DW Capital in hot water for questionable trades
The Philippine Stock Exchange (PSE) has initiated “disciplinary proceedings” against controversial stock brokerage DW Capital Inc., which is under investigation for “unauthorized” trading of stocks worth around P2.6 billion.
This means that the PSE is exercising its powers as a self-regulatory organization (SRO) to discipline DW Capital and determine whether other sanctions—such as expulsion—may be warranted.
“During the pendency of such proceedings, DW shall remain under preventive suspension and shall have no access to the trading system or facilities of the exchange,” PSE president Ramon Monzon said in a memorandum posted on Tuesday.
The Capital Markets Integrity Corp. (CMIC), a unit of the PSE and likewise an SRO, has also long petitioned to take over the operations of DW Capital.
According to the CMIC, 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.
The PSE issued a preventive suspension order on DW Capital on Aug. 10.
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.
Monzon said the disciplinary proceedings were pursuant to Sections 40.6 of the Securities Regulation Code (SRC) and Section 40.6.1 of its implementing rules and regulations.
An organization with SRO status, like the PSE, is authorized by the SRC to discipline a member of or participant, including through the suspension or expulsion of such member, and disavowal of association with such member, if such participant had engaged in acts or practices “inconsistent with just and equitable principles of fair trade or in willful violation of any provision” of the SRC and any other law administered by the SEC, the rules or regulations thereunder, or the rules of the SRO.
In any disciplinary proceeding by the SRO, the organization must bring specific charges, provide notice to the person charged, afford the person charged with an opportunity to defend against the charges and keep a record of the proceedings.
A determination to impose a disciplinary sanction must be supported by a written statement of the offenses, a summary of the evidence presented and a statement of the sanction imposed.
Based on the rules, the PSE may summarily suspend a member, participant or person associated with a member who has been expelled or suspended or suspend any member found out to be in such financial or operating difficulty such that it could no longer continue to do business as a member with safety to investors, creditors, other members, participants or the SRO.
However, the SRO must notify the SEC of the action taken. The Commission, by order, may stop such proceedings on its own motion or upon a petition by any aggrieved person—if the Commission determines that such is consistent with the public interest and the protection of investors.
