Fund managers decry slow action on BW

Foreign fund managers have expressed concern over the snail’s pace action in the case involving BW Resources Corp. which nearly caused the collapse of the stock market in 1999.

SEC chairman Lilia R. Bautista, who was part of a team that recently met with foreign fund managers abroad to promote the local equities market, said foreign investors had questions on the status of the case filed against individuals and entities found to have orchestrated the Philippines’ biggest stock market scam.

"Foreign fund managers who attended the international roadshow asked whether someone had already been jailed," Bautista said.

In the history of the Philippine stock market, no individual has ever been prosecuted, convicted or jailed for insider trading or price manipulation.

In 1995, the SEC came close to pinning down manipulators in a case in which seven executives and directors of Interport Resources were accused of pocketing $2 million from illegal trading.

The case, however, hit a snag after the Court of Appeals issued an order stopping the SEC from pursuing the case. The temporary restraining order is now virtually permanent.

The main reason for the unfruitful record on prosecutions is a lack of political will. Another big problem is the control brokers maintain over the PSE.

The BW Resources scandal started the decline of the stock market which has not recovered since. The market shakeup was blamed on the exodus of foreign investors after the BW stock price fixing scandal allegedly involving a friend of then President Joseph Estrada.

The BW case is the first major stock fraud suit to be filed under the SRC, which was drafted and passed in August 2000 partly in reaction to the scandal.

The Department of Justice recently found prima facie evidence against Dante Tan, a crony of President Estrada and several other business executives for four violations of the country’s securities laws. Acting on a complaint filed by the SEC against Tan and his group, the DOJ pursued an investigation into the case.

Despite the Bureau of Immigration’s assurance that Tan is in the country, reports have it that he is now in Canada.

Apart from Tan, the others charged were Raul De Castro of A.T. De Castro Securities Corp., Federico Galang of PCCI Securities Brokers Corp. and Eduardo Co of Aurora Securities for having engaged in wash sales.

The resolution handed down by the justice Department said that "from the very start, Tan was assisted by his associates and co-conspirators . . . to cause a massive manipulation of the market in BW shares."

"As a result numerous investors were tricked and deceived into buying BW shares only to lose their investments and suffer damage when the price of the BW shares collapsed for lack of corporate fundamentals to support investments in said shares, and which also caused damage to the stock market in general."

The SEC investigation was spurred by the phenomenal rise in the share prices of BW from only P1.98 per share to a peak of P107 per share in just seven months. The shares have since fallen to below P1.

Bautista said the SEC is vigorously pursuing wide-ranging reforms needed to shore up investor confidence, badly eroded by the 1999 BW scandal.

She said the SEC has pushed for the needed legislative support to come up with structured laws and regulations to make it attractive to investors, both foreign and local and further safeguard the investing public.

These reforms, Bautista said, include innovative policies to spur the growth of the capital market and the needed legislative push to install suitable infrastructure.