Keren Concepcion G. Valmonte
EUSEBIO H. Tanco declined his nomination as director of the Philippine Stock Exchange, Inc. (PSE) following issues against his brokerage, Venture Securities, Inc. (VSI)
“Recent events which, unfortunately and unjustifiably, have besmirched the reputation of Venture Securities and its officers and employees compel me, out of delicadeza, to decline the nomination for membership in the board of the exchange,” he said in a letter to PSE Chairman Jose T. Pardo.
The PSE, also a listed company, will be electing its board on July 2. Mr. Tanco currently holds a position as director in the PSE, while sitting as chairman in the troubled brokerage.
On Tuesday, a Securities and Exchange Commission (SEC) panel revoked the license and imposed a P32-million penalty fee on Venture Securities and its key officers over a stocks fraud that led to the collapse of another brokerage, R&L Investments, Inc.
R&L Investments trading floor assistant and settlement clerk Marlo Moron stole client shares from 2012 to 2019 and transferred them into a Venture Securities account under Julieto Sulapas. The panel also canceled the license of R&L Investments and slapped a P25-million fine.
Meanwhile, the SEC Markets and Securities Regulation Department decision on Venture Securities only mentioned its president Wilfred Racadio, associated person Adora Aguilar, salesman Loreto Balabis, and settlement head Teresita Mosenabre. Mr. Tanco was not held liable by the SEC.
The decision said Venture Securities “indispensably contributed to, if they had not been the proximate cause of, the losses incurred by the clients of R&L.”
In his letter dated June 16, Mr. Tanco said they intend to contest the decision, adding that the investigation “has unnecessarily dragged” his brokerage and that it is “much a victim as the clients of R&L” by making it appear that Venture Securities was complicit in the stocks fraud.
“Had the Capital Markets Integrity Corp. (CMIC) bothered to look at R&L and its activities, the CMIC would have easily noticed what was happening as they are better equipped to detect this kind of transactions violative of the rules of the exchange,” Mr. Tanco said, explaining that the CMIC has also been auditing his brokerage for years.
CMIC responded and said: “Adopting effective internal/financial controls including compliance therewith and adherence to good corporate governance standards and practices are properly the responsibilities of the owners and management of a company, not its auditor.”
In a separate statement, the SEC affirmed CMIC’s findings against the Tanco-led brokerage: “VSI violated multiple trading rules in facilitating transactions that eventually wiped-out client shares in R&L Investments.”
“CMIC found that the associated person of VSI failed to properly supervise the activities of its employees, which resulted in the multiple violation of securities laws,” the corporate watchdog said.
The CMIC also reported that Venture Securities failed to record several transactions executed by and assigned to Mr. Sulapas. The brokerage also allowed him to trade beyond his declared financial capacity.
“CMIC’s audit findings of any trading participant (TP), Venture included, should not be construed as relieving any such TP of its accountabilities and its responsibility to answer for its violations of the pertinent securities laws, and for matters which were and are within its power, control or management,” CMIC said.
Mr. Tanco maintains that Venture Securities had every right to be protected by the CMIC and rely on its findings.
“It is truly incomprehensible that CMIC — for all of over seven years — was not able to discover the discrepancies/anomalies in R&L’s clients’ position vis-a-vis the balances in the PCD system, something which a standard auditing procedure called ‘confirmation’ would have easily shown,” Mr. Tanco said.