SEC builds up case against boiler room operators

The Securities and Exchange Commission (SEC) is strengthening its case against the boiler room operations of several firms and individuals amid charges that it has issued "judicially defective" search warrants to the concerned parties.

The corporate watchdog said in a statement that it has solid basis for charging the 21 corporations and several individuals for violation of Sec. 28 of the Securities Regulation Code, or for engaging in fraudulent securities transactions.

Although the SEC said it would not comment on the merits of the case since it is currently pending before the Regional Trial Court of Makati, the agency said it is considering the filing of contempt charges against Ronald Olivar Solis, the legal counsel of one of the accused individuals, Rufina B. Abad, for his public comments picked up in news reports, claiming such action was a clear violation of legal ethics.

Aside from Abad, others charged for securities fraud are Amador Pastrana, Noel Galang and Gregory Barnes. Among the 21 corporations in the same charge sheet are Dukes and Co. Securities, Muller & Sons Securities Mgt. Inc., Saxon & Swift Inc., Knowle & Sachs Inc., First Federal Capital Inc., Morgan Lynch United Resources Mktg. Inc., and Pryce Weston Inc.

"In light of the growing number of boiler-room operation schemes which have victimized thousands of foreign investors around the world through fraudulent investment schemes, the SEC wants to send a strong message to the public that they will clamp down hard on any securities fraud operations and will not hesitate to enforce the full effect of the law," the SEC said in a statement.

The modus operandi of boiler room operations is to set up a corporation in the Philippines and even without a secondary license, as required under the SRC, deal in securities. Using unlicensed brokers, dealers and telemarketers, they then engage in calling "leads," usually names of CEOs, general managers, directors and other moneyed individuals abroad and offer their services alleging that they are qualified brokers/dealers in securities.

Once money has been collected from the unsuspecting clients or when there is knowledge that the government is closing in on the illegal practice, these companies then close shop, leaving the investors with nothing. They later reopen under a different name.

Together with a raiding team from the National Bureau of Investigation, the SEC has been on a sweeping campaign to curb the illegal market activities of mostly foreign firms that have been using the Philippines as their base for their global investment racketeering.