SEC, PSE digging deeper into Abra Mining case
The Securities and Exchange Commission and the Philippine Stock Exchange are jointly digging deeper into the trading of unissued and unlisted shares of Beloy family-led Abra Mining and Industrial Corp., vowing to step up efforts to protect the investing public.
In a parallel preliminary fact-finding investigation, the SEC found that Abra Mining had more than double the number of shares being traded in the open market and lodged with the Philippine Depository & Trust Corp. (PDTC) compared to those listed on the PSE.
Abra Mining—which traded under the ticker AR until indefinitely suspended by the PSE last week—had about 258.96 billion shares lodged with the PDTC as of Feb. 16, about 186 billion shares more than about 72.95 billion listed shares.
Under the rules, only securities approved for listing should be lodged with PDTC for trading. Furthermore, all fully paid issued and outstanding shares should be applied for listing.
In its 2019 audited financial statements, Abra Mining reported an issued and outstanding capital stock totaling about 99.29 billion shares.
‘Protect investors’
On Saturday, the PSE and SEC jointly announced they were working closely together to investigate the trading of unissued and unlisted shares of Abra Mining and to “pursue the necessary actions to protect investors.”
Records showed that each and every Abra Mining share that had entered the system was confirmed and cleared by the transfer agent for lodgment. “The SEC, in coordination with the PSE and PDTC, will continue investigating the issue not only to resolve the current incident but also to find system-wide measures to prevent its recurrence. In the meantime, AR was ordered to submit its proposed actions to address the discrepancies in its issued, outstanding, listed and lodged shares,” the PSE and SEC said in their joint statement. Section 173 of the Revised Corporation Code defines outstanding capital stock as “the total shares of stock issued under binding subscription contracts to subscribers or stockholders, whether fully or partially paid, except treasury shares.” Accordingly, even shares, which have not been fully paid, are considered issued and must be reflected on the company’s books.
Section 63 of the RCC, however, provides that “no certificate of stock shall be issued to a subscriber until the full amount of the subscription together with interest and expenses [in case of delinquent shares], if any is due, has been paid.” Section 62 of the RCC further provides that the certificate should be signed by the president or vice president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation. In order to lodge securities with PDTC, the certificates covering the securities must be delivered to the transfer agent. Once lodged in the central depository, the securities are deemed fungible and may be used for settlement of exchange trades.
The transfer agent, as an extension of the corporate secretary of the corporation, has the pertinent information, and thereby has the sole authority and duty to certify that each share meets PDTC’s and the PSE’s respective requirements for lodgment.
Among the requirements is that the transfer agent must issue or register only those securities of the corporation that are authorized for issuance and listing by the PSE, and must timely notify PDTC if the shares delivered are found not valid or defective.
