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Duterte signs law imposing heavy penalties vs. investment fraud

President Rodrigo Duterte has signed into law a measure penalizing individuals found guilty of investment fraud with significant years of jail time or as much as P10 million fine or both.

The new penalties are provided under Republic Act No. 11765, or the Financial Products and Services Consumer Protection Act, which defines investment fraud as any form of deceptive solicitation of investments from the public.

Under the law, investment fraud covers Ponzi schemes and other schemes involving the promise or offer of profits or returns that are sourced from the investments or contributions made by the investors themselves.

It also covers boiler room operations and the offering/selling of investment schemes to the public without a license or permit from the Securities and Exchange Commission (SEC).

Financial product or service, on the other hand, refers to products or services which developed or marketed by a financial service provider which may include -- but are not limited to -- savings, deposits, credit, insurance, pre-need and health maintenance organization products, securities, investments, payments, remittances and other similar products and services.

This also includes digital financial products or services which pertain to the broad range of financial services accessed  and delivered  through  digital channels.

Under the new law signed May 6, any person found guilty of committing investment fraud will face a jail time of one to five years or face a P50,000 to P2 million fine or both.

In the event that such violation is committed by a corporation or a juridical entity, the directors, officers, employees, or other officers who are directly responsible, these aforementioned units and individuals will face the same penalties.

The new law also provides that administrative sanctions of the respective charters of the financial regulators will be made applicable to a financial service provider, its directors, trustees, officers, employees  or agents for violation  of the law or any related rules, regulations, orders or instructions of financial regulators; or to any persons found administratively liable for investment fraud on top of the SEC fine worth P50,000 to P10 million for each instance of investment fraud and without prejudice to the enforcement of other laws and criminal sanctions.

In addition to these hefty fines, a P10,000 fine for each day of continuing violation in addition to the other administrative sanctions under Section 54 of  Republic Act No. 8799 or Securities Regulation Code will also be imposed.

In the event that a profit is gained or loss is avoided as a result of the violation of the law or investment fraud, a fine not more than three times the profit gained or loss avoided may also be imposed by the financial regulator, provided that in addition to the administrative sanctions that may be imposed, the authority of the financial service provider to operate in relation to a particular financial product or service may be suspended or cancelled by the financial regulator.

A  financial regulator, consistent with public interest and protection of financial consumers, is authorized to institute an independent civil action on behalf  of aggrieved  financial consumers  for violations of this Act and its Implementing Rules and Regulations.

"If the financial regulators obtain a civil penalty against any person or entity in any of such proceedings or such person or entity agrees to settle such civil penalty, the amount of such civil penalty shall, on the motion of the financial regulators, be added to and become part of a disgorgement fund or other fund established for the benefit of the aggrieved financial consumer," the law states.

The financial regulators have been tasked to provide guidelines on implementing the new law within one year from its effectivity.  —KBK, GMA News