The Securities and Exchange Commission (SEC) reported that the Court of Appeals (CA) has upheld the cease and desist order (CDO) the commission issued against AlphanetWorld Corporation.
AlphanetWorld, doing business under the name and style of NWorld, was ordered by the SEC to stop soliciting investments from the public without the necessary license.
In an 11-page decision promulgated on Dec. 27, 2024, the CA 8th Division held that the SEC provided NWorld with due process in issuing the CDO and the company was involved in offering investments to the public without registration and necessary licenses from the SEC.
The SEC issued the CDO against NWorld on Feb. 23, 2022, directing the company and its directors, stockholders, agents and all persons acting on their behalf to immediately stop from soliciting investments without the commission’s approval.
Subsequently, the SEC issued a resolution on July 19, 2022, denying the motion filed by NWorld to lift the order for lack of merit, making the CDO permanent.
Investigation of the SEC Enforcement and Investor Protection Department found that NWorld was involved in the selling of investment packages ranging from P4,750 to P19,000, with a guaranteed return of up to P127,000 per month.
Its investors were allegedly entitled to bonuses such as discounted rates for every purchase of investment packages, referral bonus, sales match bonus, and potential earning of P25,000 under NWorld’s “XX Cash” program whenever they meet the required pairs of recruits.
The offering of NWorld involved investment contracts, which is a form of securities as defined under Section 3 of Republic Act (RA) No. 8799, or the Securities Regulation Code (SRC).
Section 8 of the SRC prohibits the sale or distribution of securities without a registration statement duly filed with and approved by the SEC.
“Undoubtedly, [NWorld’s] business operation or scheme constitutes an investment contract that is a security under R.A. No. 8799. Hence, it must be registered with SEC before its sale or offer for sale or distribution in order to protect the investing public from fraudulent securities,” the CA ruled.
It added that “the strict regulation of securities is founded on the premise that the capital markets depend on the investing public's level of confidence in the system. As [NWorld] failed to register the same, its offering or sale to the public was rightfully enjoined by SEC.”
Additionally, the CA ruled the SEC observed due process when it issued the CDO against NWorld, noting that informing the company of the result of its investigation is sufficient, and it was given a reasonable opportunity to file a motion to lift the CDO and motion for reconsideration.
The SEC in July 2022 cancelled the corporate registration of NWorld for employing fraud in the procurement of its certificate of incorporation, citing its submission of an invalid Tax Identification Number in its Articles of Incorporation.