BSP to blame for Urban fiasco -SEC

The Securities and Exchange Commission (SEC) has denied any responsibility in supervising or regulating investment houses, claiming that the Bangko Sentral ng Pilipinas (BSP) has retained supervision over investment houses, including Urbancorp Investment Inc. and Westmont Investment Inc. (Wincorp).

In a memorandum dated May 4, 2000, the corporate watchdog took exception to news articles quoting BSP Gov. Rafael B. Buenaventura as saying that the BSP would seek supervision of investment houses from the SEC which supposedly has direct regulatory authority over such entities.

The SEC pointed out that, indeed, there was supposed to be a transfer of supervision from the BSP to the SEC following the passage of RA No. 7653.

Under RA 7653, the BSP was to phase out its regulatory powers over non-bank financial institutions (NBFIs) and other institutions performing similar functions and transfer those functions to the SEC.

However, the SEC pointed out, the transfer was limited as the BSP did not allow the complete transfer of those institutions to the SEC.

There was also an agreement, the SEC argued, that the BSP will continue to regulate and supervise quasi-banks including their subsidiaries and affiliates engaged in allied activities as well as NBFIs authorized to engage in trust or other fiduciary business/investment management operations.

The agreement, the SEC said, also stated that NBFIs suspected to be engaged in trust or investment management functions should be referred by the SEC to the BSP for examination.

The SEC also revealed that the BSP did not turn over to the SEC the NBFIs with authority to engage in trust and investment management operations and NBFI subsidiaries or affiliates of BSP to blame bank and non-bank quasi-banks.

The SEC also cited the fact that the BSP reiterated its continuing jurisdiction in at least two letters, one dated April 28,1999 and signed by Director Candon B. Guerrero, which stated that Urbancorp, having a trust function is retained under BSP's supervision.

The other letter dated Feb. 18,2000 and also signed by Guerrero stated that the BSP will continue to regulate and supervise investment houses with trust and investment management authority and investment houses which are subsidiaries and affiliates of banks and quasi-banks.

That same letter dated Feb. 18, 2000, the SEC said also indicates that Urbancorp (with trust function) and Wincorp (being an affiliate of a bank) are under the BSP's regulation and supervision.

The corporate watchdog explained that these kinds of investment houses have at least two departments which are an investment house proper (which deals with underwriting and trading of registered securities) and a trust department (which deals with loans and other kinds of securities).

The SEC said an initial report of its Brokers Examination Division (BED), in their special audit, showed that most of the questionable transactions of Urbancorp and Wincorp are recorded in their trust department books.

In other words, the corporate watchdog said, during the routine audit of the SEC examiners last year, these kinds of transactions were not reflected in the investment house proper books because they were recorded in the trust department which "is under the supervision and regulation of the BSP."

The SEC further pointed out that with respect to Urbancorp. "the examiners of the BSP were there last November 1999 examining the trust department books. It is then clear that the transactions as reported in the papers are presently under the jurisdiction of the BSP."

The SEC said that "analyzing these circumstances, it is unfair to say that BSP plans to take over the supervision of investment houses from the SEC because the problem being encountered by these investment houses now should have been discovered by BSP itself when its examiners were examining the books of their trust department."

In a press conference last Friday, Buenaventura was apparently unaware that the BSP has retained supervision over investment houses.

"We don't supervise them," he responded to a question if the BSP will crack down on investment houses, adding that "they're not under my supervision, let's put it this way, I think the DOF will be making the appropriate legislation because they are under their supervision." -