SEC makes permanent cease-and-desist order vs KAPA

MANILA, Philippines – The Securities and Exchange Commission (SEC) has made permanent its cease-and-desist order (CDO) to Kapa-Community Ministry International Inc. (KAPA), a Surigao del Sur-based religious corporation that was found to be soliciting investments from the public in a manner resembling a Ponzi scheme.

In a resolution dated March 14, the SEC en banc made the order permanent after KAPA failed to file a motion to lift the CDO within the prescribed period.

The SEC issued the CDO on February 14, citing substantial evidence that KAPA has offered and sold securities – in the form of investment contracts and in the guise of donations – without the necessary license and in a manner resembling a Ponzi scheme.

A Ponzi scheme is an investment fraud which lures investors with promises of high financial returns or dividends. In such a scheme, the operator pays the initial disciples by the amount invested by subsequent investors while bulk of the investment remains with the proponent or operator.

The CDO covers the partners, officers, directors, agents, representatives and all other persons acting for and in behalf of KAPA, which also operates as KAPA Kabus Padatuon (Enrich the Poor), KAPA/ KAPPA (Kabus Padutoon), KAPA-Co Convenience Store and General Merchandise, and KAPA Worldwide Ministry.

The 2016 SEC rules of procedure provide that a CDO would be deemed permanent if the respondent failed to file the appropriate pleading within the prescribed period. KAPA had five days from receipt of the CDO to move for the lifting thereof.

SEC also noted that the CDO against KAPA would remain valid notwithstanding an ongoing petition by the religious corporation for a preliminary injunction.

While KAPA did not file any motion at the SEC to counter the CDO, it filed before the Regional Trial Court (RTC) in General Santos City a petition for injunction with application for issuance of a 72-hour restraining order, a temporary restraining order (TRO) and/or a writ of preliminary injunction. But in an order dated March 1, the court denied the application for the 72-hour TRO, noting that KAPA still had a remedy to file a motion to lift the CDO with the SEC. KAPA, however, did not avail of said remedy.

SEC believes the petition must be dismissed outright, arguing that the RTC had no jurisdiction over this case.

Section 179 of the Revised Corporation Code affirms that “no court below the Court of Appeals shall have jurisdiction to issue a restraining order, preliminary injunction, or preliminary mandatory injunction in any case, dispute, or controversy that directly or indirectly interferes with the exercise of the powers, duties and responsibilities of the Commission that falls exclusively within its jurisdiction.”

SEC has reiterated its calls on the public to be cautious in dealing with KAPA and to report to its head office or extension offices any continued investment-taking activity by KAPA and its allied entities.

While KAPA is a registered corporation in the Philippines, its certificate of incorporation dated March 3, 2017 explicitly stated that it was not authorized to undertake business activities requiring a secondary license such as acting as broker or dealer in securities, investment house and close-end or open-end investment company.

Based on SEC’s findings, KAPA has recruited and encouraged members to “donate” any amount in exchange for a 30 percent monthly return. Based on an investigation by the National Bureau of Investigation in Caraga, KAPA – mostly targeted teachers in Bislig City – has amassed P7 million from hundreds of investors at some point.