Insider trading, investment scams and abusive traders

The last time I checked, regulators have yet to come out with its report on the P48-billion budget overrun of telco giant PLDT, although initial findings say there are no indications of fraudulent transactions.

The Securities and Exchange Commission (SEC) and the Philippine Stock Exchange (PSE) are particularly looking at possible insider trading after PLDT’s share prices rallied just before it disclosed the budget scandal.

Market investors are awaiting the results of the investigation.

Only an independent investigation by regulators and their final report can determine what really happened.

In the meantime, as we await the final judgement on PLDT, regulators can also look at the possible insider trading activities in other listed companies just very recently.

The business grapevine is abuzz with such observations. Many noticed quick movements in the share prices of some listed companies prior to big announcements lately – from acquiring a stake in this or that or making a tender offer.

Their respective charts would show blue lines recently – signs of how their share prices rallied and moved up prior to their respective announcements.

I hope the PSE is looking at these companies for insider trading.

And by the way, some deals are still ongoing so let’s wait and see whose charts will suddenly see a spike in prices.

Of course, it’s not to say that every unusual spike in prices was due to insider trading. Others may be due to honest-to-goodness speculative bets fueled by the rumor mill.

But regulators should look at insider trading with equal – or more – fervor as they do in the case of investment scams.

Insider trading, after all, is just another form of investment scam as this deprives other shareholders of material information which they could otherwise use in deciding the fate of their investments.

Seriously going after investment scams and putting perpetrators to justice may encourage more investors to place their bets in the stock market and stay away from get-rich-quick schemes.

Investment scams

Speaking of investment scams, it’s good that the SEC is stepping up efforts against entities offering such schemes. They are now all over the place – on Facebook, Instagram, Twitter, etc., enticing unwitting investors to put their hard-earned money.

The SEC continues to issue cease and desist orders and advisories against unauthorized investment schemes, as well as share its consumer and education initiatives to counter the rise of scammers in the country.

This year alone, the SEC has already issued 75 advisories against groups and individuals who have been soliciting investment from the public without the necessary license.

A total of 115 and 126 advisories were issued in 2021 and 2020, respectively.

But simply shutting down these entities isn’t enough. Again, the SEC must bring perpetrators to justice.

There are very few convictions to date and the wheels of justice churn impossibly slow in this nation of scams.

Last year, the SEC secured what would be one of the few convictions under Republic Act No. 8799, or the Securities Regulation Code (SRC).

A regional trial court ruled that the president of a brokerage manipulated the market in illegal trade transactions involving stocks of then listed firm Best World Resources Corp. (BW).

The Pasig City Regional Trial Court Branch 67 found Johnny Yap of Solar Securities Inc. guilty beyond reasonable doubt of violation of SRC violations.

The court sentenced Yap to a penalty of imprisonment of 14 years and a fine of P1 million. It also ordered the issuance of a warrant of arrest against Yap.

The decision stemmed from the SEC’s criminal complaint against Yap and other officers of the company after the brokerage was found to have committed wash sale transactions composed of 142 buy and sell orders for stocks of BW during the months of June and October 1999.

BW shares were trading for 80 centavos each at the start of 1999. Shares in the company steadily increased in that year and by October, BW shares had reached a price of P12.50 each, the same time as when Solar Securities executed its wash sale transactions. This is despite the fact that BW posted losses of P10.84 million in 1999 and had no corporate fundamentals.

Imagine how delayed the resolution was – 23 long years.

The case marks the fifth conviction under the SRC since its enactment in 2000.

Previous convictions mostly involved fraudulent investment scams, including a 2015 decision against Rosario and Saturnino Baladjay of Multitel notoriety, who were sentenced to a total of 455 years in prison and made to pay a total of P8 million to complainants.

Imagine that – just five convictions 23 years later.

Lending scams

Another problem hounding investors now is unscrupulous lending practices.

A colleague from another paper has been victimized by these collecting agents and their shameless collection practices.

They shame their clients on social media, send them threatening messages and other forms of cyber bullying.

You know what this is like? This is exactly what Japan’s Yakuza did in its heyday, leading some Japanese borrowers to take their own lives out of shame.

Shame on these lending companies which are no different from organized criminals. Do they actually realize that they are making money out of people’s desperate need for money?

The least they can do is to abide by legitimate and acceptable collection practices.

Note that the SEC, through the circular Prohibition on Unfair Debt Collection Practices of Financing

Companies and Lending Companies, does not allow abusive, unethical and unfair debt collection practices.

For sure, our corporate regulators have a lot in their hands. But they cannot do it alone. Our justice system must also send perpetrators to justice. As the police would say, kailangan may masampolan!

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Email: [email protected]. Follow her on Twitter @eyesgonzales. Column archives at EyesWideOpen on FB.