The Capital Markets Integrity Corporation (CMIC), the independent audit, surveillance, compliance and enforcement unit of The Philippine Stock Exchange, Inc., denied allegations that it had been remiss in its previous audits of Venture Securities Inc.
In a statement released to media, Venture cited CMIC’s previous regular audit examinations and the lack of a finding of any wrongdoing on Venture’s part.
“The purported lack of citations of irregularities from CMIC for and within a certain audit period, or even after the conduct thereof, does not preclude a subsequent finding that other rules have been violated by the trading participant (TP),” CMIC said.
It added that, “CMIC’s notices to all TPs after an audit expressly declare that the findings are without prejudice to the initiation of another investigation and/or imposition of appropriate fines and penalties against the concerned TP and/or its officers and employees.”
In its audit of TPs, CMIC said “trading-related documents for a particular period may not arouse suspicion by themselves, but if similar documents for prior periods are correlated to each other, the suspicion of fraud may be supported by extending the examination procedures for the relevant prior periods or years.”
“This is similar to the regular audit practice of companies that are not TPs, wherein it is not uncommon for the external auditor to revisit records of prior periods/years, when warranted, particularly in cases of suspected fraud,” it noted.
SEC expressed the same view in a statement on June 15, 2021 relative to the appeal of Venture on the findings of CMIC.
“The Commission finds that Venture’s argument that CMIC is barred from penalizing the Trading Participant for transactions that occurred more than five (5) years from the time of the special audit pursuant to Article 1149 of the Civil Code, is misplaced,” it quoted the SEC.
The SEC also stated, “The records show that Venture recognized and submitted to the jurisdiction of the CMIC when it voluntarily submitted to the latter its internal records (which included documents for the year 2012 which was clearly beyond the five (5) year prescriptive period) for purposes of the conduct of the special audit. We thus agree with CMIC that Venture is now estopped from assailing the authority of CMIC to pass upon the matters covered by the special audit, after it has consented to be audited by and subjected to the jurisdiction of CMIC.” CMIC conducts annual audits of all TPs based on specific audit parameters submitted yearly to the SEC. The regular audit examinations are conducted based on a sampling methodology sanctioned by the SEC.
The annual audit generally covers a current period, but CMIC is not precluded from investigating a possible violation committed outside of that period.
“CMIC’s audit findings of any TP, Venture included, should not be construed as relieving any such TP of its accountabilities and its responsibility to answer for its violations of the pertinent securities laws, and for matters which were and are within its power, control or management,” CMIC said.
It pointed out that, “Adopting effective internal/financial controls including compliance therewith and adherence to good corporate governance standards and practices are properly the responsibilities of the owners and management of a company, not its auditor.”