SEC probes DW Capital’s P2.6B ‘unauthorized’ trades
The Securities and Exchange Commission is reviewing a petition from the Capital Markets Integrity Corp. (CMIC) to take over stock brokerage DW Capital Inc., whose operations had been suspended due to “unauthorized” trading of stocks worth around P2.6 billion.
CMIC, a self-regulatory organization and the primary regulator of the trading participants of the Philippine Stock Exchange (PSE), filed with the SEC on Aug. 8 a petition to take over DW Capital.
Based on a briefer issued by the SEC on Friday, the CMIC’s petition alleged that DW Capital had engaged in unauthorized trading of stocks involving five accounts with market value of “short” or sell positions amounting to around P2.6 billion as of July 28, 2017.
On August 7, the lawyers of DW Capital’s clients requested CMIC to prohibit the stock brokerage from trading the shares of stock of their clients, and to direct DW Capital to preserve the records of transactions pertaining to subject securities.
However, it was reported to CMIC on August 09 that there were shares of stocks that had not been delivered by DW Capital to them. Thus, these clients demanded the immediate delivery of these securities.
By August 10, the PSE issued a memorandum implementing a preventive suspension on DW Capital, without discussing the reason behind the suspension.
For its part, the CMIC also issued an order preventing DW Capital – which is led by its nominee Derwin Wong and associated person Connie Lozada – from directly or indirectly trading on PSE. The CMIC also pursued a special audit of the stock brokerage.
The SEC said that under the Securities Regulation Code, it may order an exchange to take over the operation of a failed trading participant, after proper investigation or verification, for the purpose of preserving and protecting the books, records, customer accounts, trade-related assets and settling its liabilities to its customers.
On August 18, the SEC said it had instructed its markets and securities regulation department (MSRD) to conduct an investigation and verification of the allegations contained in the CMIC’s petition. The MRSD afterwards ordered DW Capital to submit various records that would establish the financial condition of the brokerage firm, including customer master list; stock position report detailed per customer, per stock, per location alongside portfolio reports, transaction reports; account ledgers; statement of accounts; confirmation invoices; customer account information forms.
DW Capital, for its part, moved to partially quash the subpoena and requested for additional time to comply with the submission of documents.
As of Thursday, the MSRD was still awaiting DW Capital’s submission of all the documents and records enumerated in the subpoena.
MSRD has set the case for clarificatory hearing this August 29 (Tuesday).
