SEC tightens rules on public offers

The Securities and Exchange Commission has tightened the definition of public offering to make it easier for the corporate watchdog to go after entities engaged in pyramiding or pseudo-investment operations. SEC Chairman Lilia R. Bautista said there is a need to clearly define what constitutes a public offering to ensure that shares are registered first with the commission before any sale is consummated.

Public offering has been defined as a random or indiscriminate offering of securities to anyone who will buy, whether solicited or unsolicited.

Unless proven otherwise, any solicitation or presentation of securities for sale through any of the following mode shall constitute public offering:

• Publication in any newspaper, magazine or printed reading material which is widely distributed within the Philippines

• Presentation in any public or commercial place

• Advertisement or announcement in ra dio

• Distribution or making available flyers, brochures or any offering materials in a public or commercial place, or mailing the same to any prospective purchaser

Citing the Securities Regulation Code, Bautista said it shall be unlawful for anyone to offer securities to the public without prior approval from the SEC.

Under the previous set-up, issuers of securities were only required to register with the SEC if the shares were offered to more than 19 individuals or entities.

With the new definition, the SEC hopes to curb pyramiding or pseudo-investment scams which have left thousands of investors holding an empty bag.Pseudo investment firms offer ridiculously high interest rates and use high pressure sales techniques to entice the public to put in their hard-earned money.

The yields are significantly higher than the two to four-percent annual rate offered by commercial banks. Bautista said the SEC will not hesitate to file criminal charges against those who will be found to have violated its registration requirements and other provisions of the securities law.

The SEC chief said the commission can now easily track down operators of fraudulent investment schemes since most of these firms advertise their business and hold seminars to inform the public about the benefits of investing in their products.

Even if only one investor comes out and files a complaint against the erring firm, the SEC can already initiate criminal proceedings against the company on the basis of evidence gathered.

In the past, the SEC had to wait for at least 20 individuals to file a complaint against a pyramiding or pseudo-investment firm before any action is taken by the agency.

More often than not, scams and anomalies come out in the open only after too many people have been misled or robbed, and the perpetrators have run away. The SEC had filed criminal complaints against pseudo-investment firms Multinational

Telecommunications Investors Corp., Everflow Group of Companies, Mateo Management Group, Tibayan Group for violations of the Securities Regulation Code and for large-scale estafa.

Of the suspects in various pyramid scams, only Rosario Baladjay of Multitel – who was charged with syndicated estafa – and Maria Teresa Santos, who allegedly defrauded thousands of policemen, have been arrested and are now in jail.

The National Bureau of Investigation earlier said the amount of money lost to several major pyramid scams could amount to as much as P120 billion.

Multitel accounted for P20 billion to P25 billion, MMG (P20 billion to P25 billion), and Tibayan (P2 billion to P3 billion).