The Securities and Exchange Commission (SEC) has upheld the findings of the Philippine Stock Exchange’s independent audit, surveillance and compliance arm against Venture Securities, Inc. (VSI) for violation of multiple trading rules.
The PSE’s Capital Markets Integrity Corporation said these violations were made while facilitating transactions that eventually wiped out client shares in R&L Investments, Inc.
In a decision dated June 15, the Commission En Banc denied the appeal of VSI to reverse and set aside the resolution issued by CMIC, which found the stock brokerage in violation of the self-regulatory organization’s rules and imposed a corresponding penalty of P5.16 million.
CMIC issued the assailed resolution on July 10, 2020 following the discovery of fraudulent transfers of client shares from R&L to the account of a certain Julieto Sulapas in VSI.
The transactions — facilitated by one Marlo Moron on behalf of Mr. 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.
After conducting a special audit, CMIC found that VSI failed to properly record several transactions executed by and assigned to Sulapas. The multiple discrepancies in the records proved the failure of VSI to exercise due diligence, according to CMIC.
CMIC also noted that VSI allowed Sulapas to continue to execute trades and use its facilities notwithstanding the brokerage’s awareness that he has been trading considerably beyond his declared financial capacity.
Additionally, CMIC found that the associated person of VSI failed to properly supervise the activities of its employees, which resulted in the multiple violation of securities laws.
The Commission En Bancruled that CMIC was able to prove by substantial evidence that VSI and its associated person violated the CMIC Rules in relation to the Implementing Guidelines of the Revised Trading Rules.
“[T]he records show that Venture effected and executed a considerable number of transactions which the CMIC found and substantiated to have violated the CMIC Rules in relation to the Implementing Guidelines,” the decision read, noting that VSI itself admitted such violations although not in their entirety.
It added that, “It bears emphasis that the development and integrity of the market also depends on the reliability of the records of its Trade Participants for it is in the proper and dutiful upkeep of these documents that the investing public derives confidence to participate in the economic activity and invest their hard earned money.”
A special hearing panel (SHP) created by the SEC earlier issued separate decisions finding VSI, R&L, Moron and Sulapas liable for fraudulent transactions that led to the collapse of R&L in November 2019.
The SHP imposed a monetary penalty of P32 million against VSI and its officers. It further revoked the brokerage’s license and disqualified the key officers from performing similar functions in other companies.
The SHP also canceled the license of R&L and imposed a monetary penalty totaling P22 million on the brokerage and its officers, who were likewise disqualified from performing similar functions in the future.
Meanwhile, the SHP imposed a P2 million monetary fine for Moron and P1 million for Sulapas. In addition, the panel disqualified Messrs. Moron and Sulapas from being registered persons and officers, directors, or persons performing similar functions.