SEC wants ‘truth’ unearthed in P700-M stock brokerage theft

The Securities and Exchange Commission (SEC) expects the truth to be unearthed behind the nearly P1-billion theft perpetrated by a rogue employee of a 50-year-old stock brokerage firm.

The SEC is closely monitoring developments as the Capital Markets Integrity Corporation (CMIC) investigates the reported theft that nearly wiped out the stock market position of R&L Investments.

“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,” the corporate regulator said in a statement on Friday.

CMIC is the independent audit, surveillance, and compliance arm of the Philippine Stock Exchange (PSE) in line with its mandate to reinforce confidence among the investing public in capital market institutions.

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.

Its mandate is to investigate and resolve violations by trading participants as well as trading-related irregularities and unusual trading activities involving listed companies.

“The SEC is aware of reports that stock brokerage R&L Investments Inc. was forced to cease operations after an employee allegedly siphoned off stocks worth more than P700 million,” the corporate regulator said.

Marlo Moron confessed to having stolen shares of stocks from R&L Investments, one of the oldest brokerage firms in the country.

In a written statement, Moron claimed that he alone committed the theft. He started stealing from the company minuscule amounts in 2011 until he was tempted to go for larger amounts.

“The [CMIC] investigation should also provide clarity as to how such transactions could have slipped past multiple control measures,” the SEC said.

“For one, the 2015 SRC Rules require broker dealers to conduct monthly security examinations, count and verify accounts for discrepancies,” the commission noted.

The SEC 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 controls and deter similar incidents from occurring in the future.

The facility allows the names of individual securities investors to be recorded by the PDTC.

The present practice allows most securities to be recorded under “omnibus accounts” that aggregate the shareholdings of all investors in a particular stock.

The creation of sub-accounts under the NoCD will raise transparency in securities trading, the SEC noted.

It also gives investors a means to monitor movements in their accounts via SMS or email notifications, the regulator said.

The SEC is discussing with PDTC the creation of mechanisms allowing the trust corporation to provide monthly reports on a stock brokerage’s position directly to the board of directors. —Ted Cordero/VDS, GMA News