In the Matter of Crown Regency Holiday International, Inc., et al.

March 26, 2009 SEC CASE NO. 03-09-007 IN THE MATTER OF CROWN REGENCY HOLIDAY INTERNATIONAL, INC., FUENTE TRIANGLE REALTY DEVELOPMENT CORPORATION, MEGATREND REALTY NETWORK, INC. and BORACAY MULTIPLE PROPERTIES DEVELOPERS, INC. COMPLIANCE AND ENFORCEMENT DEPARTMENT , petitioner . CEASE AND DESIST ORDER This resolves the Motion for the Issuance of a Cease and Desist Order ("CDO") against Crown Regency Holiday International, Inc., Fuente Triangle Realty Development Corporation, Megatrend Realty Network, Inc. and Boracay Multiple Properties Developers, Inc. ("Respondents") filed on 17 March 2009 by the Compliance and Enforcement Department ("CED") of this Commission. aATCDI Respondent Crown Regency Holiday International, Inc., ("CROWN REGENCY") is a corporation duly registered with the Commission on 04 May 2004 under SEC Registration No. CS200406937, with principal office at Unit 1001, 10/F Atlanta Center, Annapolis Street, Greenhills, San Juan, Metro Manila. Its primary purpose is: "To subscribe for, engage in, or otherwise acquire and own, hold, use, sell, assign, transfer or otherwise dispose of real and personal properties, including shares of stocks, securities, contracts, or obligations of any corporation, domestic or foreign, engaged in the general business of a hotel, resort, restaurant, fastfood, recreational, amusement, real estate brokerage, finance, transportation, medicine distribution, construction and other allied businesses and to the limit and extent permitted by law, to acquire and own, either by purchase or lease or other means of acquisition, land, equipment, buildings and other equipment, buildings and improvements thereto for the conduct and operation of the general nature of its business and object of all other similar or related activities incidental thereto, to include the sale and issuance of non-proprietary Holiday Ownership Membership Certificates to natural and juridical persons which shall entitle the purchaser or holder thereof to the use, at any time, or at some future time, one or more weekly intervals future vacation accommodation in the facilities and amenities of the establishments to be organized, managed and operated for the welfare and benefit of the holder or purchaser of the certificates." Respondent Fuente Triangle Realty Development Corporation ("FUENTE TRIANGLE") is a corporation duly registered with the Commission on 05 May 2006 under SEC Registration No. CS200606993, with principal office at Unit 1001, 10/F Atlanta Center, Annapolis Street, Greenhills, San Juan, Metro Manila. Its primary purpose is: "To acquire by purchase, lease, donation or otherwise, and to own, use, improve, develop, subdivide, sell, mortgage, exchange, lease, develop and hold for investment or otherwise, real estate of all kinds, whether improve, managed or otherwise dispose buildings, houses, apartments and other structures of whatsoever kind, together with their appurtenances, and to carry in a general real estate business, to purchase, manage, to take, own real and personal property, whether for investment or for its own use or to protect existing interest therein for other purposes, to mortgage, sell and convey the same, to negotiate, purchase, hold and sell mortgage, stocks, bonds and other securities and personal property and to invest money in real estate for itself. However, the corporation will not engage in the management of land, securities portfolio and other similar assets of persons, firms or entities." Respondent Megatrend Realty Network, Inc. ("MEGATREND") is a corporation duly registered with the Commission on 31 March 2005 under SEC Registration No. CS200505118, with principal office at Suite 2601-B East Tower, Philippine Stock Exchange Building, Exchange Road, Ortigas Center, Pasig City. Its primary purpose is: aAHISE "To own, use, develop, subdivide, sell, exchange, lease, and hold for investment or otherwise, real estate of all kinds, including buildings, houses, apartments and other structures." Respondent Boracay Multiple Properties Developers, Inc. ("BORACAY MULTIPLE") is a corporation duly registered with the Commission on 13 April 2007 under SEC Registration No. CS200705854, with principal office at Unit 1008 Atlanta Center, Annapolis Street, Greenhills, San Juan, Metro Manila. Its primary purpose is: "To carry on a general real estate business, to purchase, manage, to take, own real and personal property whether for investment or for its own use or to protect existing interest therein of other purposes, to mortgage, sell and convey the same, to negotiate, purchase, hold and sell mortgage, stocks bonds and other securities and personal property and to invest money in real estate for itself. However, the corporation will not engage in subdivision business and in the management of fund, securities portfolio and other similar assets of persons, firms or entities." On 27 September 2007, the Corporation Finance Department ("CFD") of this Commission issued a Memorandum referring the case of respondent CROWN REGENCY to CED for investigation on the alleged offering of securities to the public without any prior permit issued by the Commission. On 11 October 2007, the CED investigating team proceeded to the sales office of CROWN REGENCY located at EDSA Shangrila Plaza but the same was no longer open for business transactions. On 08 November 2007, a surveillance of the operations of MEGATREND was carried out by the CED. The investigating team went to the principal office of MEGATREND at Suite 2601-B East Tower, Philippine Stock Exchange Building, Exchange Road, Ortigas Center, Pasig City, to inquire about the units of Boracay Crown Regency Resort and Convention Center ("BORACAY CROWN REGENCY") that were being sold to the public. Mr. Noel Ablaza, the Training Manager, made a presentation to the investigating team regarding BORACAY CROWN REGENCY and pointed out that the construction of the project will commence in November 2007 and with a projected completion on November 2009. In the conduct of their investigation, CED found out that MEGATREND is the marketing arm of BORACAY CROWN REGENCY, which is a project of CROWN REGENCY. aECTcA Furthermore, the leaflets, brochures and documents supplied by Mr. Ablaza, namely, the Management and Profit Sharing Agreement, Investment Reservation Application Form and Contract to Sell, revealed that aside from CROWN REGENCY and MEGATREND, respondents FUENTE TRIANGLE and BORACAY MULTIPLE were involved or connected with the project as property developer and owner of the property situated at Barangay Balabag, Central Boracay, Aklan, respectively. During the investigation carried out by the CED, it was also established that respondents indiscriminately offered for sale said securities to its clients and even to the members of the investigation team during the surveillance. Respondents likewise offered and advertised for sale through their website www.ultimaresidences.com/boracay, without the necessary license in violation of the abovequoted provisions of the SRC. In a Certification dated 04 October 2007, the CFD attested that CROWN REGENCY, BORACAY MULTIPLE and FUENTE TRIANGLE were not registered issuers of securities under Sections 8 and 12 of the Securities Regulation Code ("SRC") and therefore, not licensed to offer or issue securities to the public. Likewise, the Market Regulation Department ("MRD") of the Commission issued a Certification dated 03 December 2007 stating that Mr. Noel Ablaza has not been issued any license to act as broker or dealer in securities, agent, trader, salesperson and associated person under the SRC. On 15 April 2008, the MRD issued a Certification stating that MEGATREND has not been issued any secondary license to act as broker-dealer in securities, investment adviser of an investment company and investment house or transfer agent. Sections 3, 8 and 12 of the SRC provides: "Sec. 3. Definition of Terms . 3.1 "Securities" are shares, participation or interest in a corporation or in a commercial enterprise or profit-making venture and evidenced by a certificate, contract, instrument, whether written or electronic in character. It includes: (a) Shares of stock , bonds, debentures, notes, evidence of indebtedness, asset-backed securities; (b) Investment contracts , certificates of interest or participation in a profit sharing agreement, certificates of deposit for a future subscription; xxx xxx xxx" "Section 8. Requirement of Registration of Securities . EICScD 8.1. 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. Prior to such sale, information on the securities, in such form and with such substance as the Commission may prescribe, shall be made available to each prospective purchaser." "Sec. 12. Procedure for Registration of Securities . 12.1. All securities required to be registered under Subsection 8.1 shall be registered through the filing by the issuer in the main office of the Commission, of a sworn registration statement with respect to such securities, in such form and containing such information and documents as the Commission shall prescribe. The registration statement shall include any prospectus required or permitted to be delivered under Subsections 8.2, 8.3 and 8.4." Rule 3 Paragraph 1, subparagraph (G) of the Amended Implementing Rules and Regulations of the SRC defines an investment contract as: "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 other. 1. An investment contract 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." Based on the business scheme adopted by the respondents, the investment package involves, not only the sale of preferred shares of stock of BORACAY MULTIPLE, which represent a specific condotel unit at BORACAY CROWN REGENCY, but at the same time, partakes of the nature of an investment contract, wherein the money invested is placed in a common enterprise and the investor is led to expect profits from the efforts of others. Likewise, the act of respondent MEGATREND in allowing Mr. Ablaza to offer for sale unregistered securities to the public constitutes a violation of Sections 28.1 and 28.2 of the SRC, thus: HSEIAT "28.1. No person shall engage in the business of buying or selling securities in the Philippines as a broker or dealer, or act as a salesman, or an associated person of any broker or dealer unless registered as such with the Commission. 28.2. No registered broker or dealer shall employ any salesman or any associated person, and no issuer shall employ any salesman, who is not registered as such with the Commission." Moreover, respondents' act of offering and selling securities to the public, through the distribution of flyers, brochures, the conduct of presentations and placing of advertisements in the internet, also constitute public offerings as defined under Rule 3, paragraph 1, subparagraph N of the Amended Implementing Rules and Regulations of SRC, thus: "N. Public offering means a random or indiscriminate offering of securities in general to anyone who will buy, whether solicited or unsolicited. Any solicitation or presentation of securities for sale through any of the following modes shall be presumed to be a public offering: i. Publication in any newspaper, magazine or printed reading material which is distributed within the Philippines or any part thereof; ii. Presentation in any public or commercial place; iii. Advertisement or announcement in any radio or television, or in any online or email system; or iv. Distribution and/or making available flyers, brochures or any offering material in a public or commercial place, or mailing the same to prospective purchasers." The continued offering and sale of the abovementioned securities by the respondents CROWN REGENCY, FUENTE TRIANGLE, MEGATREND and BORACAY MULTIPLE, their representatives or agents, without the requisite registration and license, will likely cause grave or irreparable injury and prejudice to the investing public. Hence, this must be restrained to protect the investing public. PREMISES CONSIDERED, respondents CROWN REGENCY, FUENTE TRIANGLE, MEGATREND and BORACAY MULTIPLE, their officers, directors, partners, representatives, assigns, agents and any and all persons acting for and/or in their behalf are hereby ordered to immediately CEASE AND DESIST, under pain of contempt, from further offering, advertising, soliciting and selling Investment Contracts and Shares of Preferred Stock of BORACAY MULTIPLE to the public until the requisite registration statement is duly filed and approved by this Commission and the corresponding permit to offer and sell securities is issued, and to SHOW CAUSE why the Cease and Desist Order should not be made permanent. DECcAS Further, respondents are directed to submit a report on the actual number of unregistered shares already sold to the public. Pursuant to Section 10-3 of the 2006 Rules of Procedure of this Commission, respondents may file a formal request or motion for the lifting of this Cease and Desist Order within a non-extendible period of five (5) business days from receipt of the Order, stating therein whether the corporation is willing to enter into a settlement offer under Section 55 of the SRC and would opt for summary procedure. Let a copy of this Order be furnished the Corporation Finance Department and the Economic Research and Information Department for their information and appropriate action. SO ORDERED. March 26, 2009, Mandaluyong City, Philippines. (SGD.) FE B. BARIN Chairperson MA. JUANITA E. CUETO Commissioner (SGD.) RAUL J. PALABRICA Commissioner (SGD.) THADDEUS E. VENTURANZA Commissioner (SGD.) MANUEL B. GAITE Commissioner