In the Matter of Aman Futures Group Phils., Inc.

July 18, 2013 SEC ADMINISTRATIVE CASE NO. 11-12-164 (EPD Case No. 12-3004) IN THE MATTER OF AMAN FUTURES GROUP PHILS.,INC. ENFORCEMENT AND PROSECUTION DEPARTMENT , movant . ORDER Pending consideration by the Commission is a Petition (For Revocation of Certificate of Incorporation) (Petition) dated 26 November 2012 by the Enforcement and Prosecution Department (EPD) of this Commission against AMAN FUTURES GROUP PHILS.,INC. (AMAN). AMAN is a corporation registered with the Commission on 22 June 2012 under Company Registration No. CS201211620. 1 The names and addresses of AMAN's incorporators and directors are the following: Manuel K. Amalilio, Fernando R. Luna, Lelian Lim Gan, Eduard Lim, William L. Fuentes, Naezelle M. Rodriguez and Lurix Lopez. 2 The primary purpose of AMAN is to engage in, conduct and carry on the business of buying, selling, distributing, marketing at wholesale/retail basis in so far as may be permitted by law all kinds of goods such as but not limited to palm oil, gold, coconut oil, manganese, nickel, ore and any agricultural products, commodities, wares and merchandise of every kind and description, to enter into all kinds of contracts for import, export, purchase, acquisition, sale at warehouse/retail basis and other dispositions for its own account as principal or representative capacity as manufacturing representative, merchandise broker, commission merchant, factors or agents upon consignment of all kinds of goods, ware, merchandise or product whether natural or artificial. 3 AMAN's Certificate of Incorporation states that it does not authorize the corporation to undertake business activities requiring a Secondary License from the Commission such as a broker or dealer in securities. 4 EHIcaT The EPD initiated an investigation on the business activities of AMAN 5 based on an endorsement letter from the Department of Trade and Industry received by the Commission on 15 August 2012. 6 The endorsement letter referred to an email from a certain Serafin P. Baretto, Jr., requesting for an investigation of AMAN for allegedly operating a pyramid or ponzi scheme in Pagadian, City, Mindanao. 7 On 6 September 2012, a conference was held with AMAN in order to shed light on the allegations of engaging in pyramiding or ponzi scheme by the corporation. 8 During the conference, Atty. Isagani Laluna, Corporate Secretary of AMAN, and Lurix B. Lopez, one of its directors and incorporators, detailed the activities of AMAN before the investigating panel. 9 They claimed that Manuel K. Amalilio, a Filipino of Malaysian descent, is allegedly a long-time trader in futures commodities in Malaysia and Japan. 10 Believing that AMAN may engage in commodities trading activities, the company started accepting investments (money placements) from investors for the purpose of trading in commodities abroad, specifically in Malaysia, with the promise to return the principal with a good rate of return or interest. 11 The operational scheme of AMAN as narrated by Atty. Laluna and Mr. Lurix B. Lopez is as follows: TIaDHE "AMAN FUTURES receives or accepts investments. The investors will then sign an Investment Agreement/Profit-Sharing with AMAN FUTURES, where the investors will entrust money in favor of AMAN FUTURES and the latter agrees to return the sum in the form of post-dated checks plus investment profit. The profit ranges from 15% to 30%,or even as high as 40% . AMAN FUTURES allegedly has a Customer Agreement with OKACHI (MALAYSIA) SDN. BHD (OKACHI),a broker with Bursa Malaysia. Upon advise of AMAN FUTURES, OKACHI engages in commodity futures trading ( e.g. ,oil, manganese, palm oil, nickel, etc.) AMAN FUTURES allegedly maintains a huge dollar account with OKACHI. The dollar-denominated profits from such trading are claimed and remitted to Aman Futures, with appropriate conversion to Philippine Peso. These profits are then distributed to the investors, together with the money they initially invested, and AMAN FUTURES get 5% of the profits made. On rare occasions, AMAN FUTURES utilizes funds from the local investments/deposits, converted into dollars, and transmitted via telegraphic transfer to the dollar account with OKACHI (MALAYSIA) ." 12 On 11 September 2012, AMAN submitted a Verified Memorandum signed by Atty. Laluna and Lurix Lopez 13 which detailed its activities and reiterated the statements made during the conference. AMAN also confirmed that it was soliciting investments from the public guaranteeing to return the principal, plus a profit ranging from 15% to 40%. AMAN also claimed that all its profits are derived from earnings made from trading in futures commodities in Malaysia though its alleged broker, OKACHI (MALAYSIA). AMAN further alleged that the money collected from the investors is seldom used in investing in futures commodities. Instead, Mr. Amalilio allegedly maintains a "huge dollar account" with OKACHI (MALAYSIA) and it is there that the amount to be used for trading is debited and the profits derived therefrom are allegedly remitted in the Philippines, to be distributed to the investors. 14 SEHaDI The Commission continued to receive reports from concerned citizens and other government agencies of an alleged double your money scam that is being perpetrated by AMAN in Pagadian City and other parts of Visayas and Mindanao. 15 According to the reports, AMAN was soliciting investments from the public and promising a rate of return of investment from 30% to as high as 60%. 16 Moreover, people were allegedly lining up in order to invest their hard earned money in the hope of receiving the promised return. 17 This prompted the EPD to file with the Office of the General Counsel (OGC) of the Commission a Motion for the Issuance of a Cease and Desist Order 18 against AMAN, on 5 October 2012, from continuing to solicit investments from the public. 19 On 8 October 2012, the Commission En Banc issued a Cease and Desist Order (CDO) 20 against AMAN ordering it to cease and desist from offering, soliciting or selling unregistered securities to the public. 21 The Commission En Banc found four (4) grave violations by AMAN FUTURES: 1) non-registration of securities; 2) non-registration as broker or dealer; 3) engaging in commodity futures contract and 4) commission of ultra vires acts . 22 Thereafter, a Certification dated 10 October 2012 was issued by the Corporate Finance Department (CFD) of the Commission certifying that, based on the records filed with the Commission, no application for the registration of securities such as investment contracts were filed by AMAN. 23 cEHITA On 14 November 2012, the Anti-Money Laundering Council (AMLC) forwarded to the Commission copies of the following documents: (i) Complaint-Affidavit dated 15 October 2012 executed by Nany S. Mendez; (ii) Joint Complaint Affidavit dated 12 October 2012 executed by Jovanie C. Dimasar, Rauwolfio N. Pamaran, Vicente P. Cartalla, Moises Philip V. Siangco, Rolly D. Erat and Sergio B. Secretario, Jr.; and (iii) Sinumpaang Salaysay dated 12 October 2012 of Rudy Ases. 24 In their Complaint-Affidavits, the above-named individuals detailed how they were enticed to invest in AMAN because of the promise of a very high rate of return in a short period. They further allege that, sometime in September 2012, AMAN closed its office and the checks issued to them, representing their investments and interests therein, were dishonored by the bank. 25 On 28 November 2012, the EPD filed this instant Petition praying that the Commission render a judgment revoking the Certificate of Registration of AMAN for violating Sections 8 and 28 of the Securities Regulation Code (SRC) 26 and committing ultra vires acts in violation of Section 45 of the Corporation Code 27 which it claims are tantamount to serious misrepresentation as to what a corporation can do or is doing to the great prejudice of or damage to the general public as provided for under Section 6, par. (l) (2) of P.D. No. 902-A. The Commission issued a Summons dated 3 December 2012 to AMAN. Records show that the Summons was served on AMAN, through its Directors and Incorporators William Fuentes and Naezelle M. Rodriguez, 28 and its Corporate Secretary Atty. Isagani Laluna 29 on 5 March 2013. However, AMAN failed to file its Answer within fifteen (15) days from receipt of the Summons. SECAHa Thus, for failure to file its Answer, AMAN is considered in default. Sec. 3-12 of Rule III, 2006 Rules of Procedure provides: " If the respondent FAILS TO ANSWER the complaint within the above-stated period, he shall be considered as in default .The Hearing Panel, or Officer shall, motu proprio ,proceed to render judgment granting the complainant such relief as the complaint may warrant, unless the Hearing Panel or Officer determines the complainant should be required to submit ex parte additional evidence." Based on the records, AMAN's Certificate of Registration must be revoked. AMAN was engaged in the sale of unregistered securities, in the form of "investment contracts", 30 in violation of Sec. 8.1 of the SRC. 31 An "investment contract" has been defined under Rule 3 paragraph 1, subparagraph (G) of the Amended Implementing Rules and Regulations of the SRC as follows: "G. An investment contract means a contract, transaction or scheme (collectively "contract") whereby a person invests his money in a common enterprise and is led to expect profits primarily from the efforts of others. 1. An investment is presumed to exist whenever a person seeks to use the money or property of others on the promise of profits. 2. A common enterprise is deemed created when two (2) or more investors 'pool' their resources creating a common enterprise, even if the promoter receives nothing more than a broker's commission." TSAHIa To be a security subject to regulation by the SEC, the Supreme Court, in Power Homes Unlimited Corporation v. Securities and Exchange Commission , 32 held that an investment contract in our jurisdiction must be proved to be (1) an investment of money, (2) in a common enterprise, (3) with expectation of profits, (4) primarily from efforts of others. In the instant case, as admitted by Atty. Laluna and Mr. Lurix B. Lopez, AMAN, through its Chairman and CEO Manuel K. Amalilio, receives or accepts investments from investors. The investor entrusts money in favor of AMAN, and the latter "agrees to return the entire sum in the form of post-dated checks plus investment profit," which "ranges from 15% to 30%,or even as high as 40%." Likewise, the 15% to as high as 40% profit of AMAN is primarily dependent on its expertise or efforts, more particularly in the person of Mr. Amalilio, its Chairman and CEO. As previously intimated also, AMAN receives or accepts investments or money placements from a growing number of investors with an agreement to return the entire sum in the form of post-dated checks plus investment profit, which ranges from 15% to 30%,or even as high as 40%.Thus, it appears that what lures investors in parting with their money is the promise and corresponding expectation of high returns or profits. ADScCE Lastly, the profits derived by the investors are derived primarily from the efforts of AMAN via Mr. Amalilio, its Chairman and CEO. The participation of investors is limited in investing money with AMAN. Thus, AMAN is engaged in the sale of securities without proper registration in violation of Sec. 8.1 of the SRC. The SRC is explicit that as a general rule, securities must be registered with the Commission before being offered or sold to the public in order to protect the investing public from worthless securities. Moreover, they are in violation of Sec. 28 of the SRC which provides that no person shall engage in the business of buying or selling securities in the Philippine as a broker or dealer unless registered as such with the Commission. In the instant case, it appears that AMAN FUTURES is acting as either a broker or dealer without being registered as such. 33 Next, the business activities of AMAN are entirely different from its primary purpose as stated in the Articles of Incorporation, which constitutes ultra vires acts. This is prohibited under Sec. 45 of the Corporation Code which provides that no corporation shall possess or exercise any corporate powers except those conferred by the Corporation Code or by its Articles of Incorporation and except such as are necessary or incidental to the exercise of the powers so conferred. In this case, the business scheme of Aman Futures is off-tangent with the primary purpose of the company, which, as stated in its Articles of Incorporation, is that of a general trading company. Nowhere in the primary purpose of Aman Futures is it stated that the company can engage in the business of soliciting and accepting investments and money placements from the public. Incidentally, Aman Futures' Certificate of Incorporation states that it is not authorized to undertake business activities requiring a Secondary License from the Commission such as a broker or dealer in securities. aHTcDA The activities of AMAN directly violate P.D. 902-A, particularly 6 (i) (2) which specifically states: " Section 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers :... (l) To suspend, or revoke, after proper notice and hearing, the franchise or certificate of registration of corporations ,partnerships or associations, upon any of the grounds provided by law, including the following :... 2. Serious misrepresentation as to what the corporation can do or is doing to the great prejudice of or damage to the general public ;..." In the case at bar, AMAN misrepresented to its investors that it is authorized to engage in the offer and selling of securities to the public and continued to solicit investments from the public. Clearly, the above-mentioned violations warrant the revocation of the certificate of AMAN. WHEREFORE, premises considered, it is hereby ordered that the Certificate of Registration of AMAN FUTURES GROUP PHILS., INC. bearing SEC Registration No. CS201211620 be REVOKED for serious misrepresentation as to what the corporation can do or is doing to the great prejudice or damage to the general public pursuant to Section 6 (l) (2) of P.D. 902-A, without prejudice to criminal prosecution of the incorporators, directors and/or officers for act(s) punishable by the Revised Penal Code or other penal statute. Let a copy of this Order be furnished the Company Registration and Monitoring Department, the Corporation Finance Department and the Economic Research and Information Department for their information and appropriate action. FAIL NOT UNDER PENALTY OF LAW. SO ORDERED. cSIHCA Mandaluyong City, July 18, 2013. (SGD.) TERESITA J. HERBOSA Chairperson (SGD.) MA. JUANITA E. CUETO Commissioner (SGD.) MANUEL B. GAITE Commissioner (SGD.) ELADIO M. JALA Commissioner (SGD.) ANTONIETA F. IBE Commissioner Footnotes 1. Petition ,Annex "A" (Certificate of Incorporation). 2. Id. ,(Fifth and Sixth Articles of Annex "B",the Articles of Incorporation of Aman). 3. Id. ,(Second Article of Annex "B",the Articles of Incorporation of Aman). 4. Id. ,(Certificate of Incorporation). 5. Id. ,par. 6. 6. Id. ,par. 5. 7. Id. 8. Id. ,par. 7. 9. Id. ,par. 8. 10. Id. ,par. 9. 11. Id. ,par. 10. 12. Id. ,par. 11. 13. Id. ,Annex "D". 14. Id. ,Annex "D" and par. 13. 15. Petition ,par. 15. 16. Id. ,par. 16. 17. Id. 18. Id. ,par. 17, Annex "E" (Motion for Issuance of a Cease and Desist Order). 19. Id. ,par. 17. 20. Id. ,par. 18. 21. The dispositive portion of the CDO reads as follows: "PREMISES CONSIDERED, Aman Futures Group Phils.,Inc.,its officers, directors, agents, representatives, conduits, assigns, and any and all persons claiming and acting for and in behalf and under their authority are hereby ordered to IMMEDIATELY CEASE AND DESIST, 21 UNDER PAIN OF CONTEMPT, from further offering, soliciting, or otherwise offering or selling unregistered securities to the public, such as, but not limited to, investment contracts, pooling of funds, investment trusts, or similar forms, and, in connection therewith, soliciting, accepting or receiving from others, money for the purpose of trading in any futures contract . Moreover, to forestall grave damage and prejudice to all concerned and to ensure the preservation of the assets for the benefit of the investors, respondents or any of their representatives, or any person/s acting for and in their behalf, and such other persons directing or controlling the activities of such corporation, officers, representatives, salesmen and agents, are all ENJOINED from a) transacting any and all business involving the funds in its depository banks, and b) from transferring, disposing or conveying in any other manner any and all assets, properties, real or personal, and including bank deposits, if any, of which the named persons herein may have any interest, claim or participation whatsoever, whether directly or indirectly, under their custody, immediately upon receipt of this Order, until further orders from this Commission ...." 22. CDO, pp. 6-10. 23. Id. ,par. 24, Annex "J" (CFD Certification dated 10 October 2012). 24. Id. ,par. 19, Annexes "G","H" and "I" (Complaint-Affidavit of Nany S. Mendez dated 15 October 2012; Joint Complaint Affidavit dated 10 October 2012 executed by Jovanie C. Dimasar, Rauwolfio N. Pamaran, Vicente P. Cartalla, Moises Philip V. Siangco, Rolly D. Erat and Sergio B. Secretario, Jr.;and Sinumpaang Salaysay of Rudy Ases). 25. Id. ,par. 20. 26. Republic Act 8799 (2000). 27. Batas Pambansa 68 (1980). 28. Affidavits of Service executed by Anthony Glenn C. Paggao on 20 March 2013 states that the Summons was received by the NBI where William Fuentes and Naezelle M. Rodriguez are detained. William Fuentes and Naezelle M. Rodriguez are detained at the NBI Building, Taft Avenue, Ermita, Manila, Records, pp. 108-111. 29. Affidavit of Service of Summons executed by Anthony Glenn C. Paggao dated 20 March 2013, Records, p. 107. 30. Section 3.1 of the SRC defines securities as the following: "Sec. 3. Definition of Terms. 3.1. "Securities" are shares, participation or interests in a corporation or in a commercial enterprise or profit-making venture evidenced by a certificate, contract, instrument, whether written or electronic in character. It includes: xxx xxx xxx (b) Investment contracts ,certificates of interest or participation in a profit sharing agreement, certificates of deposit for a future subscription;" (emphasis ours) 31. Section 8.1 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. 32. G.R. No. 164182, 26 February 2008. 33. CDO, p. 8.