SEC asks Summit to explain ‘manipulative trading practices’

Summit Securities, a stock brokerage firm headed by former Philippine Stock Exchange (PSE) chairman Harry Liu, is in hot water. An audit report by the Securities and Exchange Commission (SEC) stated that the company has engaged in manipulative trading practices.

A report by the SEC’s market regulation department has recommended that Summit be required to show cause and explain its side. The MRD said it will be endorsing the case to the compliance and enforcement department (CED) for further investigation.

The audit report covered the period from Jan. 1 to Aug. 22, 2001 wherein the company was required to present books, records and other related documents of all transactions.

The examination was prompted primarily by reports of unusual transactions in the seldom-traded Liberty Telecoms Holdings Inc. (LTHI), which rose into one of the most active issues from June to August this year after a series of cross sales led by Summit.

Interestingly, the brokerage firm holds a substantial 9.91 percent stake in the still in operational telecoms company. Aside from owning Summit, Liu, the PSE chairman from 1998 to 1999, is also a director in the 15-man PSE board and is chairman of the Association of Securities Analysts of the Philippines.

The SEC said that based on available records, Summit engaged in cross trading (buy and sell) of LTHI stocks which created the impression that it was actively traded in the stock market.

"Further review of order tickets indicated that cross trading of both the buy and sell transactions were made on the same time of the day for the said issue. Likewise, parties therein were somewhat related because the sellers, although minimal, has stockholdings to the buyers which were all corporations whose paid-up capital ranging from P1 million to P12.5 million and incorporated from Feb. 28 to July 12, 2001," the SEC said.

The sale involved some 485 million shares – or about 38 percent of the company’s outstanding capital – jointly owned by LTHI’s three biggest shareholders: chairman and vice president Raymond Moreno, senior vice president Edgardo Quiogue; and executive vice president Rene Jose Domingo.

The buyers listed were 14 different companies: Moredel Homes, Viswa Ventures , Akshra Resources, JRLT Holdings, AJAR Holdings, ARJA Holdings, RAAJ Holdings, JORU Holdings, JRAA Holdings, San Isidro Assets, Cassandra Conglomerate, Oceanus Conglomerate, Seven Seas Holdings, and Four Devas Assets.

"No actual payments was made for the buy transactions by the buyers and no remittance was done by the subject company to the sellers. Settlement of each trading transactions were only made by mere issuances of credit and debit memorandums by the subject company and payment of minimal amount of peso, if there is any, by the buyers. This seems to appear a non-exclusive example of an improper matched order," the SEC said. – Conrado Diaz Jr.