MANILA, Philippines—Another pre-need firm is in trouble.

The Securities and Exchange Commission (SEC) has revoked the license of Prudential Plans Inc. to sell pre-need plans because of a deficiency in its trust fund.

Pre-need plans (education, pension and memorial) are contracts that provide for future services or payment of money at the time of actual need.

A trust fund is an asset account that includes stocks, real estate and bonds. It must provide a sufficient source of money at any given time to pay for current and future obligations.

At the resumption of the Senate inquiry into the troubled pre-need industry, SEC chair Fe Barin said Monday that Prudential was the only pre-need company that failed to make the grade out of 24 that her agency was strictly monitoring.

Ineligible

Barin told senators that the 24 companies were given until April 15 to file a proposal to build up their capital and trust fund. The SEC found that Prudential’s proposal at this time was “ineligible.”

“That’s why the commission decided on Friday that until (Prudential) doesn’t complete and address its requirements, its dealer’s license is suspended,” she said.

Barin later told reporters that the dealer’s license of Prudential had been revoked and that the pre-need firm would be notified.

Global financial crisis

In a statement, Jose Alberto T. Alba, Prudential Plans president, blamed the global financial crisis for the deficit posted by the firm’s trust fund.

Barin urged the Prudential plan holders to come to the SEC so she could meet with them.

Asked whether the plan holders should stop paying their premiums, Barin said: “I don’t know yet. We have to take a look at the situation of the company. Whether or not to continue is the decision for the plan holder after seeing the condition of the company.”

Advice to plan holders

For Sen. Manuel Roxas II, chair of the Senate trade and commerce committee that is looking into the pre-need industry, it would be better if plan holders would open a separate bank account where they could pay their premiums.

Roxas said if he were in the shoes of the Prudential plan holders, he would do this to show the pre-need firm that he was not defaulting on his payments.

“This will show that I am complying with the requirements but at the same time my money is safe,” Roxas told reporters in Filipino.

Legacy Group

The Senate trade and commerce committee has focused its inquiry into the financial troubles of the Legacy Group whose pre-need companies have P1.3 billion in obligations to more than 50,000 plan holders.

Legacy’s pre-need firms—Legacy Consolidated Plans Inc., Scholarship Plan Philippines Inc. and All Asia Plans Corp.—ceased operations in January.

Just before Christmas last year, Legacy’s 13 rural banks closed for being insolvent. The Bangko Sentral ng Pilipinas said the rural banks had engaged in unsafe and unsound practices.

Among the Legacy plan holders are more than 12,000 police officers and soldiers, who have paid close to P320 million.

Their payments were deducted monthly from their salaries by the Armed Forces and Police Savings and Loan Association Inc.