The Philippine Securities and Exchange Commission (SEC) is set to probe into the multi-million theft by a stock trader which led to the closure of one of the country’s oldest brokerage firms.
In a statement on Friday, the SEC said it was aware of reports that brokerage firm R&L Investments Inc. was forced to cease operations earlier this week after an employee siphoned off stocks worth P700 million ($13.86 million).
The commission said it will closely monitor the issue as the Capital Markets Integrity Corporation (CMIC) investigates the reported theft that nearly wiped out the position of R&L Investments.
As a self-regulatory organization, CMIC is tasked to enforce Republic Act No. 8799, or the Securities Regulation Code (SRC), and the pertinent rules and regulations. Among its powers and functions is to investigate and resolve violations by trading participants of the securities law as well as trading-related irregularities and unusual trading activities involving issuers.
“The SEC expects CMIC to conduct a thorough investigation to unearth the truth behind the transactions in question, identify all parties involved, and uncover the extent of the damage to the stock brokerage, its clients and the overall market,” it said.
“The investigation should also provide clarity as to how such transactions could have slipped past multiple control measures. For one, the 2015 SRC Rules requires broker dealers to conduct monthly security examination, count and verification to account for discrepancies,” it added.
The Commission expects the full rollout of the Name on Central Depository (NoCD) facility of the Philippine Depository & Trust Corp. (PDTC) by the first quarter of 2020 to reinforce the controls and deter similar incidents from occurring in the future.
The NoCD facility allows for the recording of securities at PDTC in the name of individual investors. At present, most securities are recorded in “omnibus accounts” that aggregate the holdings of all investors.
The creation of sub-accounts under the NoCD arrangement will increase transparency in the trading of securities. It will also give investors a means to monitor movements in their accounts through SMS or email notifications.
The SEC is also in discussion with PDTC for the creation of a mechanism that will allow the latter to provide monthly reports on a stock brokerage’s position directly to the board of directors.
The R&L Investments employee admitted to the crime, claiming that he started drawing off the total amount of stocks since 2011.
He also claimed to have acted alone and was forced to steal larger amounts due to his growing casino habit.
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