KAPA “investors”: Wake up

Recently, after a multitude of scams that victimized the investing public for the past several years, the Securities and Exchange Commission (SEC) has stepped up its information campaign against fraudulent business practices.

In particular, it singled out Kapa-Community Ministry International (KAPA) on the latter’s claim that “it would soon be able to secure a license to operate” as it, allegedly, already filed with the SEC “an application for a secondary license to sell and offer for sale securities to the public.”

The SEC, however, flatly refuted this claim as there was no application, whatsoever, that was received as verified by the SEC’s Company Registration and Monitoring Department (CRMD).

Moreover, KAPA claimed that the Bangko Sentral ng Pilipinas (BSP) had supposedly “approved its investment scheme.” The BSP also completely denied this. Apparently, therefore, these claims are all false.

Unfortunately, however, KAPA has continued to notoriously use the pious facade of its alleged denomination to lure gullible investors. Therefore, it is incumbent upon us, who are well-informed, to educate them.

For one, from the looks of it, KAPA is selling securities. As far as selling securities is concerned, we are guided by Republic Act 8799, otherwise known as the Securities Regulation Code.  Particularly, Sec. 8 of such act provides that “securities shall not be sold or offered for sale or distribution within the Philippines, without a registration statement duly filed with and approved by the Commission.” This is primarily the reason why on April 3, this year, the SEC revoked the certificate of incorporation of KAPA for soliciting investments from the public without securing a secondary license first.

However, for the sake of argument, if we should assume that they are legitimate and that this is not another Ponzi scheme, let us do some math and try to figure out if this is (their investment scheme) really sound. Remember, they claimed to have five million members.  Assuming that these members invested (or should we say, donated?) P10,000 (some claimed to have invested millions) each, then, conservatively, the pooled amount shall be P50,000,000,000 (three commas mean billion).  Therefore, at 30 percent monthly return, KAPA pays P15,000,000,000 per month or an incredulous annual payout of P180,000,000,000.

We should, further, assume that this annual payout represents net income. Why? This is because paying investors out of the company’s capital is not allowed, that is illegal. Unless the company folds up, it should pay its investors from its accumulated profits.

So that, we may ask, if this payout represents accumulated profits, what business is KAPA engaged in? Remember this is a staggering 360 percent return of their (investors or should we say, donors?) investments. San Miguel Corporation, for one, never turned in this much annually in net profit nor had it declared this much dividend in a year. Yet, we saw their factories and delivery trucks. We also have tasted its products and cheered for its heavily funded basketball team in the PBA.

What about KAPA? Did we see its factories or delivery trucks? Have we tasted its products or services? Or, if we say, it is largely involved in e-commerce, then, have we visited its website? Have we used its platform?

Clearly, what we only saw are tiny offices. Yet, most of our gullible investors trusted them (the owners and officers of KAPA). As clear as daylight, therefore, this is a Ponzi scheme.

Ponzi schemes, actually, are not difficult to understand. There are five key elements for it to succeed. These are beyond (1) normal benefits, (2) a systematic flow of how the rates are achieved, (3) initial credibility of company owners, (4) pay-off of early or initial investors, and (5) the “word-of-mouth” approach in advertising or communicating pay-offs. KAPA did all these so they succeeded. Remember, headed by a Pastor, he had credibility.

So that, today, as we stare on the prospect that KAPA will continue to take advantage on the existing and some potential investors’ gullibility or lust and greed for money, we should be constantly reminded by the misfortunes the victims have suffered then and agonized until today.  Moreover, let us all heed the legitimate warning of the SEC. Ignoring both is a monumental display of stupidity.