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Business

SEC warns public on resurgence of ‘boiler room’ type operations

- Zinnia B. Dela Peña -
With pyramiding schemes laying low, boiler room operators have been reviving their operations in the country and investors are advised to exercise caution against these entities.

Securities and Exchange Commission (SEC) Associate Commissioner Joselia Poblador said there has been a resurgence of boiler operations in Cebu, Pampanga and Davao. "They are testing the waters again," Poblador said.

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.

Poblador said the SEC has received an e-mail from a foreign investor based in Australia, inquiring on the legitimacy of operations of a certain company.

She said investors should first conduct a background check on companies they invest in before parting with their money.

SEC chairman Lilia R. Bautista said the Commission has also sought the help of the association of call centers to address the problem on looming boiler room operations in the country. "They should do something about it because it’s giving them a bad name," Bautista said.

Boiler room operators entice investors to buy foreign shares that are traded at the Nasdaq, Ofex , Countex and other known foreign stock exchanges. In the end, these stocks turn out to be non-existent.

Companies engaged in boiler room operations set up corporations in various countries, including the Philippines and without secondary license deal in securities. They use aliases in dealing with their clients as part of their modus operandi. To lure potential investors, members of the syndicate would introduce themselves as representatives of international stockbrokers supposedly with offices in different countries.

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 ilegal 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.

According to the SEC, foreigners, mostly Europeans, run these syndicates, employing Filipinos to call up prospective victims to entice them to buy foreign stocks.

In 2001, the SEC had recommended to the Department of Justice the filing of criminal charges against the officers and salesmen of at least 21 corporations that were suspected members of a syndicate operating a global investment scam in the country.

Among the 21 corporations were Dukes & Co. Securities Inc., Muller & Sons Securities Mgt., Saxon & Swift Inc., Knowle & Sachs Inc., First Federal Capital, Morgan Lynch United Resources Marketing, Pryce Weston Inc., FFCI Marketing & Dev., 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.

These corporations, the SEC said, represented themselves as broker dealers although most of them were registered as management consultancy firms.

Among the other corporations that were found to have engaged in boiler room operations were Evergreen, Barclays, and Goldberg and Price Richardson.

vuukle comment

AMP

ASSOCIATE COMMISSIONER JOSELIA POBLADOR

BARNES MARKETING CONCEPT INC

BAUTISTA

BOILER

BRADFORD-KEMPNER MANAGEMENT SERVICES INC

BRADSHAW GLOBAL ASSET MANAGEMENT INC

COMSAT INTERNATIONAL

INC

OPERATIONS

ROOM

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