Biz buzz: DBP, FMIC top brass, officers fined for ‘wash sales’ | Inquirer Business

Biz buzz: DBP, FMIC top brass, officers fined for ‘wash sales’

05:57 AM October 26, 2016

Remember the issue of so-called “wash sales” at the state-owned Development Bank of the Philippines (DBP) that resulted in P717 million in losses for the government bank that we exposed earlier this year?

And remember, too, that an investigating unit of the Securities and Exchange Commission (SEC) wanted to imposed a P1-million fine on each of the DBP personalities involved in the transaction, including members of its board of directors?


Well, Biz Buzz recently got hold of the new report issued by the same SEC department—specifically, the Enforcement and Investor Protection Department—and the findings of its director Jose Aquino are jaw dropping, to say the least.

To recall, an auditor of the Commission on Audit (COA) had flagged dozens of bond trades between the government financial institution and the investment banking arm of Metropolitan Bank and Trust Co. executed in 2014—but revealed only this year—totaling P14 billion. DBP sold the bonds to FMIC and bought them back at the same day and at the same price in an effort to transfer them from one internal book to another, and in the process incur millions in losses.


According to the SEC report, which was released a few weeks ago (a copy of which Biz Buzz obtained recently), the transactions between DBP and First Metro Investment Corp. (FMIC) had indeed violated the provisions against market manipulation in the Securities Regulation Code (SRC), the law governing the trading of negotiable instruments such as bonds in the country.

“The subject transactions between DBP and FMIC appeared to be legitimate transactions under the guise of actual change in beneficial ownership of subject securities, when in fact, there was no ultimate change in beneficial ownership thereof, as the securities were reverted to DBP and with the end result that the parties squared their respective positions at the end of the trading day,” the SEC report said.

“Hence, based on analysis of the data and other information available, the subject transactions only created the impression that DBP’s real intention was to enter into subject transactions without changing the beneficial ownership of the securities through what appears to be legitimate buy and sell transactions,” the regulator added.

“Undeniably, violation of Section 24.1 (a)(iii) of the SRC was committed,” SEC said, referring to the provision of the law that prohibits the creation of “misleading appearance of active trading” and performing acts “where there are no change in beneficial ownership.”

And what penalties did the SEC’s investigating unit prescribe?

DBP directors, namely chair Jose Nuñez Jr., former president and CEO Gil Buenaventura — and now the new CEO of the money laundering issue-linked Rizal Commercial Banking Corp. — directors Lydia Echauz, Reynaldo Geronimo, Daniel Laogan, Alberto Lim (who chaired the board’s risk oversight committee), Cecilia Lorenzo, Vaughn Montes and Jose Luis Vera, were determined to have violated provisions of the law against price manipulation and failure to ensure internal controls at the bank. For that, they were all slapped with a penalty of P500,000 each — a 50-percent reduction from the earlier recommendation of a P1-million fine each.

DBP’s treasury head Kit Agena was also fined P500,000 and prohibited from sitting as an officer or board director for two years. DBP official Rafael Reynante was fined P300,000 for failing to conduct due diligence on the deal as part of his compliance functions, while “no sufficient evidence” was found against DBP officials Susan Prado, Ruston Corpuz and Francis delos Reyes.


But interestingly enough, FMIC was also slapped with penalties by the SEC unit.

Metrobank’s investment banking arm was told to pay a P1-million fine for violating the SRC. Its financial markets group head Reynaldo Montalbo; debt securities trading head Anna Graziela Banaad; David Ignacio; Perceval Peña; and trader Bernice Joyce Nobleza were also ordered to pay a monetary fine of P100,000 each within 15 days of receiving the SEC order.

FMIC’s compliance officer Jonathan Tabac was also slapped a P300,000 fine and a two-month suspension by the corporate regulator.

From the point of view of SEC probers, there was enough blame to go around and almost all the parties who were involved in the deal were penalized one way or the other. So… all’s well that ends well? Let’s see. —Daxim L. Lucas

‘Big brother’

If you think internet connectivity, traffic and airport congestion are too bad in Manila, then Beijing isn’t for you. This is what some businessmen and media people (who don’t frequent China’s capital) came to realize during the four-day state visit of President Duterte.

But Pinoy expats said connectivity wasn’t always that bad in Beijing. In normal times, the quality of broadband there is even better than in Manila. They are convinced that connectivity is being jammed to enable the screening of content from the state visit. It was challenging to cover the event real-time due to slow internet, whether hooked to the Wi-Fi of a five-star hotel like Grand Hyatt (where Mr. Duterte and his Cabinet members took up official residence during the trip) or using the roaming signal.

“I’ll never complain about slow broadband back home again,” said one businessman. —Doris Dumlao-Abadilla

MVP, not MVP

Businessman Manuel V. Pangilinan turned to Twitter on Monday to clarify that he was not “not at all involved” with a group called “MVP Global Infrastructure.”

“No ownership. No links. No affiliation,” Pangilinan said.

You see, MVP Global signed two infrastructure deals (via memoranda of understanding) at the sidelines of President Duterte’s state visit to China last week. One was a joint venture with Tanjin Suli Group, one of China’s biggest industrial conglomerates, to set up a cable manufacturing enterprise in the Philippines that would produce $3 billion in trade value. Another was an MOU with China Railway Engineering Corp. (CREC) to bid for $2.5 billion worth of infrastructure investments, whether via public-private partnership bids or unsolicited bids.

MVP Global is a private investment group focused on co-investing with large mainland Chinese companies in Malaysia, Vietnam and the Philippines. The group is anchored by three entrepreneurs from Malaysia, Vietnam and the Philippines (hence ’MVP’?).

MVP’s Filipino principal is entrepreneur Enrique Gonzalez of IPVG Corp. and IP E-Game Ventures Inc.

Pangilinan, by the way, did not fly to China to join the Philippines’ 450-member business delegation as previously planned. He was instead seen cheering for Meralco in the PBA championship game versus Ginebra, a game which was dramatically won by San Miguel Corp.’s Ginebra Gin Kings. —Doris Dumlao-Abadilla

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