The move was spurred by mounting complaints received from several local and foreign nationals like Saudi Arabians, South Africans, Australians, New Zealanders, Tahiti-French Polynesians, Norwegians, Finnish, Irish and Singaporeans.
The complainants alleged that they were offered by their broker-salesmen shares of companies listed at the Nasdaq and other foreign stock exchanges. These broker-salesmen used high pressure sales tactics on these investors through overseas calls from the Philippines for the latter to buy foreign shares.
According to them, they wired money to Philippine banks as instructed by their broker-salesmen for the purchase of shares. Afterwards, they complained, they would have difficulty getting hold of their investments and then later on lost their money altogether.
The modus operandi of boiler-room operations is to employ telemarketers and foreigners who as unregistered brokers use high pressure sales techniques and promises of exorbitant returns on investment and fraudulently sell securities in unregistered transactions.
Tomas Syquia, head of the SEC’s Compliance and Enforcement Department, has warned the public against dealing with suspected boiler room operator Hylton Consultancy, saying the company is not licensed as a securities broker.
A boiler room operates with only minimal legitimate business activities – its primary activity is to raise investor funds which will then be pocketed by the principals and telemarketers in the form of commissions, costs and fees.
Once money has been collected or when there is knowledge that the government is closing in on the illegal practice, these boiler room securities corporations then close shop, leaving the investors with nothing and reopen under a different name and resume their illegal operations.
Sending a strong message to the public, the SEC said it will clamp down on any securities fraud operations and will not hesitate to enforce the full effect of the law.
The MOU, signed by SEC Chairman Lilia R. Bautista and NBI Director Reynaldo Wycoco, was intended to address the growing number of Philippine-registered corporations being used by transnational elements with dubious identities to defraud gullible investors.
Among the companies that were earlier found to have engaged in boiler room operations are Mendez Prior, Dukes and Co. Inc., Evergreen, Barclays, and Goldberg, Price Richardson, and Sterling.
The Group of Dukes is reportedly composed of 20 corporations, including Dukes & Co. Securities Inc., Muller & Sons Securities Mgt., Saxon & Swift Inc., Knowle & Sash Inc., First Federal Capital, Morgan Lynch United Resources Marketing, Pryce Weston Inc., FFCI Marketing & Dev’t., Bradshaw Global Asset Management Inc., Wells Chadwick Inc., Comsat International, Worldwide Investors Management Inc., United Capital Management, Newport Pacific Securities & Management, Interloop Marketing Services Inc., Freelander & Kuhn Inc., United Resources Asset Mgt., Westwood Management, Sherman Bros. Mgt. Ltd., Bradford-Kempner Management Services Inc., and Barnes Marketing Concept Inc.