Venture Securities Inc. the local stock brokerage owned by businessman Eusebio Tanco, said Tuesday it will appeal the decision of a special hearing panel of the Securities and Exchange to revoke its license.
VSI said in a statement it had not committed fraud in relation to the collapse of brokerage firm R&L Investments Inc.
“Venture Securities has not committed any fraudulent act nor are we the proximate cause of any fraud which may have led to the collapse of R&L Investments. The decision of the special hearing panel of the Markets and Securities Regulation Department of the Securities and Exchange Commission is not final. 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,” VSI president Wilfred Racadio said.
VSI said the fraudulent scheme was committed solely within R&L. It said Capital Markets Integrity Corp., which was tasked to audit brokers, failed to discover the fraudulent act which happened from a period of eight years from 2012 to 2019.
“In addition, Ventures itself has been audited by CMIC and no report of any wrong doing has been ascribed to Ventures. As a broker, Ventures 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.
Meanwhile, the SEC also cancelled the license and slapped a P25-million fine against R&L Investments over the alleged P700-million stock fraud which led to its collapse.
The special hearing panel, in a decision dated June 11, said it found R&L, along with its president Joseph Lee, nominee and salesman Lucy Linda Lee and associated person Jonathan Lee liable for the alleged fraudulent transfer of client shares to an account in VSI.
The panel said it also found Marlo Moron and Julieto Sulapas liable for allegedly engaging in fraudulent transactions, in violation of Republic Act No. 8799 or The Securities Regulation Code and its implementing rules and regulations.
The case involved the alleged siphoning off client shares from the stock brokerage to another through a series of transactions conducted by Moron.
Documents submitted by R&L and VSI showed that a total of P1.13 billion worth of client shares in R&L were transferred to Sulapas’ account in VSI through a securities of trades executed by Moron from 2012 to 2019.
Sulapas’ ledger in R&L revealed that no such shares existed, and that the shares transferred to VSI actually came from the accounts of other clients of R&L.
The scheme reportedly resulted in the loss of P700 million worth of client shares in R&L and led to the deterioration of the brokerage’s financial condition to the extent that it could not readily meet the demands of clients for the delivery of securities and/or payment of sales proceeds.
Investigation by the SEC Markets and Securities Regulation Department revealed that Lee allegedly gave Moron the necessary credentials to execute trades and also access to R&L’s back-office system.
Moron was able to access and acquire information pertaining to the shareholdings of all R&L clients and to allegedly tamper with the business partner portfolio reports to match the back-office records, thereby hiding the fraudulent scheme.
The panel said Lee failed to perform his duty as president of R&L and even admitted to having no knowledge of the daily operations of the brokerage.
