SEC issues CDO vs Wincorp

The Securities and Exchange Commission (SEC) has ordered Westmont Investment Corp. (Wincorp) to stop soliciting and issuing commercial papers.

A cease and desist order (CDO) was signed by Ruben Ladia, acting director of the SEC's prosecution and enforcement department (PED), based on the endorsement of the brokers and exchanges department (BED) which previously did a routine audit on the firm.

PED received a letter-complaint from the counsel of several investors, requesting that an investigation be conducted on Wincorp, Westmont Bank-UOB, their present and past stockholders and beneficial owners for alleged violations of the Revised Securities Act and other existing laws.

In particular, Wincorp has been offering to the general public, unregistered securities in the form of a confirmation advice (CA). Ladia said that based on data gathered, Wincorp is engaged in the business of lending or extending credit to corporations or individual borrowers by requiring the execution of a promissory note and loan agreement payable to Wincorp.

Prior to extending credit, Wincorp looks for funders who are mostly individuals and issues them a confirmation advice using the loan agreement as reference collateral. The CA which is considered a commercial paper, under the new rules on registration of short term commercial papers, has not been registered with the SEC nor is it exempt from registration under the said rules.

Wincorp papers also show that Wincorp has outstanding balance on the cost of negotiated sales (matching of borrower and funder) as of December 31, 1999, it has secured funds from about 1,200 lenders or individuals with an average of more than P7 billion worth of commercial papers per month.

The PED also found out that Wincorp's operations include normally shouldering in advance the interest of the loan of the funder for the account of its borrower whenever one of its borrowers failed to pay the principal amount and the interest of the loan.

As a result of this practice, Wincorp has accumulated interest paid in advance to funders for the account of the borrowers amounting to P165.8111 million as of end 1999.

"This bolsters the fact that Wincorp's borrowers have been defaulting on their obligations to the detriment of the investing public," Ladia said.