PSE unit taking over operations of collapsed R&L Investments

Capital Markets Integrity Corp. (CMIC), the independent audit, surveillance compliance arm of the Philippine Stock Exchange (PSE), is taking over the operations of collapsed stockbroker R&L Investments.

The Securities and Exchange Commission (SEC) said in a statement on Friday that it had issued the order on Nov. 14. to protect affected customer accounts.

The development comes in the wake of revelations of a P700-million stock theft at R&L by settlement clerk and longtime employee Marlon Moron.

“The SEC issued the order, after establishing that the financial condition of R&L Investments has so deteriorated that it cannot readily meet the demands of its clients for the delivery of securities and/or payment of sales proceeds,” the corporate regulator said.

R&L Investments nominee Lucy Linda Lee first reported the discovery of the discrepancy to the PSE on Oct. 31 this year.

This was after the nominee of another brokerage flagged numerous error transactions made by settlement officer Moron on several trading days.

The SEC cited a special audit by CMIC that showed R&L inflated the number of client shares to the tune of P747.82 million as of Oct. 31. The Philippine Depository & Trust Corp. (PDTC), however, accounted for P30.4 million the day before.

In its 2018 audited financial statements, R&L Investments booked client securities worth P738,897,290. But Business Partner Report provided by the PDTC showed the brokerage’s client portfolio amounted to P132.25 million.

Moron had reportedly admitted to forging reports to conceal his actions from the management, as well as from the audits conducted.

According to the SEC, the exchange or CMIC will settle the failed broker’s liabilities to customers through the sale of the latter’s “trading rights and other trade-related assets, liquidation of its paid-up capital, and/or supervision of payment of claims against the surety bond.”

Customers may also claim compensation for losses from the trading participant’s accredited trust fund, subject to the validation of their claims by the exchange or SRO and the trust fund.

At the PSE, the Securities Investors Protection Fund manages a fund contributed by trading participants for the protection of investors against losses in case of fraud, failure or insolvency of trading participants.

Should these measures fall short, the exchange or CMIC shall refer the outstanding liabilities to the trust fund and inform the customers of the further steps necessary for claiming compensation for unsatisfied losses.—MIGUEL R. CAMUS