The SEC has also directed the PSE to include in the distribution to ACE clients all shares lodged in the Philippine Depository & Trust Corp. under the broker firm’s client accounts.
The PSE has taken over the operations of ACE because of the latter’s deteriorating financial condition and after finding reasonable grounds it violated provisions of the Securities Regulation Code (src).
The SEC explained that any share lodged by ACE in its client accounts has been identified and acknowledged by the company as belonging to its clients and not to the broker-dealer firm. "Since these assets are merely held in trust by ACE for its customers, then the rules on concurrence and preference of creditors should not apply to the release of these shares and the general creditors should not be allowed to participate in their distribution."
The SEC said shares lodged in a PDTC sub-account of ACE that is in the name of a specific client should be released to said client. If the shares in the omnibus client account are insufficient to satisfy all clients that have a claim against it, then the shares should be distributed on a pro-rata basis, the SEC further said.
The SEC filed before the Department of Justice a criminal complaint against ACE president Francisco Borromeo for violation of several provisions of the src.
In its complaint, the SEC accused Borromeo, a former governor of the PSE, of engaging in fraudulent activities to the detriment of ACE investors.
In particular, the SEC accused Borromeo of authorizing and using fictitious accounts, engaging in fictitious trades, selling clients’ securities without their knowledge and consent, and fabricating records and reports submitted to securities regulators.
The alleged unethical and unlawful business practices of Borromeo, according to the SEC, led to the collapse and eventual issuance of a take-over order by the Commission for the PSE to assume control over the operations of ACE for the protection of its clients.
Violation of any provision of the src carries a criminal penalty of a fine not less than P50,000 nor more than P5 million or imprisonment of not less than seven years nor more than 21 years or both.