an empty warning. Some even scoffed at the action questioning why the SEC is not shutting down the operations of Rigen. And then there were those who went to the extent of questioning why the advisory was not signed.

Francisco clarified that advisories are posted in the SEC website which the agency controls. “No Advisory is issued without prior approval of the commission en banc,” he said. “In addition, we have repeatedly gone on media to explain and educate, but dami hard headed talaga.”

The SEC Commissioner explained that the advisory is just a preliminary step made by the SEC in clamping down on illegal investment schemes.
The advisory, he said, is “an immediate warning based on initial reports/investigation gathered and based on our factual finding that no secondary license or permit was issued by SEC for such activity.” 
“A prudent investor should at least verify with us kung allowed ba yung company to sell,” Francisco said.

“Under the Securities Regulation Code, before an entity can offer securities including investment contracts and the like to the public, it must first register the securities with SEC and secure a license from us,” he explained. “Both Kapa and Rigen did not do the same. As for Kapa, we issued an Advisory, a Cease and Desist Order and even revoked their certificate of registration. As to Rigen, we already issued an Advisory as an immediate warning to the public while further processes are on-going,” he added.

As to what other steps the SEC is doing, Francisco said “there are other things we are working at but cant divulge yet.”

The investment schemes that violate the law, Francisco said, run against various provisions of the Securities Regulation Code (SRC). “But more importantly Sections 8 and 28,” he said.

Securities Regulations Code (SRC), Section 8 provides for the Requirement of Registration of Securities. It stipulates that “Securities shall not be sold or offered for sale or distribution within the Philippines, without a registration statement duly filed with and approved by the Commission. Prior to such sale, information on the securities, in such form and with such substance as the Commission may prescribe, shall be made available to each prospective purchaser. ‘

Under the same law, Section 28 provides for Registration of Brokers, Dealers, Salesmen and Associated Persons. It stipulates that “No person shall engage in the business of buying or selling securities in the Philippine as a broker or dealer, or act as a salesman, or an associated person of any broker or dealer unless registered as such with the Commission.”

Francisco stressed that “under the SRC, all those who solicit, convince, recruit, offer either as salesmen, broker or agent without the proper license may be prosecuted and held criminally liable. Penalty is a maximum fine of P5 million and/or imprisonment of 21 years. So even investors, who also convince others to invest may be liable.”