R&L working with clients to recover assets; case filed against rogue clerk

The owners of shuttered equities brokerage firm, R&L Investments Inc.—which lost its entire P765-million inventory of clients’ stocks to theft by a rogue employee—said over the weekend that it had filed a case against its settlements clerk with the Mandaluyong City courts.

At the same time, the Lee family, led by the firm’s bourse nominee, Lucy Linda Lee, said it had been communicating with its clients who were affected by the fraudulent activities of its longtime “trusted” staffer, Marlo Moron, who had since been apprehended by the police.

“At present, our priority is to dialogue and collaborate with the clients affected by Mr. Moron’s fraudulent activities, as well as to coordinate closely with the Philippine Stock Exchange and its regulatory organizations,” the management of R&L Investments said in a statement.

They added that the firm was currently conducting “a comprehensive and rigorous investigation to determine how Mr. Moron was able to intentionally and deliberately deceive our company, its auditors, and other regulators for such an extended period of time” and siphon off P765 million in clients’ stocks since 2011.

Records from the Capital Markets Integrity Corp.—the watchdog organization of the Philippine Stock Exchange—showed that R&L Investments was audited by a Pasig City-based firm called KL Siy & Associates, from which it received a clean bill of health in its most recent set of financial statements at the end of 2018.

KL Siy and Associates is an accredited auditor with the Bangko Sentral ng Pilipinas, which vets accounting firms whose reports are acceptable for financial institutions to submit to regulators.

In the statement, the Lee family said they were unable to give media interviews or comments at present in addition to the official statement. An earlier letter they sent to the bourse management stressed, however, that they would honor their obligations to their clients as of Oct. 31, 2019, when the theft was uncovered.

PSE sources said R&L Investments’ management—composed of the children of the firm’s founder who passed away in 2017 —would dispose of personal assets in order to settle their obligations to clients, but asked for time to liquidate their properties, including real estate holdings.

Earlier, the Securities and Exchange Commission said it was closely monitoring the ongoing investigation of the CMIC.

“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 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.