Salazar v. C & T Global Futures, Inc.

[SEC-SICD * CASE NO. 5226. August 5, 1999.] MELMA P. SALAZAR , plaintiff, vs . C & T GLOBAL FUTURES, INC., PETER CHUA & ARIES DEL MUNDO , defendants . D E C I S I O N Plaintiff seeks to recover her investments in commodity futures trading done through the encouragement and solicitation of respondent C & T Global, Inc., its officers and employees. In sum, plaintiff stated in her complaint the following facts: Sometime in December, 1994, the plaintiff was approached at her office by defendant Aries del Mundo; the latter informed the plaintiff that he was a registered investment consultant employed with the defendant C & T and tried to convince the plaintiff to invest in foreign currency futures trading upon the following alleged fraudulent assurances and/or material misrepresentation: IcHTAa a) That the plaintiff would earn at the very least ten (10%) percent a month from the trading and that as long as the money remains with C & T, plaintiff would earn huge .profits compared to a bank where her money would earn interest of 3% per annum in a savings account or at best, 10% per annum in a time deposit; b) That there would be no risk that the plaintiff would lose her investment; c) That C & T will only deduct a commission whenever plaintiff makes a profit; d) That defendant Aries del Mundo is a licensed and/or registered investment consultant; e) That upon advice, the plaintiff could withdraw her investment anytime; Thereafter, the plaintiff decided to visit the defendant C & T's office where she was entertained by a certain Peter Chua, Vice President of C & T who only kept stressing plaintiff's potential for earning huge profits if she decided to invest; that when asked by the plaintiff how her investment would be protected, Peter Chua replied that her investment would be insured; that because of the above assurances, a week later, plaintiff delivered the amount of One Hundred Thousand Pesos (P100,000.00) to Peter Chua who then hurriedly showed some papers including a "Customer's Agreement" in front of her and pointed simply on the blank space where the plaintiff was to affix her signature; that Defendant Peter Chua never took the time to explain the contents of the documents and informed the plaintiff that their accomplishments were mere requirements or formalities. Plaintiff further states that she was then asked to pre-sign several blank "Instruction to Buy/Sell" slips which would enable the defendants to invest her money without need of obtaining the plaintiff's signature each time her account was traded; That on January 31, 1995, defendant Aries del Mundo traded plaintiff's account and later informed her that she had realized a profit; subsequent trading were conducted by Del Mundo who later informed the plaintiff that there were no significant changes in her position or account status; that on March 06, 1995, the plaintiff left written instructions with the defendants on trading of her account inasmuch as she was leaving on an out-of-town business trip; a copy of said instruction is attached as ANNEX "A"; that a few days later upon her return, the plaintiff got the shock of her life when she received a notice from defendant C & T informing her that her entire principal investment of P100,000.00 had been practically wiped out in trading; that to make matters worse, the notice further required the plaintiff to deposit an additional amount of P30,000.00; that already in panic, plaintiff immediately called up defendants Chua and Del Mundo to ask for an explanation and to find out why her account was traded despite the written instructions she had left earlier; that defendants proceeded to assure the plaintiff that her investments was just on a "float" status and that inasmuch as the loss was as yet unliquidated, the plaintiff could still recover her investment provided she puts in an additional P30,000.00, otherwise, she would lose everything. Plaintiff further avers that out of fear of losing her entire investment, she delivered an additional sum of P30,000.00 to the defendants but to her dismay and grief, plaintiff was informed that even the additional P30,000.00 was lost in trading; that plaintiff's money was never recovered and worst, plaintiff could no longer locate defendant Chua and Del Mundo despite diligent effort to locate them for an accounting of petitioner's investment; that when plaintiff went to this Commission to seek redress for her loss, plaintiff discovered that defendant Aries Del Mundo was not even a licensed or registered trader in clear violation of the rules on the matter (ANNEX "B"). Plaintiff now seeks redress from this Commission through this complaint for the return of her investments of P130,000.00 in addition for her claim for moral and exemplary damages as well as attorney's fee and cost of this suit. Respondents, aside from the denial of the charges against them raised the following affirmative and special defenses to wit: That plaintiff has no cause of action against defendants; that contrary to the allegations of the complainant, the business of foreign currency trading was never a "sure win" business venture; the pros and cons of the high risk trading business were, fully explained to the complainant; that the trading account by complainant was voluntarily entered into by her because of her inordinate desire to earn profits; that in the same vein, to show the awareness of the risk of loss in trading foreign currency, plaintiff even affixed her signature in the Risk Disclosure Statement, both written in English and Filipino and incorporated in the Customer's Agreement; that to further show complainants awareness of the risk of loss, she even deposited an additional amount of P30,000.00 as additional margin deposit because her initial margin deposit suffered substantial losses due to the fluctuations in the world currency market which were adverse to her positions and the same were beyond the control of herein defendants. Defendants further stated that the documents which evidenced the transactions are clear and were fully disclosed to the complainant as well as all the conditions, advantages and disadvantages of the contract resulting therefrom and such being the case, complainant can not now alleged to be a victim of deceit and to have suffered damages thereby, and simply put, the non-generation of profit in a business is not deceit. By way of counterclaim, defendants claim that by reason of this unfounded suit, defendants was constrained to engage the services of counsel and incurred attorney's fees of P50,000.00 as retainer's fee plus P1,000.00 as appearance fees for every hearings conducted. Culled from the foregoing, the sole issue posed for resolution is whether or not complainant is entitled to a return of her investments. cISDHE The above cause of action finds relevance to the following pertinent laws, rules and regulations on the matter. Section 20, Revised Rules on Commodity Futures Trading provides in part that: "SECTION 20. Licensing of persons associated with futures commissions merchants . It shall be unlawful for any person to be associated with any futures commission merchants as a partner, officer, or employee (or any person occupying a similar status or performing similar actions) in any capacity which involves (a) the solicitation or acceptance of customers orders (other than in a clerical capacity or (b) the supervision of any person so engaged unless such person shall have been registered/licensed by the Commission and as such license shall not have expired nor been suspended or revoked, and it shall be unlawful for any futures commission merchant to knowingly permit such person to become or remain associated with him in such capacity." "SECTION 33-A. Prohibitions against Certain Foreign Currency , Contracts . Unless licensed by the Securities and Exchange Commission, it shall be unlawful for any person to engage in, or solicit or accept orders, or act as conduit, or make or enter into any foreign currency contract which is in the form of a futures contract." The question now posed before us is: Who first introduced the business to either party? Is it the petitioner first seeking the services of respondents to trade in Foreign Currency Contract or is it the respondents going into the place of petitioner soliciting her valuable investment to trade in Commodity Futures? From the allegations of the parties, we find it more credible, the narration of facts by plaintiff; that it was defendant Aries del Mundo who first approached plaintiff who, by then, has no inkling nor understanding whatsoever and in fact has not experience trading in Commodity Futures. Any possible investor may be susceptible to encouragement by Commodity Futures Salesmen just to entice them to trade in the market given the promise of high return of investment without due regard to the risk attached to it; First, it is of judicial notice that the many irregularities committed by Commodity Futures Brokers led this Commission to issue a Cease and Desist Order (CDO) against these firms as early as 1996, amongst which are: (1) investors were enticed into trading without previous experience on the matter; (2) they were encouraged to invest and trade only because of a promise of earning high interests yield by misrepresenting the true facts that it was a very risky one, although the customers were required to sign a Customer's Agreement wherein the Risk Disclosure Statement is incorporated therein but were never given emphasis by the salesman; and that (3) unlicensed salesmen were employed by the brokers who are initially given as training grounds the solicitations of customers. As a matter of fact, the same happened to plaintiff. In the initial trading days, she allegedly earned a profit, to justify defendants prodding for plaintiff to invest more or maintain her investment and in order that plaintiff should not make any withdrawal, only to realize later on that such profit together with the initial and subsequent investments will be totally wiped out in a matter of weeks. These are only some of the few horrible experiences that almost all the victims of Commodity Futures Brokers can relate, plaintiff included among them. Respondents' defense that plaintiff signed the Customer's Agreement and the Risk Disclosure Statement does not hold water. The said documents, if ever signed by plaintiff is comparable to a "contract of adhesion", wherein the only participation of plaintiff is affixing her signature. The signing thereof is undoubtedly tainted with material misrepresentation which if fully disclosed, could have changed plaintiff's interest in Commodity Futures trading. The mere fact that plaintiff instructed respondents not to trade her account while she is away is a manifestation that the prior Contract to Buy/Sell wherein plaintiff pre-signed has been superseded by the later instructions. Instead of heeding plaintiff's instructions, defendants still traded plaintiff's account by using the pre-signed Contract to Buy/Sell. Any trading therefore that was made by defendants in contravention with plaintiff's instructions is void and should not have affected plaintiff's security position, if the representation during the solicitation process were followed. Obviously, the same did not happen. Defendants are only too willing to trade regardless of the results to plaintiff in order for them to earn commissions. The mere fact that the initial solicitation stage was done by unlicensed salesman (Aries del Mundo) all the more voided the subsequent proceedings. The initial stage alone is a clear violation of this Commission's existing rules on the matter, which renders the contract nugatory and of no legal effect. Corollary thereto is the plaintiffs entitlement to the return of her investments. Respondent C & T cannot escape liability on the acts of its employees, for the reason that investments made by plaintiff redounded to the coffers of respondent company. To say that Peter Chua and Aries del Mundo did not respond to this complaint nor this Commission did not acquire jurisdiction over them is not a valid excuse to exculpate respondent corporation from the liability. For one, individual respondents were admitted to be an officer and employee of respondent C & T. Secondly, now that the company is already closed and in the process of liquidation, naturally, the individual respondents can not be expected to continue being at the employ of the company who has no more operations as of this time and is just only awaiting its formal liquidation and distribution of its remaining assets on a pro-rata basis. Plaintiff's victory in this case is a shallow one. Although defendant C & T Global is adjudged to be liable for the refund, what is there to refund if the company has no more officers and employees, no money but only its Compensation Fund and the Trust Fund being administered by the duly appointed SEC Liquidator. At most, the order of refund of the investments of plaintiff upon finality, will be only ordered recorded into the books of the SEC Appointed Liquidator and be satisfied by the existing funds available for distribution on a pro-rata basis. WHEREFORE, premises considered, judgment is hereby rendered as follows: 1. Defendant C & T Global through the SEC Appointed Liquidator is hereby ordered to refund to plaintiff the amount of P130,000.00 as her initial and subsequent investments. 2004seccd 2. The claim for moral and exemplary damages and attorney's fees by both parties are all DENIED as the same, although plaintiff deserve such, is beyond satisfaction anyway. Upon finality of this Order, let the award of this claim be forwarded to the SEC Appointed Liquidator for satisfaction thereof from the available funds at his disposal; No pronouncement as to cost. SO ORDERED. (SGD.) JULIETO F. FABRERO Hearing Officer