SEC orders takeover of R&L Investments

Ralf Rivas
Capital Markets Integrity Corporation, the local bourse's compliance arm, is tasked to assist affected customers and submit a report for instituting criminal charges

ACTION. The Securities and Exchange Commission orders the takeover of embattled R&L Investments. Photo by Philippine Stock Exchange

MANILA, Philippines – The Securities and Exchange Commission (SEC) ordered Capital Markets Integrity Corporation (CMIC) to take over the operations of R&L Investments to protect affected customer accounts. 

In a statement on Friday, November 15, the SEC said it issued the order on Thursday, November 14, following the 50-year-old brokerage firm’s P700 million worth of losses due to unauthorized transfers of client shares by Marlon Moron, an employee who got hooked on gambling.

CMIC is the independent audit, surveillance, and compliance arm of the Philippine Stock Exchange (PSE).

CMIC is now tasked to arrange for another trading participant to take over outstanding contracts relating to securities, as well as notify affected customers and allow them to transfer their accounts to another trading participant of their choice.

It shall also settle R&L Investments’ liabilities to customers through the sale of the latter’s trading rights and other trade-related assets, liquidation of its paid-up capital, and supervision of payment of claims against the surety bond.

If trade-related assets fall short, CMIC will refer the outstanding liabilities to the PSE’s investors’ protection fund – a fund contributed to by trading participants for the protection of investors against losses in case of fraud, failure, or insolvency of trading participants.

CMIC will submit a report to the SEC before December 20 for instituting administrative or criminal action against Moron and other possible involved individuals. 

While the SEC’s latest move may be a welcome development for investors, the numbers look grim.

Owners of R&L Investments said they will pay off affected customers by selling assets, but audited financial statements showed that the company’s total net assets amount to only over P46 million. The number of missing securities, if absorbed by the company, would result in net negative equity of over P559 million.

In 2018, R&L Investments booked client securities worth almost P739 million. This contradicts a report by the Philippine Depositary and Trust Corporation (PDTC), which showed the brokerage’s client portfolio only amounted to over P132 million.

Moreover, R&L Investments reported to CMIC P734 million worth of client shares by end-August 2019, far from the P31 million the PDTC reported to the SEC.

A CMIC audit also revealed that R&L Investments inflated the number of client shares, reporting client securities worth over P747 million as of October 31, while the PDTC only accounted for P30 million the day before.

Moron is currently under police custody. –


Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.