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SEC scores legal victory against perpetrators of investment scam

The Securities and Exchange Commission (SEC) scored a legal victory over perpetrators of an investment scam after a Quezon City regional trial court fined three persons a total of P2 million for illegally soliciting investments from the public.

In a decision dated 27 November 2020, the Quezon City Regional Trial Court Branch 90 found guilty beyond reasonable doubt Rolando R. Pascua, Jr., Celia Pascua, and Mary Jane P. Recto for violations of Section 8 of Republic Act No. 8799, otherwise known as the Securities Regulation Code (SRC).

“Winning cases against perpetrators of fraudulent investment schemes affirm the Commission’s commitment to holding them accountable for their actions against our fellow Filipinos,” SEC Chairperson Emilio B. Aquino said.

“The SEC will remain steadfast in its mission to protect investors and educate the public about these types of scams, so that moving forward, no more Filipinos would be duped of their hard-earned money.”

The case stemmed from affidavits filed on 14 September 2009 by 22 complainants-investors with the SEC’s then Enforcement and Prosecution Department, now the Enforcement and Investor Protection Department (EIPD).

The complainants-investors accused officers of RJF Construction and Development Corp., which claimed to be a land developer accredited with the Home Development Mutual Fund (PAG-IBIG), of enticing them to make an investment in exchange for a guaranteed interest rate of 5% per month, or 60% per year.

The investors were allegedly given post-dated checks as proof of their investments, as well as other documents such as original copies of land titles that serve as security for the loans.

RJF issued a total of 16 promissory notes, supported by multiple post-dated checks, to the 22 complainants-investors. The company claimed that the money raised will be used to finance its PAG-IBIG housing project worth about P2.5 billion, or 1,016 housing units for about P200,000 each.

While the company was initially able to give the promised returns to investors, RJF eventually failed to pay them the guaranteed interest and principal, prompting investors to seek relief from the Commission.

In a conference arranged by the SEC on 14 October 2009, nine complainant-investors named Recto as the RJF officer who enticed them to invest in the company.

The court ruled that the post-dated checks issued by RJF assumed the character of “evidences of indebtedness,” which are among the securities mentioned under Section 3 of the SRC.

Section 3 of the SRC defines securities as “shares, participation or interests in a corporation or in a commercial enterprise or profit-making venture and evidenced by a certificate, contract, instrument, whether writer or electronic in character.

Meanwhile, Section 8 of the SRC provides that securities shall not be sold or offered for sale or distribution in the Philippines without a registration statement duly filed with and approved by the Commission.

“In the instant case, the checks were issued by RJF in lieu of the securities enumerated under the (SRC) in an attempt, to take the case out of the purview of the law, which requires prior license to sell or deal in securities and registration thereof. The arrangement was designed to circumvent the law,” according to the decision.

The court also noted that the RJF is not a registered issuer of securities based on SEC records, and is therefore not licensed to offer or issue securities to the public.

“It is one thing for a corporation to issue checks to satisfy isolated individual obligations, and another for a corporation to execute an elaborate scheme where it would comport itself to the public as a pseudo-investment house and issue postdated checks instead of stocks or securities to evidence the investments of its clients,” the decision read.

“Accused adopted this system in an attempt to circumvent the Revised Securities Act, which requires a prior license to sell or deal in securities.”

Pursuant to the SEC’s continuing fight against investment scams, the Commission in 2020 issued advisories against more than 100 groups and individuals for soliciting investments without the necessary license, almost double the total number in 2019.

The SEC likewise issued cease and desist orders and revocation orders against entities engaging in fraudulent investments schemes, including Boss Network, Forsage, and Fast Track Worldwide Inc.

Previously, the Commission has charged 32 individuals in seven cases for violations of the SRC, and in two cases for violations of Republic Act No. 10175, or the Cybercrime Prevention Act of 2012.

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