SEC body recommends CDO vs Wincorp

The brokers and exchanges department (BED) of the Securities and Exchange Commission (SEC) is recommending a cease and desist order (CDO) against bankrupt investment house Westmont Investment Corp. (Wincorp).

SEC sources said the BED recommendation will be taken up today at the regular meeting of the commission en banc.

The sources said Wincorp, whose debts piled up to P7 billion, violated several rules governing the issuance of long-term commercial papers (LTCPs), among them, the investment house's failure to register such LTCPs.

"Contrary to Wincorp's claims, we don't believe their assertions that they did not borrow funds for their own accounts but merely brokered and re-lent it to other borrowers. There is evidence showing that the proceeds from the loans were deposited in the accounts of several of Wincorp's shareholders," the sources added.

The BED had earlier recommended a CDO for Wincorp, but the commission en banc directed it to strengthen further the legal basis for issuing such an order.

A number of Wincorp investors earlier asked the SEC to conduct an investigation of stockholders and owners of the firm, including United Overseas Bank (UOB), formerly Westmont Bank.

Apollo X.C.S. Sangalang, legal counsel for the unnamed investors who are both depositors of UOB and holders of securities issued by Wincorp., urged the SEC to expand the scope of the probe and to look into the past and present stockholders and beneficial owners, directors, officers and employees of the investment house and the bank.

Sangalang said there is legal basis for recommending that Wincorp and Westmonk Bank-UOB be prosecuted administratively and criminally for various violations of the Revised Securities Act.

The investors claimed that through branch offices and personnel of UOB, they were lured into diverting funds previously deposited with the bank, and transferring their investments in securities offered by Wincorp in the form of a "confirmation advice."

Sangalang said the confirmation advice was made to appear that the investors invested their "hard-earned money" in previously undisclosed third party "borrowers," and that Wincorp merely brokered the transactions.

"Our clients were conditioned to believe that they were investing in securities guaranteed and/or underwritten by Westmont Bank-UOB and/or Wincorp as they were never shown any prospectus, financial statement or debt instrument issued by these alleged "borrowers."

Sangalang said that a check showed the alleged borrowers eventually turned out to be merely fronts of some of the past and present beneficial owners, stockholders directors and officers of Westmont-UOB and Wincorp.

"Based on these, Westmont Bank-UOB and/or Wincorp clearly violated the RSA by offering to the general public securities which are not exempted from SEC registration, by way of a transaction which is likewise not exempted."