CA junks Powerhomes’ bid for recall of SEC order

The Court of Appeals has denied Power Homes Unlimited Corp.’s motion to reconsider an earlier decision upholding the cease and desist order (CDO) issued by the Securities and Exchange Commission (SEC) against the firm in 2001.

In affirming the SEC’s decision, the CA said the marketing strategy of Powerhomes proved an absence of a product and that it mainly derives profits through recruitment, or from the efforts of others.

The CA also questioned the trainings conducted by Powerhomes to new investors, noting that these trainings could not possibly have a real value of $234.

The CA decision would virtually result in the closure of Powerhomes’ marketing operations unless the firm can secure a restraining order on the imposition of the CDO which was made permanent by the SEC.

The CDO was issued against Powerhomes in Jan. 16, 2001 for selling unregistered investment contracts.

An investment contract, as defined under the implementing rules and regulations of the Securities Regulation Code, is a transaction in which a person invests money in a common enterprise and is led to expect profits primarily from the efforts of others.

Under Powerhomes’ sales scheme, members were given the opportunity to own real estate such as a house and lot package in exchange for $234 in enrollment fee. With the enrollment fee, the investor becomes a business center owner (BCO).

Upon enrollment and completion of training, the BCO is provided with a personal business center in the form of an Internet website where other members can be recruited for a fixed income.

At a certain time, a portion of the BCO’s commissions will be set aside as partial payment for the property chosen by the same BCO.

Powerhomes argued that the computer module of the program has a fair market value, pointing out that the price charged to the purchasers was lower than those charged by established computer schools such as STI, AMA or Informatics for a similar course.

With the CA’s denial, the SEC has strongly advised the public to take the necessary precautions before entering into transactions with Powerhomes.

The SEC has earlier ordered Powerhomes to return the investments of its over 100,000 members and to refrain from holding seminars or trainings which are intended to attract more investors.

Powerhomes was also directed to immediately stop from soliciting new investments, whether in the Philippines or abroad, to avert further damage to the investing public.

The company earlier said it would exhaust all legal means to prevent the SEC from closing down its operations.

Powerhomes said the SEC failed to conduct a hearing on the issue of the procedural validity of the CDO and had issued the CDO without any evidence.