SEC warns vs. fraudulent fitness gym investment schemes

The Securities and Exchange Commission (SEC) warned the public against the growing number of investment offers related to setting up fitness gyms in the guise of franchise or partnership agreements. 

“The Commission has received reports that there has been a proliferation of offering and solicitation of investments for the purpose of setting up FITNESS GYMS or for ESTABLISHING NEW FITNESS GYM BRANCHES in the guise of a franchise agreement, co-franchisee agreement, partnership agreement, co-ownership contract and/or other forms of contract that offers to the public an opportunity to invest in their company and earn profit through income sharing,” the SEC said in an advisory on Thursday. 

“The Public is hereby advised to exercise caution in dealing with these FITNESS GYM COMPANIES or persons purporting to be their representatives and NOT TO INVEST or STOP INVESTING in these entities.” 

The SEC cautioned that the companies behind these gyms usually offer a percentage of shares in the company or in a branch.  It added that offers may also come in the form of partnership agreements, wherein the gym will be co-owned by several individuals. Or sometimes, a co-franchisee contract may be offered wherein a single fitness gym will be franchised and owned by several co-franchisees. 

“The investors will just have to place their money, sign the contract, then wait for the monthly or quarterly distribution of profits. Some would even offer a guaranteed profit by claiming that the loss will be shouldered by the company through their contingency funds,” the commission explained. 

The SEC noted that such kinds of contracts are considered as securities under the law and public solicitation of securities must be registered with the commission. Hence, any offer or sale of unregistered securities is illegal, it added. 

The commission also warned of criminal liability against anyone acting as dealers or agents in convincing people to invest in such a scheme. 

“The Commission warns that those who act as salesmen, brokers, dealers or agents of these FITNESS GYM COMPANIES in selling or convincing people to invest in the scheme being offered by said entities including solicitations and recruitment may be prosecuted and be held liable under Section 28 of the Securities Regulation Code (SRC and Section 11 of the FCPA, both penalized separately with a maximum fine of Five Million Pesos (PhP 5,000,000.00) or penalty of Twenty-One years of imprisonment or both pursuant to Section 73 of the SRC,” the SEC said. 

Further, the SEC advised the public to visit its website to check the list of registered issuers of securities. It also asked everyone to report any incidents of investment solicitations by fitness gym companies to epd@sec.gov.ph.  —Vince Angelo Ferreras/RF, GMA Integrated News