SEC raises ante on R&L Investments probe

Securities and Exchange Commission

MANILA, Philippines–The Securities and Exchange Commission (SEC) is closely monitoring the ongoing investigation of the Capital Markets Integrity Corp. (CMIC) — the independent audit, surveillance and compliance arm of the Philippine Stock Exchange — on rogue trades at shuttered local stock brokerage R&L Investments. 

The SEC was referring to P700-million worth of stocks allegedly stolen by a rogue settlement clerk, Marlo Moron, in snowballing scam that was perpetrated at the 50-year-old stock brokerage since 2011.

READ: 50-year-old PH stock brokerage shuts down

“The investigation should also provide clarity as to how such transactions could have slipped past multiple control measures,” the SEC said in a statement on Thursday.

For one, the SEC noted that the 2015 Securities Regulation Code rules required broker dealers to conduct monthly security examination, count and verification to account for discrepancies.

The SEC said it expected the full rollout of the Name on Central Depository (NoCD) facility of the Philippine Depository & Trust Corp. (PDTC) by the first quarter of 2020 to reinforce the controls and deter similar incidents from occurring in the future. The NoCD facility allows for the recording of securities at PDTC in the name of individual investors. At present, most securities are recorded in “omnibus accounts” that aggregate the holdings of all investors.

“The creation of sub-accounts under the NoCD arrangement will increase transparency in the trading of securities. It will also give investors a means to monitor movements in their accounts through SMS or email notifications,” the SEC said.

The SEC is also in discussion with PDTC for the creation of a mechanism that will allow the latter to provide monthly reports on a stock brokerage’s position directly to the board of directors. /jpv