President Duterte has signed into law a measure imposing stiff penalties on persons found guilty of investment fraud, notably the so-called Ponzi schemes and boiler room operations.
Republic Act No. 11765, also called the Financial Products and Services Consumer Protection Law, which defines “investment fraud” as any form of deceptive solicitation of investments from the public.
Under this law, investment fraud covers Ponzi schemes and other plots of deception involving the promise and offer of profits or returns on investments or contributions solicited from the victims.
The new law also covers boiler room operations and the offering or selling of dubious investment schemes without the required license or permit from the pertinent agencies particularly the Securities and Exchange Commission (SEC).
Financial product or service, on the other hand, refers to products or services developed or marketed by a financial service provider which may include savings, deposits, credit, insurance, pre-need and health maintenance organization products, securities, investments, payments, remittances and other similar products and services.
This also includes digital financial products or services which pertain to a broad range of financial services accessed and delivered through digital channels.
Under the new law signed last May 6, any person found guilty of committing investment fraud will face a jail time of one to five years or pay a fine of P50,000 to P2 million, or both.
Officers and employees of erring corporations or juridical entities would also face the same punishments.
The new law also provides that administrative sanctions of the respective charters of the financial regulators will be made applicable to a financial service provider, its directors, trustees, officers, employees or agents for violation of the law or any related rules, regulations, orders or instructions of financial regulators; or to any persons found administratively liable for investment fraud on top of the SEC fine worth P50,000 to P10 million for each instance of investment fraud and without prejudice to the enforcement of other laws and criminal sanctions.
In addition to these hefty fines, a P10,000 fine for each day of continuing violation in addition to the other administrative sanctions under Section 54 of Republic Act No. 8799 or Securities Regulation Code will also be imposed.
In the event that a profit is gained or loss is avoided as a result of the violation of the law or investment fraud, a fine not more than three times the profit gained or loss avoided may also be imposed by the financial regulator, provided that in addition to the administrative sanctions that may be imposed, the authority of the financial service provider to operate in relation to a particular financial product or service may be suspended or cancelled by the financial regulator.
A financial regulator, consistent with public interest and protection of financial consumers, is authorized to institute an independent civil action on behalf of aggrieved financial consumers for violations of this Act and its Implementing Rules and Regulations.
“If the financial regulators obtain a civil penalty against any person or entity in any of such proceedings or such person or entity agrees to settle such civil penalty, the amount of such civil penalty shall, on the motion of the financial regulators, be added to and become part of a disgorgement fund or other fund established for the benefit of the aggrieved financial consumer,” the law states.
The financial regulators have been tasked to provide guidelines on implementing the new law within one year from its effectivity.