Asian Capital investors to recover only 20% of investments, says SEC official

Investors of Asian Capital Equities Inc. (ACE) will likely recover only 20 percent of their total investments placed with the debt-strapped brokerage house, according to an official of the Securities and Exchange Commission (SEC).

Jose P. Aquino, head of the SEC’s Markets Regulation Department, said ACE’s assets and cash might not be sufficient to cover all the broker-firm’s debts and payables to investors.

As of Feb. 27, 2004, total claims filed against ACE amounted to P95.2 million.

ACE ceased operations last year due to severe cashflow problems and various violations of the securities law.

Among the options being considered earlier by the SEC to satisfy investors’ claims are to draw on ACE’s P5-million surety bond or tap the securities investor protection fund (SIPF), which has total collections of P20 million. Each client or investor can claim P100,000.

The SIPF has been formed to compensate investors for the ordinary loss or damage they may suffer due to business failure or fraud or mismanagement of persons with whom they transacted.

Meanwhile, brokers which have yet to comply with the P100-million unimpaired paid-up capital requirement are mandated to file a P5- million surety bond.

Aquino said "any person damaged by the failure of a broker-dealer to comply with the provisions of the Securities Regulation Code shall be entitled to sue the sureties under such bond and to recover the damages so suffered."

ACE is in the process of liquidating all its assets to settle unpaid obligations.

The Philippine Stock Exchange (PSE) has taken over the operations of ACE because of the latter’s deteriorating financial condition and after finding reasonable grounds it violated provisions of the SRC.

The SEC had filed with the Department of Justice a criminal complaint against ACE president Francisco Borromeo for violation of several provisions of the SRC.

In its complaint, the SEC accused Borromeo, a former PSE governor, of engaging in fraudulent activities to the detriment of ACE investors.

In particular, the SEC accused Borromeo of authorizing and using fictitious accounts, engaging in fictitious trades, selling clients‚ securities without their knowledge and consent, and fabricating records and reports submitted to securities regulators.

Last Jan. 15, 2004, upon request of the SEC, the DOJ issued a hold-departure order against Borromeo.