SEC orders freeze on books, assets of shuttered R&L
The country’s corporate regulator has issued a “stay order” meant to preserve the company records and remaining assets of shuttered stockbroker R&L Investment Inc. in a bid to get to the bottom of a P700-million theft of clients’ equity holdings perpetrated by a longtime employee.
In a Nov. 12 letter, a copy of which was obtained by the Inquirer, the Securities and Exchange Commission’s markets and securities regulation department also ordered various stock market organizations to “take all the necessary actions to ensure that this order is complied with.”
“In line with the power of this Commission to perform acts which are necessary or incidental to its mandate to protect investors and mandated in the declaration of policy of the Securities Regulation Code, this department orders the preservation of the books and records of R&L Investment and all its assets until otherwise directed,” the regulator said.
“Hence, R&L Investment is hereby ordered not to dispose of the assets of its customers and the company’s assets unless otherwise expressly authorized by the Commission,” the SEC added, as it ordered Philippine Depository and Trust Corp., Capital Market Integrity Corp. and the Philippine Stock Exchange to comply with the order, as well.
R&L Investment—one of the oldest stock brokerage firms in the country—ceased operations early last week after its owners uncovered a long-running scam by a “trusted employee” that resulted in almost the entire clients’ shares held by the firm being wiped out.
The firm said it saw “over P700 million worth of its inventory of stocks” stolen by its settlement clerk, who was apprehended by police operatives and had since confessed to the crime, according to various market sources.
The SEC said that, based on its records, R&L Investment only had total assets of P77.1 million and a net worth of P51.6 million at the end of October 2019.
Taking into account the P700 million worth of stocks it held for clients that were sold illegally, the regulator said the stockbroker’s condition “will be so deteriorated that it will not readily meet the demands of its customers for the delivery of securities or payment of sales proceeds.”
“The Commission, to prevent further damage, is authorized to issue ex parte an order to the trading participants and the exchange or pertinent self-regulatory organization to take necessary actions to protect customers’ accounts including, but not limited to, the preservation of the failed trading participant’s books and records,” it explained.
The Inquirer obtained a copy of the letter of R&L Investment’s owner Lucy Linda Lee to the PSE narrating the details of the theft by the firm’s employee, Marlo Moron, who allegedly began dipping his hands into the firm’s stock inventory in small amounts in 2011—with the amounts gradually increasing as he was emboldened over the years.
“Almost all our stock position had been depleted,” Lee said in her report to the PSE where she also disclosed that the firm had decided to stop trading operations this week to mitigate the damage. At the end of 2018, R&L Investment held P765 million worth of stocks on behalf of its clients, according to its audited financial statements.
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