The Securities and Exchange Commission (SEC) has insisted that the Maria Francesca Tan (MFT) Group of Companies, Inc. and Foundry Ventures I, Inc. should have secured the necessary government licenses first  before soliciting investments from the public, the Department of Justice (DOJ) said on Tuesday, July 2.

The DOJ said the SEC submitted its consolidated reply affidavit before the panel of prosecutors conducting the preliminary investigation on the commission's complaint filed against MFT and Foundry Ventures.

In the affidavit, the DOJ said the SEC refuted the argument of MFT that the loan agreements and promissory notes it issued to investors can’t be classified as “securities” and, thus, "not subject to regulation."

It said "the SEC emphasized that loan agreements are in the nature of securities as contemplated precisely under the Securities Regulation Code (SRC).”

“Notably, the attached affidavits of the investor-complainants delineate the MFT Group and the Foundry’s acts of obtaining funds from the public, indicating that their transactions with the investors/complainants fall under Section 3.1 (a), as evidence of indebtedness, and/or Section 3.1 (b), as investment contracts under SRC,” the DOJ said quoting from the reply affidavit. 

Also, it said, the SEC pointed out that “it is clear that MFT’s offering and/or selling the aforesaid ‘securities’ lacked authorization as it did not secure requisite secondary licenses as Lending Company, Investment Adviser of an Investment Company, Investment House and Transfer Agent and other relative functions from the SEC’s Company Registration and Monitoring Department (CRMD).”

“Moreover, the owner of MFT Group, Maria Francesca Tan, admitted in her Counter-Affidavit that she secured various loans from different persons to finance her business activities which are all proven with an evidence of indebtedness as contemplated under the SRC,” the DOJ said.

The DOJ panel of prosecutors under the department's Task Force on Business Scam led by Senior Deputy State Prosecutor Peter Ong started conducting the preliminary investigation last May 14 and is expected to wrap up the hearings on August 1 when the parties in the case will be submitting their rejoinders.

In its complaint, the SEC accused MFT Group and Foundry Ventures of violating Sections 8, 26, and 28 of Republic Act (RA) No. 8799, the SRC law, in relation to Section 6 of RA 10175, the Cybercrime Prevention Act of 2012.

It also accused MFT and Foundry Ventures of violations of Section 54.1(c), in relation to Section 54.2 of the SRC and Section 177 of RA 11232, the Revised Corporation Code (RCC), and SRC Rule 68, in connection with the alleged material misrepresentations in their audited financial statements.

In an earlier statement, the DOJ had said that “the SEC has found out that MFT offered 12-18% returns to investors through the issuance of postdated checks reflecting a 1-percent to 1.5-percent monthly interest.”

 “Investors were given either a promissory note or borrower-lender agreement as proof of their investment,” it said. “However, all of these were executed without proper documentation and registration with the SEC, making the same as illegal,” it added.