SEC, BSP define roles in probe of pseudo-investment scams

To address the urgent need to coordinate investigative efforts, the Securities and Exchange Commission and the Bangko Sentral ng Pilipinas have signed a memorandum of agreement delineating their responsibilities with respect to investigations of pseudo-investment or borrowing scams.

SEC officials said the MOA is necessary to eliminate problems and difficulties encountered by both the BSP and the SEC in the exercise of their responsibilities, and to expedite the investigation and prosecution of perpetrators of pseudo-investment schemes and other illegal investment solicitation activities.

Pseudo investment firms offer ridiculously high interest rates ranging from from five to 15 percent a month to entice the public to invest their hard-earned money. The yields are significantly higher than the four to five percent annual rate on Treasury bills.

The MOA aims to protect investors and ensure that their funds are channeled only to legitimate investment opportunities with the end in view of preserving the integrity and stability of the financial system.

The SEC and BSP noted the growing cases of pseudo investment scams which, in turn have resulted in the proliferation of bouncing check cases, have posed a threat to the stability of the country’s financial system.

To ensure proper coordination, both parties agreed to meet quarterly or as the need arises.

Industry observers said the BSP and the SEC have been remiss in tracking down operators of pseudo-investment schemes which have victimized thousands of individuals through their enticing get-rich-quick schemes.

The SEC noted that the BSP, in the past, had been referring to the Commission cases and incidents of money being solicited from at least 20 individuals. Some of these referrals and other complaints reveal that these companies are engaged in activities which may partake of a nature of banking activities and/or quasi-banking functions without authority from the BSP.

To further safeguard the interest of the investing public, the SEC had asked the Bankers Association of the Philippines (BAP) to properly monitor and control the issuance of checkbooks to corporations or individuals.

It also asked the BAP to immediately report to the appropriate government agencies any suspicious activities involving requests for unusually high volumes of checkbooks.

In the course of its investigation and profiling of corporations engaged in pyramiding and Ponzi schemes, the SEC noticed that an essential component of their modus operandi is the issuance of post-dated checks. Records showed that for each investor six to seven checks are issued covering six interest payments and the principal payment.

Intensifying its drive against securities fraud, the SEC has been regularly issuing advisories regarding investment scams to aid the public in their investmest-making decisions and to, hopefully, prevent the repeat of the Multitel and Tibayan investment fiascos, which have victimized thousands of investors.