SEC v. SANTOS (FREGILLANA) 2.

Since the head of PIPC Corporation (Liew) has gone missing and with him
March 19, 2014 | Perez, J. | Securities Regulation Code are the monies and investment of a significant number of investors, the SEC
received complaints from thirty-one (31) individuals against PIPC
PETITIONER: Securities and Exchange Commission Corporation, its directors, officers, employees, agents, and brokers for the
RESPONDENTS: Oudine Santos alleged violation of Sec. 28 of the SRC.
3. Santos was charged in her capacity as investment consultant of the PIPC.
SUMMARY: In 2007, a certain Michael H.K. Liew, a self-styled financial guru Santos was alleged to have induced Lorenzo and Sy (Private Complainants)
to invest in the corporation.
and Chairmen of the BOD of Performance Investment Products Corporation
4. Common statement in the 31 complaints:
(PIPC-BVI), a foreign corporation registered in the British Virgin Islands. In “Due to the inducements and solicitations of the PIPC
order to do business in the Philippines it was then incorporated as Philippine corporation’s directors, officers, and employees/agents/brokers, the
International Planning Center Corporation (PIPC Corporation). Since the head former were enticed to invest their hard-earned monet, the
of PIPC Corporation (Liew) has gone missing and with him are the monies and minimum amount of which must be $ 40,000.00 with PIPC-BVI,
investment of a significant number of investors, the SEC received complaints with a promise of higher income potential of an interest of 12 to 18
from thirty-one (31) individuals against PIPC Corporation, its directors, officers, percentum per annum at relatively low risk investment program.
The private complainanrs also claimed that they were made to
employees, agents, and brokers for the alleged violation of Sec. 28 of the SRC.
believe that PIPC Corporation refers to Performance Investment
Santos was charged in her capacity as investment consultant of the PIPC. Santos Product Corporation, the Philippine Office or branch of PIPC-BVI,
was alleged to have induced Lorenzo and Sy (Private Complainants) to invest in which is an entity engaged in foreign currency trading and not
the corporation. Philippine International Planning Center Corporation.”

DOCTRINE: It was Santos who brought about the sale of the securities made 5. Likewise, it was narrated in the complaint affidavits how Oudine Santos
by PIPC Corp. and/or PIPC-BVI to certain individuals. Furthermore, it is took part in the inducement for them to invest their monies. According to
through the information provided by Santos that they were able to close the sales the complainants Santos presented the investment product referred to as the
of the securities. Although Santos was not a signatory to the contracts on Sy’s or “Performance Managed Portfolio”. Furthermore, Santos refused to disclose
the names of the traders for it is confidential. Santos also requested from Sy
Lorenzo’s investments, Santos secured the sale of these unregistered securities to to keep the transaction confidential because they were not authorized to
the two (2) complainants through the information that she provided on the conduct foreign currency trading.
investment products being offered for sale by PIPC Corporation and/or PIPC-
BVI and later on convincing them to invest therein. It is beyond doubt that she 6. Pertinent characteristics of the investment product referred to as the
connected the probable investors, Sy and Lorenzo, to PIPC Corporation and/or Performance Managed Portfolio:
PIPC-BVI, acting as an ostensible agent of the latter on the viability of PIPC a. 8 calendar week maturity period;
b. Principal investment (minimum of USD 40,000) is protected;
Corporation as an investment company. At each point of Sy’s and Lorenzo’s
c. Investments maintained in strict confidentiality;
investment, Santos’ participation thereon, although it was not evidenced by any d. Features: security, liquidity, short term commitment;
documents, was prima facie established. e. Tax-exemption status for offshore investments.

7. Investment Flow as enumerated by the Supreme Court:

a. Investors’ funds will be placed into a fixed deposit account with a
PIPC designated bank and shall not be exposed for trading
FACTS: purposes. The PIPC designated bank shall then extend a margin
1. In 2007, a certain Michael H.K. Liew, a self-styled financial guru and line request for trading based on the deposit;
Chairmen of the BOD of Performance Investment Products Corporation b. PIPC shall open a separate account which will contain an amount
(PIPC-BVI), a foreign corporation registered in the British Virgin Islands. of not more than 30% of its own funds to serve as a profit and loss
In order to do business in the Philippines it was then incorporated as account;
Philippine International Planning Center Corporation (PIPC Corporation). c. Trading will commence with PIPC designated bank closely
 monitoring the performance to ensure that if losses are incurred 2. It was Santos who brought about the sale of the securities made by PIPC
trading will cease immediately should the 20% stop limit be hit; Corp. and/or PIPC-BVI to certain individuals. Furthermore, it is through the
d. Profits will be credited into the Profit and Loss account with PIPC information provided by Santos that they were able to close the sales of the
designated bank account. Losses will be debited from the same securities.
account up to the controlled 20% limit; 3. Although Santos was not a signatory to the contracts on Sy’s or Lorenzo’s
e. Notice of withdrawals must be submitted two weeks prior to investments, Santos secured the sale of these unregistered securities to the
schedule of maturity otherwise investment is automatically rolled two (2) complainants through the information that she provided on the
over to the next batch; investment products being offered for sale by PIPC Corporation and/or
f. At maturity, profits accumulated in the settlement account shall be PIPC-BVI and later on convincing them to invest therein.
distributed and deposited into each investor’s dollar bank account 4. It is beyond doubt that she connected the probable investors, Sy and
within fourteen (14) banking days; Lorenzo, to PIPC Corporation and/or PIPC-BVI, acting as an ostensible
g. The funds of various investors are pooled, batched and deposited agent of the latter on the viability of PIPC Corporation as an investment
with PIPC designated bank account acting as custodian bank, to company. At each point of Sy’s and Lorenzo’s investment, Santos’
form a massive asset base. This account is separate and distinct participation thereon, although it was not evidenced by any documents, was
from the Profit and Loss Account. The line from this pooled fund prima facie established.
is then entrusted to full time professional and experienced foreign 5. And as categorically ruled by the Supreme Court:
traders who each specialize in the following currencies: Japanes
Yen, Euro, British Pound, Swiss Francs and Australian Dollar. The transaction initiated by Santos with Sy and
Profits generated from trading these major currencies is credited Lorenzo, respectively, is an investment contract or
into the Profit and Loss Account, which at the end of the eight participation in a profit-sharing agreement that falls
calendar week lock-in period, will be distributed among the within the definition of the law. When the investor is
investors. Investors are informed of their account status thru relatively uninformed and turns over his money to
trading statements issued by PIPC every time there is a trade made others, essentially depending upon their
in their respective accounts. representations and their honesty and skill in
managing it, the transaction generally is considered
8. However, Santos denied for having participated in the said fraudulent to be an investment contract. The touchstone is the
scheme for she never became a stockholder, director, general manager, or presence of an investment in a common venture
officer of the PIPC Corp. Santos’ duty was limited to providing information premised on a reasonable expectation of profits to be
about the corporate clients of PIPC. derived from the entrepreneurial or managerial
9. DOJ: Found no probable cause to charge Santos for the violation of the efforts of others.
SRC;
10. CA: Affirmed the findings of the DOJ. 6. Santos cannot be exempted from liability due to the mere fact
that she was not a signatory to the contracts or documents
ISSUE/s: evidencing the sale of securities to the complainants.
1. Whether Santos shall be held liable under Sec. 28 of the SRC? – YES
.

RULING: SC granted the petition.

RATIO:
1. Elements for violation of Sec. 28 of the Securities Regulation Code:
a. Engaging in the business of buying or selling securities in the
Philippines as a broker or dealer; or
b. Acting as a salesman; or
c. Acting as an associated person of any broker or dealer, unless
registered as such with the SEC.