A SECURITIES and Exchange Commission (SEC) panel revoked the license of R&L Investments, Inc. and imposed a P25-million penalty on the brokerage, its key personnel, and the owner of the account used to steal shares of its clients.
The SEC’s Markets and Securities Regulation Department (MSRD) special hearing panel found R&L Investments President Joseph Lee, nominee and salesman Lucy Linda Lee, and associated person Jonathan Lee liable for the fraudulent transfer of client shares to another brokerage, Venture Securities, Inc.
R&L Investments trading floor assistant and settlement clerk Marlo Moron stole client shares from the brokerage from 2012 to 2019, which were transferred into a Venture Securities account under Julieto Sulapas.
Over P1.13-billion R&L Investments client shares were transferred to Mr. Sulapas’ account through trades executed by Mr. Moron, who is not a licensed or registered trader.
“The scheme resulted in the loss of P700-million worth of client shares in R&L and in the consequent deterioration of the brokerage’s financial condition, to the extent that it cannot readily meet the demands of its clients for the delivery of securities and/or payment of sales proceeds,” the SEC said.
As the lone salesman in the brokerage, Ms. Lee was the only person allowed to have access to the order and trade management tool provided by the Philippine Stock Exchange.
However, the SEC’s MSRD found that she gave Mr. Moron credentials to execute trades, to which Jonathan Lee admitted to having knowledge of.
The rogue clerk also had viewing access to R&L’s back-office system.
“As a result, he was able to access and acquire information pertaining to the shareholdings of all R&L clients and to tamper with the business partner portfolio reports to match the back-office records, thereby hiding the fraudulent scheme,” the SEC said.
The panel decided to revoke the license of R&L Investments and imposed a P6-million fine on the brokerage.
Joseph Lee, who admitted to having no knowledge of the daily operations of the brokerage, was also fined P6 million and was disqualified from being a registered person under the Securities Regulation Code (SRC).
Jonathan Lee and Ms. Lee are also disqualified from being registered persons, and were also fined P6 million and P4 million, respectively.
The SEC fined Mr. Moron P2 million, while Mr. Sulapas was imposed a P1-million penalty for allowing himself and his accounts “to be used as a tool in the commission of the fraudulent scheme.” Both are also disqualified from being registered persons under the SRC.
The SEC move comes a day after the commission announced the cancelation of the license of Venture Securities for its involvement in the collapse of one of the country’s oldest stock brokerages.
Venture Securities said: “The CMIC (Capital Markets Integrity Corp.) should easily have discovered that Mr. Moron is both trader and settlement clerk which is not allowed under the rules. Moreover, if CMIC did its duty, they would have discovered the fraudulent transfer of the clients’ shares to Sulapas.”
“We intend to exhaust all administrative and legal remedies available to us to prove that we have not committed any fraud and that we have acted well within the bounds of the rules of the SEC and the PSE as a broker,” Wilfred Racadio, president of Venture Securities, said in a statement on Tuesday. — Keren Concepcion G. Valmonte