SEC looking into new type of ‘boiler room’ operations

The Securities and Exchange Commission (SEC) is looking into a new type of boiler room operation in the country involving the use of mailboxes by individuals using false names.

An SEC official said the agency has received information from its foreign counterparts that several companies engaged in boiler room operations have rented mailboxes in the Philippines to allow them to continue doing business.

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 investors with nothing, and reopen under a different name and resume their illegal operations

The SEC official said foreign securities regulators received complaints from a large number of investors who had been solicited by telephone salespersons allegedly based in the Philippines to buy shares in another overseas market. High pressured selling tactics were used and investors were then asked to send money offshore where it was destined to stay.

The same official said the SEC will come up with guidelines to ensure the identity of customers. "The know-your-customer rule should be strengthened to ensure the real identities of clients," the official said.

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.

The SEC earlier received reports there has been a resurgence of boiler operations in Cebu, Pampanga and Davao.

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.

The same official said the agency is also looking into alleged boiler room operations in Bicol and Mindanao.

The SEC was unsuccessful in its previous attempts to pin down two suspected boiler room operators which have managed to change their business profiles even before the investigation got any closer.

One was said to have converted into a company engaging in an international simple resale (ISR) operation. ISR is a method of routing and completing international long distance calls using lines, cables, antennae, and/or air wave frequency which connect directly to the local or domestic exchange facilities of the country where the call is destined.