SEC gets favorable RTC ruling on Kapa issue

General Santos Regional Trial Court has junked a petition for injunction filed by the controversial Kapa-Community Ministry International Inc. against the Securities and Exchange Commission (SEC), allowing the corporate watchdog to continue its crackdown on this group’s illegal investment solicitation.

Kapa filed the petition for injunction on April 4, some two months after the SEC ordered it to cease and desist from selling and offering to the public investment contracts in the guise of donations without license to do so.  The SEC has revoked Kapa’s corporate registration.

The RTC issued a writ of preliminary injunction against the SEC on April 10. The SEC, however, maintained that the court did not have jurisdiction over the matter.

Section 179 of Republic Act No. 11232, or the Revised Corporation Code of the Philippines, stated: “No court below the Court of Appeals shall have jurisdiction to issue restraining order, preliminary injunction, or preliminary mandatory injunction in any case, dispute, or controversy that directly or indirectly interferes with the exercise of powers, duties and responsibilities of the Commission that falls exclusively within its jurisdiction.”

“Accordingly, the motion is hereby denied and this case is hereby ordered dismissed,” RTC presiding Judge Oscar Noel Jr. ruled on June 17.

The SEC, through the Anti-Money Laundering Council, earlier obtained a freeze order from the Court of Appeals to preserve assets linked to Kapa. On June 18, the SEC filed a criminal complaint against Kapa and its operators and promoters in the Department of Justice, citing violations of Republic Act No. 8799, or the Securities Regulation Code.

The  DOJ is currently conducting preliminary investigation on the SEC complaint. In the meantime, the Davao Regional Trial Court issued on July 4 a precautionary hold departure order against the operators and promoters of Kapa.

The National Bureau of Investigation and three aggrieved investors also filed a complaint against Kapa in the DOJ on July 8 for syndicated estafa.

The SEC issued an advisory against Kapa as early as March 2017. The group had been enticing the public to “donate” at least P10,000 in exchange for a 30- percent monthly “blessing” or “love gift” for life, without having to do anything other than invest and wait for the payout.

The arrangement between Kapa and its members constituted an investment contract, a form of security regulated by the SEC.

Section 26 of the Securities Regulation Code prohibits fraudulent transactions, including Ponzi schemes where investors are lured with impossibly high returns and paid using the money contributed by other investors.

A person found to have violated the Securities Regulation Code will face a maximum fine of P5 million or imprisonment of seven to 21 years, or both.