The Securities and Exchange Commission (SEC) has issued a cease-and-desist order (CDO) against EF Easy Franchise Technological Ventures Inc., which counts popular show host Rene “RJ” Ledesma as a co-founder, to stop its illegal solicitation of investments from the public for so-called franchise businesses.

This comes after an investigation was conducted by the SEC’s enforcement and investor protection department (EIPD) due to numerous complaints and reports alleging that the firm and its officers and representatives engaged in unauthorized investment-taking and potential investment fraud.

The company and its representatives allegedly entice the public to invest in franchise businesses in the Philippines through purported “investment starter” and franchise management programs.

Complainants claimed that the respondents offered end-to-end franchise solutions and management services while promising passive income, guaranteed returns, profit-sharing arrangements, and high returns on investment (ROI).

The complainants identified several franchise entities and business outlets allegedly organized and facilitated by the respondents for investor-members, including T-Biz Corp. (Tapsulit), Poseidon Water Station Inc., Water2Go Inc., and Pacific Consumer Solutions Inc. (Lavada/Lalawash), among others.

Under these arrangements, investors were allegedly made to appear as incorporators, shareholders, or co-owners of the franchise entities despite having no participation in the management and operation of the businesses, which remained under the control of the respondents.

According to the complainants, the respondents actively targeted the public, particularly overseas Filipino workers (OFWs), through online promotional activities and social media presentations encouraging them to invest in franchise outlets through “investment starter” schemes.

Several complainants further alleged that they failed to receive the promised returns and payouts, while some franchise outlets either ceased operations or failed to open altogether.

Based on the findings of its investigation, the SEC determined that these schemes possess the characteristics of investment contracts, which are considered securities under the Securities Regulation Code (SRC), since investors contributed money to a common enterprise with the expectation of profits derived primarily from the entrepreneurial and management efforts of EF Easy Franchise.

Such investments were offered without the necessary registration and secondary license from the SEC authorizing the company to offer or sell securities and solicit investments from the public.

The SEC also found that EF Easy Franchise, its related entities, and individuals involved are not registered and licensed to act as brokers, dealers, associated persons, or salesmen to offer securities.

Section 8 of the SRC proscribes the sale or offer of securities without a registration statement duly filed with and approved by the SEC, while Section 28 mandates that all persons engaged in the business of buying or selling securities as a broker, dealer, or salesperson be registered with the commission.

“[T]he continued offer and solicitation activities of [EF Easy Franchise] pose a serious risk of loss, damage, irreparable injury, and prejudice to the investing public, particularly to OFWs and other individuals who were allegedly enticed to invest their hard-earned money through promises of passive income and guaranteed returns,” the order read.

The SEC’s EIPD thus directed EF Easy Franchise, Sunspark Holdings Inc., and related individuals to immediately cease and desist from offering or selling unregistered securities in the form of investment contracts, profit-sharing agreements, franchise investment schemes, partnership deals, and other similar activities.

They were likewise prohibited from transacting any business involving funds covered by the order in their depository banks and from transferring or disposing of all assets and properties under their control to preserve the assets for the benefit of investors.