SEC files raps vs 13 individuals for stock manipulation

MANILA, Philippines - The Securities and Exchange Commission (SEC) has filed with the Department of Justice a criminal complaint against 13 individuals alleged to have rigged the share price of agriculture firm Calata Corp.

One of the respondents is the firm’s head financial advisor.

In a 78-page complaint-affidavit, SEC identified the 13 as Zandro Zulueta, chief executive officer of Absolute Traders & Consulting; Arnold Dellosa, Arnold Martin, Dennis Vistan, Juvy Ocampo, Glaizel Eco, King Sulit, Alvin Morfe, Sheryl Sia, Michael Angeles, Carmelo Bunag, Richie Isip, and Gary Taboso.

Dellosa, Martin and Vistan are from Plaridel, Bulacan where Calata is based.

Ocampo, Eco, Sulit, Morfe and Sia are connected with Calata.

Zulueta, Isip, Taboso and Vistan already owned shares in Calata prior to the firm’s initial public offering (IPO) in May.

The SEC alleged that the 13 conspired with one another to perpetuate stock market fraud by  “intentionally and unlawfully” raising the price of Calata shares from May 23 to June 8 through various illegal means for their own profit in violation of Section 24 of the Securities Regulation Code. “Respondents engaged in high-frequency, high-volume buying and selling transactions and several EO-trades for the purpose of artificially raising the price of CAL shares which they eventually dumped on the market at a profit,” SEC said in its complaint.

EO trades refer to the transfer of shares held by a beneficial owner with one broker to his account with another broker. The transfer is made through a request authorization letter, which the beneficial owner gives to the sending broker.

The investigation into Calata was triggered by the unusual increase in its share price two weeks after its listing on May 23. Calata’s share price zoomed by a cumulative 225.85 percent from its opening level of P7.35 on May 24 to P23.95 on June 4. 

“This increase was peculiar since there were no significant events or disclosures made which could have accounted for the sharp increase in the price and volume traded for Calata shares,” the SEC said. 

The price movement of CAL shares during the period was monitored through Technistock, a program which tracks and analyzes data of stocks traded through the PSE.

According to the complaint, the respondents executed multiple buy transactions through brokerage firms Sun Securities, Nieves Securities and Tower Securities, amassing 32.95 percent of the total volume of Calata shares bought during the period.  

“This gave the impression to the public that CAL was being heavily traded at the PSE. This naturally induced the public to invest in the same, which only served to artificially increase its price,” SEC said.

“Aside from the high-volume nature of the buy transactions executed by the respondents, the frequency and timing of the said transactions also support a finding of market manipulation through hype and dump. It can be readily observed that the buy transactions entered into by the respondents are mostly ‘buy-ups’ or near ‘buy-ups’ which mean that they offered to buy Calata,” SEC pointed out.

Buy-ups refer to the posting of multiple buy orders at increasing prices throughout the trading day to adjust for changes in the last traded price and sustain the upward movement of the price. 

“This observation is consistent with the common testimony of the salesmen of the subject brokers that the respondents would call them multiple times a day, sometimes even more than 20 times, to post various buy orders with different prices,” the SEC complaint read.

The SEC also alleged that after the respondents achieved record peaks for the price of Calata shares, they started dumping their shares to the public by selling them at levels above their acquisition price.

To maximize their dumping activity and stem the downward movement of the price of CAL shares during this selling spree, respondents systematically used EO trades to distribute the shares they held prior to the IPO.

“This was made to deceive the public into thinking that the shares were being sold by different owners as opposed to the truth that they were being unloaded by an organized group which would have accelerated the fall of the price had the public become aware of this plot,” SEC added.

Through such scheme, respondents were able to sell 86.99 million shares or 38.47 percent of the total shares sold and enjoy a net gain of P216.05 million.

Under Section 24 of the Securities Regulation Code, “it shall be unlawful for any person acting for himself or through a dealer or broker, directly or indirectly to effect, alone or with others, a series of transactions in securities that raise their price to induce the purchase of a security, whether of the same or a different class of the same issuer or of a controlling, controlled, or commonly controlled company.”

Violators face a fine of P50,000 to P5 million or imprisonment of seven to 21 years.

Calata earlier lauded the SEC for its swift action on the unusual spikes in the firm’s share price two weeks after its IPO.

“We support the SEC’s efforts at keeping this a low-profile investigation and preventing this probe from becoming a controversy. In so doing, the SEC has made sure there would be no unnecessary panic in the market that could have been triggered by baseless speculations,” company president Joseph Calata earlier said in a statement. 

“Let us allow the SEC to move on with the due process so that it can end this chapter and proceed with reforms in the stock market,” Calata added.