In re Primanila Plans, Inc.

April 9, 2008 SEC ADMINISTRATIVE CASE NO. 03-08-001 IN THE MATTER OF PRIMANILA PLANS, INC. O R D E R For consideration of the Commission is the motion of petitioner Compliance and Enforcement Department ("CED") for the issuance of a Cease and Desist Order against respondent Primanila Plans, Inc. SEcADa The facts of the case are as follows: Respondent Primanila Plans, Inc. (formerly Integral Home Plans, Inc.) was registered with this Commission on 17 October 1988 and was issued Certificate of Registration No. 156350. 1 As shown in its Amended Articles of Incorporation, respondent was organized primarily to organize, establish, develop, conduct, provide, maintain, operate, offer, issue, market and sell pension plans under which the savings of professionals, officers, directors and other personnel of corporations, firms, or entities, and self-employed individuals can be pooled together, accumulated and invested in profitable placements and productive enterprises so as to build an Accumulated Fund for each individual participant or planholder for his retirement, monthly pension or for other foreseable (sic) needs in the future. 2 It has its business office address at 20th Floor, Philippine AXA Life Centre, Sen. Gil Puyat Ave., Makati City. caDTSE On January 8, 2008, the Non-Traditional Securities and Instruments Department ("NTD") received reports that respondent closed its principal office located at 20th Floor, Philippine AXA Life Centre, Sen. Gil Puyat Ave., Makati City. On January 9, 2008, Mr. Rolando Campang of NTD made an ocular inspection of the said office and confirmed that it was closed despite the lack of notice or approval of the Commission for the closure. Petitioner CED conducted its own investigation and the result of the same are as follows: 1. The office of respondent located at 20th Floor, Philippine AXA Life Centre, Sen. Gil Puyat Ave., Makati City was closed. No notices were posted outside said office to inform the public of the reason for such closure. This was confirmed by the petitioner CED when its investigators conducted an ocular inspection on February 11, 2008. 2. Respondent's website (www.primanila.com) was offering a pension plan product called Primasa Plan. 3 The website contains detailed instructions as to how interested persons can apply for the said plan and where initial contributions and succeeding installment payments can be made by applicants and planholders. According to the website, applicants and planholders can pay directly at the head office, any of its field offices or may deposit the payments in PRIMANILA's METROBANK Account No. 066-3-06631031-1. 4 This was discovered by the petitioner when a member of CED visited the respondent's website on February 12, 2008. HIaSDc 3. Respondent PRIMANILA failed to renew its Dealer's License for 2008. In view of the expiration of the said license, the NTD, through its Acting Director Jose P. Aquino, issued a letter dated January 3, 2008 addressed to respondent's Chairman and CEO Mr. Eduardo S. Madrid, enjoining respondent from selling and/or offering for sale pre-need plans to the public. 5 4. Respondent has not been issued a secondary license to act as dealer or general agent for pre-need pension plans for 2008. Also, no registration statement has been filed by respondent for the approval of a pension plan product called Primasa Plan. This is shown in the certification dated February 15, 2008 issued by NTD upon the request of Atty. Hubert B. Guevara of CED. 6 5. Respondent's Bank Account is still active. This was discovered by CED when it deposited on March 6, 2008 the sum of Php50.00 which was duly received by METROBANK Robinson's Branch as shown by the deposit slip. 7 AScTaD 6. Among the many planholders of respondent PRIMANILA are enlisted personnel of the Philippine National Police (PNP). Premium collections for Primaplans via salary deductions were religiously remitted to respondent on a monthly basis. This is shown in the documents received by the NTD from the Revenue and Collection Division, Finance Service of the PNP consisting of a list of PNP enlisted personnel who are planholders of PRIMANILA, the amount of premium collections and official receipts. 8 7. PNP remitted the total amount of Php2,072,149.38 to respondent PRIMANILA representing the aforementioned premium collections via salary deductions of the 410 enlisted personnel of PNP who are planholders. This is shown in the table prepared by the remittance clerk of the PNP, Ms. Mercedita A. Almeda. 9 8. Respondent failed to deposit the required monthly contributions to the trust fund 10 in violation of Pre-need Rule 19.1. 11 This is shown in the Trust Fund Reports for the months of November and December 2007 prepared by ASIATRUST BANK, the trustee of respondent. 12 aSCDcH 9. Respondent PRIMANILA under-declared the total amount of its collections as shown in its SEC Monthly Collection Reports which it submitted to NTD. 13 Its reports show that it only collected the total amount of Php302,081.00 from January to September 2007. However, the remittance report of the PNP shows that respondent received the amount of Php1,688,965.22 from the PNP planholders alone for the said period. Therefore, it under declared its report by Php1,386,884.22. 14 Based on the foregoing, it is evident that respondent PRIMANILA, has flagrantly violated the Securities Regulation Code (SRC) and the New Rules on the Registration and Sale of Pre-Need Plans. These are: 1. Section 16 of the SRC which states: "Section 16. Pre-Need Plans . No person shall sell or offer for sale to the public any pre-need plan except in accordance with rules and regulations which the Commission shall prescribe. Such rules shall regulate the sale of pre-need plans by, among other things, requiring the registration of pre-need plans, licensing persons involved in the sale of pre-need plans, requiring disclosures to prospective plan holders, prescribing advertising guidelines, providing for uniform accounting system, reports and record keeping with respect to such plans, imposing capital, bonding and other financial responsibility and establishing trust funds for the payment of benefits under such plans." 2. Pre-Need Rule No. 3 which states: "Rule 3. Registration of Pre-Need Plans . No corporation shall issue, offer for sale, or sell Pre-Need Plans unless such plans shall have been registered under Rule 4." 3. Pre-Need Rule No. 15 which states: "Rule 15. Registration of Dealers, General Agents and Salesmen of Pre-Need Plans. 15.1. Any issuer selling its own Pre-Need Plans shall be deemed a dealer in securities and shall be required to be registered as such and comply with all the provisions hereof; provided that the issuer selling different types of Pre-Need Plans shall be required to be registered as dealer only once for the different types of plans." There being a prima facie evidence that respondent committed the foregoing violations, it is imperative to issue a Cease and Desist Order against PRIMANILA PLANS, INC. in order to prevent further violations and in order to protect the interest of its plan holders and the public. aTEHIC WHEREFORE, pursuant to the authority vested in the Commission, PRIMANILA PLANS, INC., its respective officers, directors, agents, representatives, and any and all persons, conduit entities and subsidiaries claiming and acting under their authority, are hereby ordered to immediately CEASE AND DESIST from further engaging in activities of selling, offering for sale Primasa plans and to refrain from further collecting payments and amortizations for Primasa plans to protect the interest of investors and the public in general. In accordance with the provisions of Section 64.3 of Republic Act No. 8799, otherwise known as the Securities Regulation Code, the parties subject of this Cease and Desist Order may file a formal request or motion for the lifting of this Order within a non-extendible period of five (5) days from receipt hereof. ITDHSE SO ORDERED. Mandaluyong City. April 9, 2008. (SGD.) FE B. BARIN Chairperson (SGD.) MA. JUANITA E. CUETO Commissioner (SGD.) JESUS ENRIQUE G. MARTINEZ Commissioner (SGD.) RAUL J. PALABRICA Commissioner (SGD.) THADDEUS E. VENTURANZA Commissioner Footnotes 1. Annex "B" of the Motion. 2. Annex "C", supra . 3. Annex "E", supra . 4. Annex "E-1", supra . 5. Annex "F', supra . 6. Annex "G", supra . 7. Annex "H", supra . 8. Annexes "K" to "X", supra . 9. Annex "K". 10. Trust Fund for Primaplans. 11. As amended by Section 11 of SEC Memorandum Circular No. 4, Series of 2007. 12. Annexes "I" and "J", supra . 13. Annexes "Y" to "GG", supra . 14. Table 2, p. 7, supra .