Venture challenges penalties slapped by SEC amid R&L stock fraud
Local brokerage house Venture Securities Inc. (VSI) is challenging the decision of the Securities and Exchange Commission’s (SEC) special hearing panel (SHP) to revoke its broker dealer license, likewise refuting allegations of any fraudulent act that led to the collapse of R&L Investments.
To recall, the SHP also slapped VSI and its key officers with penalties summing up to P32 million for “acts and omissions that indispensably contributed to, if they had not been the proximate cause of, the losses incurred by the clients of R&L.”
For its part, VSI vehemently denied being involved in any fraudulent act or causing any fraud that caused the collapse of R&L Investments.
Noting that the SHP’s decision was not yet final and would still have to be cleared by the SEC en banc, VSI president Wilfred Racadio said in a statement on Tuesday: “We intend to exhaust all administrative and legal remedies available to us to prove that we have not committed any fraud and that we have acted well within the bounds of the rules of the SEC and the PSE as a broker.”
Violation
“Records show that a certain Marlo Moron, acting as both trader and settlement clerk, in violation of the SEC rules for a brokerage firm, with the obvious consent of the owners of R&L, executed the EQ (stock transfer) trades. This means he had the access code of R&L to utilize the PCD (Philippine Central Depository) system,” Racadio said.
With such access code, he said Moron was able to transfer clients’ shares to the account of one Julieto Sulapas.
“Thus, any broker dealing with R&L will not know that the shares of Mr. Sulapas are not his. This fraudulent scheme took place exclusively within R&L. EQ trades are normal transactions in the stock exchange. Ventures had no inkling about the fraudulent schemes of Mr. Moron. Ventures is as much a victim as the clients of R&L,” he said.
As the fraudulent scheme within R&L had taken place over a period of eight years, or from 2012 to 2019, Racadio said the Capital Markets Integrity Corp. (CMIC)—referring to the market regulation unit of the Philippine Stock Exchange—had the duty to audit brokers and make sure that fraudulent acts such as those of Moron would not occur.
Anomalies
“Over the entire eight-year period, the CMIC, despite its duty to preserve the integrity of trades and protect the investing public, has not called the attention of R&L to anomalies being committed, which can be easily discovered. The CMIC should easily have discovered that Mr. Moron is both trader and settlement clerk, which is not allowed under the rules. Moreover, if CMIC did its duty, they would have discovered the fraudulent transfer of the clients’ shares to Sulapas,” he said.
In addition, Racadio pointed out that VSI itself had been audited by CMIC but no report of any wrongdoing had been ascribed to his firm over those years.
“As a broker, Venture has every right to expect protection from CMIC and to rely on CMIC’s findings. CMIC was not able to discover the discrepancies/anomalies in the R&L clients’ stock position vis-à-vis the balances in the PCD system, something which a standard auditing procedure called ‘confirmation’ would have easily shown,” VSI said. INQ
