Capital

SEC Probes Brokerage After Employee Steals P700 Million Worth of Stocks From Firm

Everything you need to know about the million-peso scam.
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PSE president speaks out

In an interview with ABS-CBN News Channel, PSE President Alejandro Yu disclosed that Moron’s scam is possibly the worst to ever hit a brokerage house, stating that past incidents were “definitely not to this degree.”

In the aftermath of the theft coming to light, Yu advised all brokers to inspect their own companies to ensure a similar incident is not happening under their nose.

"We encourage all brokers, everybody downstairs [on the trading floor], up in their offices, to immediately do an internal audit and check again shares," Yu said.

In regards to R&L’s clients, Yu stated that the company will allow clients to sell their stocks with R&L based on the stock prices on October 31, before the scam was exposed. The firm will also ensure that all of its clients' shares will be settled, and R&L will liquidate its assets “just to settle everything.”

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"What the PSE has done is come in, step in and ascertain that all settled trades are in," he said.

SEC calls R&L incident a “business failure”

On Friday, November 8, the Securities and Exchanges Commission (SEC) announced the official start of their probe into what they call R&L Investment’s “business failure.” The SEC will be working with the Capital Markets Integrity Corporation (CMIC) to investigate Moron’s P700 million theft.

CMIC is an independent arm of PSE tasked to investigate and resolve violations by trading participants, as enforced by Republic Act No. 8799. This includes tracking unusual trading activities, such as Moron’s stealing of shares.

CMIC will now try to uncover the truth behind Moron’s illegal activities and the extent of the damage he caused to the firm, clients, and the entire Philippine stock market. Accrodinh to the SEC, one issue that will be investigated is how Moron managed to slip past multiple control measures, particularly audits by both internal and external persons.  

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There are a number of irregularities with the eight-year scam, which the CMIC will probe during its investigation. Until then, SEC is already planning to enforce a number of measures that will provide more trading transparency and prevent such extensive scams from occurring again in the future.

(Original article follows)

The Philippine Stock Exchange (PSE) has been hit by controversy after news broke that an employee of a 50-year-old brokerage firm managed to embezzle over P700 million worth of its stock inventory. The firm in question is R&L Investments Inc., a Mandaluyong-based brokerage firm that was forced to shut down operations on Monday, November 4, after it uncovered the the multi-million peso scam.

The Securities and Exchanges Commission (SEC) and Capital Markets Integrity Corporation (CMIC) are now in the process of investigating what SEC calls R&L's "business failure." 

In a letter acquired by the Philippine Daily Inquirer, which was the first to report the story, addressed to PSE director Alejandro Yu from R&L owner Lucy Lee, “Almost all of our stock position has been depleted” due to the sticky fingers of a once trusted settlement clerk.

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The employee, who was identified as Marlo Moron, first began stealing small amounts of the firm’s inventory in 2011, according to a handwritten confession which the Inquirer said it had read. The clerk was emboldened to steal larger amounts over an eight-year period, almost wiping out R&L Investments’ stock position. According to the investment firm’s 2018 financial statement, the company reportedly held P765,939,964 worth of stocks. The firm has shares from almost every publicly listed company, with millions invested in a number of mining corporations.

What went down

Moron was entrusted to prepare the daily stock position reports for the owners, which gave him full control in hiding his stolen stocks.

However, the scam began unraveling just before Undas 2019 when it was discovered that the company was short P3 million in stocks at the end of one trading day. Further digging found that the worth of the missing stocks had swelled to P300 million, and eventually to a whopping P700 million.

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Moron said he started filching larger amounts because of a casino habit, the Inquirer report said.

The employee managed to execute the scam by transferring shares to an account in Venture Securities, another PSE active trading participant, under the name Julieta Sulapas. Three percent would then be deposited to Sulapas’ Union Bank of the Philippines account, and the remaining balance would return to Moron, who used it for his own purposes.

What’s next

After Moron was apprehended and confessed to his crime, he said he had doctored documents to hide his crime. Over the course of his eight-year scam, he claims to have acted completely alone. Despite insisting he no longer has any cash or securities to return, he stated in a promissory note that he would return everything he had stolen. He claims that he has lost over half a billion pesos.

Moron is currently in police custody and has been charged with Qualified Theft and violations of the Cybercrime Prevention Act of 2012 and Access Devices Regulation Act of 1998, according to an ABS-CBN report.

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Meanwhile, in the letter to PSE, Lee stated that they would honor their obligations to their clients. The Inquirer report stated that the firm’s owners will “sell personal assets like real estate, houses, and other valuables” to address the issue.

The scam comes on the eve of R&L Investment’s 50th anniversary, which was celebrated only a few months ago. R&L Investments was authorized by the Securities and Exchange Comission to engage in brokerage businesses in August of 1969, making 2019 its 50th anniversary. Aside from its nine directors, the company also employs 10 office personnel, one of which was Moron.

Not the first time

This is not the first time a financial scam has hit the stock market. In 2016, a former PSE employee and seasoned trader Jose Peñaflor managed to steal P100 million from investors after duping clients into thinking they would be investing in legitimate stocks.

PSE regularly warns investors to be on the look out for potential scams, particularly those using their name and logo illegally.

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Investors with stocks entrusted to R&L Investments, Inc. are advised to contact the firm to settle their accounts.

Address: 675 Lee St., Mandaluyong City.
Contact No: 8724-6721; 8724-5207
Email: [email protected]

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