An open letter to the Securities and Exchange Commission

We fully realize the predicament of the Securities and Exchange Commission as it is mandated to enforce regulations upon companies registered with it as well as to protect the investing public. We strongly feel, however, that the paramount duty of SEC should be the latter.

It is in this context that we are constrained to make this appeal an open letter to the SEC for the around 600 thousand students that would be affected by the delay or stoppage of the license of the College Assurance Plan to sell securities and educational plans. In a nutshell, this course of action would incapacitate CAP from honoring its 600 thousand or so students (its investing public) as their planholdings mature.

As our company, Green Square Properties and Resources, Inc. expressed interest to help the College Assurance Plan in its time of need, we deem it appropriate to share with our readers our reasons for doing so.

The College Assurance Plan Philippines, Inc. (CAP) is a one hundred percent Filipino-owned corporation that pioneered into the pre-need business of assuring a college education. CAP became so successful in the sale of its education plans that it grew to be a big, if not the biggest, player in this pre-need industry.

Today, CAP needs help and support. The robust company that it is being tested upon factors and circumstances totally beyond its control and undoing. As a purely Filipino-owned company itself, we felt strongly that Green Square should stand-by and help CAP. As Chinese companies come to each other’s aid in their times of need, so must Filipino companies do the same as a matter of deep nationalistic pride and concern.

CAP’s operations was badly affected by the economic dislocation brought by the Asian currency crisis. The most stinging economic set-back, however, as it most particularly affected the education pre-need business, was the deregulation by government of the matriculation fees that could be charged and imposed by the educational institutions.

At the outset, when CAP ventured into this pioneering business, the matriculation fees was regulated by government in that schools, colleges and universities could not increase their tuition fees by more than ten percent of their existing fees each year. With this as a given, CAP was able to direct its operations and conduct its marketing scheme factoring in this open-price plans. The company’s educational planholders grew through the years and there were no problems servicing its obligations upon the maturity of the plans.

This blissful business environment changed when government deregulated the tuition fees that a school could charge. Suddenly, educational institutions could raise matriculation fees to an amount that they felt is warranted under their own assessment. And this is when CAP’s troubles began as it did not input into its operations that the deregulation scenario would as it did happen. CAP, though not responsible for this new government policy on tuition fees, became severely and adversely affected by it.

This is not to cast the blame upon the schools that, of necessity, had to increase their tuition fees by more than ten percent each year. We fully understand the rising cost of running an educational institution, let alone maintaining a high level of educational instruction. Teachers’ salaries have to be upgraded. School facilities must be modernized. Campuses must be computerized. All these cost money.

The point we wish to impart, however, is that CAP, which finds itself in troubled waters for reasons not of its own making, should be helped by others – and that is why our company is there – but most particularly, should be supported by the Securities and Exchange Commission under a living partnership between government and the business sector.

The SEC should be more than a regulating agency in respect of companies and entities registered with it. As the representative of government, it must breathe life into the partnership between government and business by playing an active role in seeing to it that registered companies are doing well and, in case of businesses that are floundering, for the SEC to come to their aid and succor.

The SEC should not be unlike the Central Bank in its relationship with banks and other financial intermediaries that it regulates. In the case of banks that experience operational difficulties on account of adverse economic conditions the Bangko Sentral initially and immediately comes to their rescue by allowing them to draw advances against the Central Bank in order to normalize their operations. This is a laudable emergency measure from government in a symbiotic partnership with private business. An opposite government response of allowing a bankís financial position to deteriorate would endanger the bank, in particular, and threaten the confidence of the people in the banking system, in general.

In like manner, the SEC should play a more active, caring and responsive role as a real partner to the business sector by adopting emergency and remedial measures to help a company in distress so that its assets would not be dissipated and the risk of loss to the investing public will not be aggravated.

In this regard, it is manifestly counter-productive for the SEC not to renew the dealership license of CAP which disenables the pre-need company to thenceforth sell securities or educational plans to the public. By doing this, the SEC has effectively curtailed the ability of CAP to raise money to meet the maturing obligations from its multitude of planholders. In the ultimate analysis, it will be the planholders of CAP who will eventually be prejudiced by SEC’s action of not allowing it to normalize its operation. The injury to both CAP and its educational planholders becomes all the more acute as the very reason for the difficulties of CAP today stems from government’s action itself in deregulating the fixing of matriculation fees of the schools and learning centers. And now, for this, the planholders of CAP will be made to suffer.

As education is the master-key to a brighter future for our youth, it would indeed be a tragedy for them to be deprived of a chance for a better tomorrow for themselves and for their future families if CAP – the biggest education pre-need company in the country today – is disallowed to fully restore its business.

If and when a pre-need company commits any impropriety in its operations, it would be more appropriate to impose fines or similar penalties upon its erring officers or employees. The company itself should not be penalized by stopping its operations or not renewing its license to operate or to sell securities as it will be the investing public (i.e. the planholders) that will ultimately be adversely affected to the detriment of the general public interest. Indeed, what would the SEC accomplish by stopping or delaying the renewal of the license of CAP to sell securities? Will this course of action help the planholders any?

By way of an alternative, the SEC could still avoid the above dismal scenario and at the same time allow CAP’s license to sell securities to be renewed by thereafter imposing safeguards and conditions to ensure that CAP will be able to meet its obligations when the educational plans of its planholders mature and fall due. To outrightly disallow the renewal of CAP’s dealership license would be much like killing the goose that lays the golden eggs.

In sum, the pre-need business for education is a vital industry. We cannot and must not compromise the future of our children by depriving them of attaining the requisite knowledge and skills today. All stumbling blocks must be removed if the next generation of Filipinos are to lead better lives than we do today.

In this mission, government and the business sector must be real, active and true partners. After all, the success of our youth, through education, is the success of the government and business and the nation. Let us, therefore keep that partnership between government and the private sector alive and well.

In closing, we hereby respectfully call on the SEC to kindly understand what we are trying to achieve through this open letter. We are pleading to the SEC so that CAP, its planholders and the general public will not be put in an adverse position. To stop a flight in mid-air will severely cause its crash. We, therefore, call on the SEC to see the wider picture and, thus seeing, forthwith endeavor to normalize CAP’s operations. Doing so will be the best protection the SEC can provide to the public.

You may write your comments / suggestions at 15/F Equitable Tower, Paseo de Roxas, Makati City or through e-mail at [email protected]

(Note: We beg the indulgence of our readers who are at times tasked to read a lengthy piece. The purpose of our writings, however, being advocacy and not merely commentary in nature, compels us to dissect a given problem, analyze its causes and effects, and offer studied solutions. The length of the article should be irrelevant to such an approach.)