The investigation was spurred by text messages sent to SEC officials, complaining about First Resources‚ cornering all of GSIS stock market deals for the first half of the year. These transactions reportedly had the backing of GSIS president Winston Garcia, who is said to be close to former PSE chairman Vivian Yuchengco.
"We have been receiving a lot of text messages about GSIS‚ stock transactions executed through First Orient. As the chief securities regulator, it is the SEC’s job to verify these reports to determine whether there has been a violation of the securities law and its implementing rules," said Jose P. Aquino, head of the SEC’s Markets Regulation Department (MRD).
Aquino, however, said preliminary results of the investigation showed that there has been no violation of the Securities Regulation Code.
"Initial results of our investigation indicated that there was nothing unusual. There was no price manipulation," he said.
"We have already investigated and inquired on the buying habit of the GSIS. They go for blue-chips and not second-liners. They like issues that declare dividends like PLDT, Meralco and San Miguel," Aquino said.
He also clarified that there was nothing wrong with GSIS picking only brokerage house to handle its buying and selling transactions.
"Any investor is free to choose his or her broker. If they think that this broker is the most qualified to execute their trades then that’s okay. There is no rule preventing the GSIS from spreading out its deals to other broker firms," he said.
"What we want to find out is whether First Resources knows anything that other people don’t‚ and has taken advantage of this material information," Aquino said.
Aquino said GSIS is only required to make a disclosure of its investments in the stockmarket only on acquisitions involving five percent of a listed company.
"When a stockholder’s ownership in a listed corporation reaches five percent, he or she has to report this. In the case of the GSIS, it files its beneficial ownership reports on time," he said.
The Insurance Commission has drafted an Administrative Order (AO) that would give it the authority to approve or reject investments to be made by either GSIS or the Social Security System.
GSIS is the pension fund for government workers.
If approved, the AO shall also give the Insurance Commission the authority to examine the financial conditions of GSIS and SSS at least once every two years, to ensure that public funds are not mismanaged.
The draft order was proposed because of suspicions that state-run pension funds were mismanaged.