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Venture Securities license revoked over R&L mess

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The Securities and Exchange Commission (SEC) has revoked the license of Venture Securities Inc. and slapped the brokerage firm, its officers and employees a total fine of P32 million for the fraudulent transfer of client shares from R&L Investments Inc.

In its decision dated June 11, the agency’s special hearing panel found acts and omissions on the part of Venture Securities and its officers that have “indispensably contributed to, if they had not been the proximate cause of, the losses incurred by the clients of R&L.”

In November 2019, the SEC ordered the Capital Markets Integrity Corp. (CMIC) to take over the operations of R&L following the discovery of unauthorized transfers of shares to the account of a certain Julieto Sulapas in Venture Securities.

The transactions—facilitated by Marlo Moron on behalf of Sulapas while acting as a trading floor assistant and settlement clerk of R&L through transfers of shares from one broker to another, also known as EQ trades—resulted in the loss of P700 million worth of client shares in R&L, one of the oldest brokerages in the Philippines.

On its part, Venture Securities and its president Wilfred Racadio, associated person Adora Aguilar, salesman Loreto Balabis and settlement head Teresita Mosenabre failed to observe know-your-client procedures and other controls mandated by Republic Act 8799, or the Securities Regulation Code (SRC), the panel said.

For one, the officers of the brokerage firm were not present when Sulapas opened an account and failed to verify the authority of Moron to transact on behalf of Sulapas.

Separate investigations conducted by CMIC and the SEC Markets and Securities Regulation Department revealed that Sulapas’ transactions under his Venture Securities’ account amounting to P9.9 million were “grossly disproportionate” to his declared total net worth, liquid net worth, and annual income of less than P1 million, as reflected in his customer account information form as of October 2017.

The brokerage firm also failed to report suspicious transactions to the Anti-Money Laundering Council and somehow even helped Sulapas evade the reporting threshold by issuing multiple checks for amounts lower than P500,000, the panel said.

The panel noted that the broker failed to maintain and keep a current and complete set of its books and records in violation of the SRC, and lacked clear customer acceptance policies and procedures, among others.

“We cannot tolerate and ignore any act or omission on the part of those involved in the capital market which would violate the norm set by the securities law especially on the transactions and responsibilities of broker dealers and that would diminish or even just tend to diminish the faith of the investors on the integrity of the capital market,” the SEC panel said.

“Likewise, the practice of installing undiscerning persons in entities involved in the capital market cannot be tolerated, let alone allowed to perpetuate. This must be curbed by holding accountable those who consciously and willfully commit wrongful acts in the performance of their duties as officers, registered persons or employees.”

The panel slapped fines amounting to P8 million on Venture Securities, P9 million on Racadio, P8 million on Aguilar, P5 million on Balabis and P2 million on Mosenabre.

The SEC revoked the registration and license of Venture Securities as broker/dealer, and disqualified Racadio, Aguilar Balabis and Mosenabre from being registered persons of the company. Racadio was also disqualified from being an officer, director, or person performing similar functions of a broker.

“For this reason, it is totally unacceptable and unconscionable to place the respondents’ act and imprimatur on these issues that seriously endanger the integrity of entire securities market. For this Commission to cop-out and to close its eyes to these acts and deeds, while convenient, would be to abandon its duty of safeguarding public interest and the integrity of the capital market.”

Read full article on BusinessMirror

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