Troubled investment houses Urbancorp Investment Inc. and Westmont Investment Corp. showed Securities and Exchange Commission (SEC) auditors a different set of documents which do not indicate their real financial conditions, according to initial findings by the examiners of the brokers and exchanges department (BED).
In their special audit, the BED noted that most of the questionable transactions of Urbancorp Investment and Wincorp were recorded in their "trust department" books.
An official of the SEC explained that investment houses like Urbancorp Investment and Wincorp which are subsidiaries and affiliates of banks and quasi-banks, have at least two departments. One is the so-called "investment proper house" which deals 'Questionable transactions' with underwriting and trading of registered securities, and the other one is the "trust department" which deals with loans and other kinds of securities.
"During the routine audit of the SEC examiners for 1999, these kinds of (questionable) transactions were not reflected in the 'investment house proper' books being looked into or reviewed because these were recorded in the 'trust department' which is under the supervision and regulation of the Bangko Sentral ng Pilipinas."
The official was referring to reports that the BSP is set to take over the supervision of investment houses without quasi-banking licenses from the SEC, adding it is "unfair to say that BSP plans to take over the supervision of investment houses from the SEC because the problem being encountered by these investment houses now should have been discovered by the BSP itself with its examiners were reviewing the books of their trust department."
The move of the BSP was prompted by the Urbancorp Investment and Wincorp fiasco but the official said there is already a standing agreement between the SEC and BSP wherein supervision was never transferred to the SEC but remained after all with the BSP.
The BSP and SEC already have a memorandum of agreement signed last year spelling out the demarcation line between the SEC and BSP. The BSP was supposed to phase out its regulatory powers over non-bank financial institutions (NBFIs) and other institutions performing similar functions and transfer these to the SEC. BSP, however, will continue to regulate and supervise quasi-banks including their subsidiaries and affiliates engaged in allied activities as well as NBFIs authorized to engage in trust or fiduciary investment management operations.