SEC, BSP to define roles in investment scam investigations

The Securities and Exchange Commission and the Bangko Sentral ng Pilipinas are drafting a memorandum of agreement that will define their responsibilities with respect to investigations of possible scams arising from various investment or borrowing schemes.

SEC Compliance and Enforcement Department director Tomas Syquia said the MOA is necessary to eliminate problems and difficulties encountered by both the BSP and the SEC in the exercise of their responsibilities.

The agreement, he said, will ensure better coordination between the SEC and the central bank and is meant to effectively monitor violations of laws of both agencies.

Syquia said both the SEC and BSP underscored the need to coordinate their efforts in order to expedite the detection, investigation and prosecution of perpetrators of pseudo-investment schemes (also known as Ponzi scheme) and other illegal investment solicitation activities.

To ensure proper coordination, both parties agreed to meet quarterly or as the need arises.

Under the draft MOA, the BSP and SEC will jointly conduct investigations of companies that illegally solicit funds from more than 19 lenders to ensure that regulatory gaps do not occur.

The growing cases of pseudo investment scams, which in turn resulted in the proliferation of bouncing check cases, have posed a threat to the stability of the country’s financial system, the draft MOA noted.

"It is therefore in the interest of both the BSP and SEC to protect investors and ensure that their funds are channeled only to legitimate investment opportunities with the end in view of preserving the integrity and stability of the financial system," the MOA said.

Industry observers said the BSP and the SEC were remiss in tracking down operators of pseudo-investment schemes which have victimized thousands of individuals through their enticing come-ons that offer to make huge profits from a small investment for just a short period of time.

It will be recalled that the SEC earlier urged the BSP to do its part in running after pseudo-investment firms that were defrauding the public of billions of pesos in savings.

SEC Chairman Lilia R. Bautista asserted that the central bank should look at the activities of companies soliciting investments from the public instead of just referring these cases to the commission. She said section 6 of the General Banking Law of 2000 is very clear that the BSP also has jurisdiction over such firms.

Section 6 of the GBA provides that the "Monetary Board shall determine whether a person or entity is performing banking or quasi-banking functions without BSP authority. The MB may, through the appropriate supervising and examining department of the BSP, examine, inspect or investigate the books and records of such person or entity."

The same law prescribes sanctions against persons or entities found to be performing banking or quasi-banking functions without BSP license.