ALTHOUGH the legal journey is arduous and bumpy, the Securities and Exchange Commission (SEC) and other regulators in the investment community finally won a conviction in court of an errant stockbroker and investor. But this is after 22 years of legal battle, and just in the level of the regional trial court.
The Pasig City Regional Trial Court has sentenced Johnny Yap, then president, sales manager and director of Solar Securities Inc., to 14 years of imprisonment and a P1-million fine for insider trading and stock prices manipulation, a scam that earned him and his group hundreds of thousands of pesos but victimized many gullible retail investors who lost the same thousands.
In 1999, the local bourse had the biggest scandal in its history with illegal trades and stock price manipulation scam involving BW Resources Corp. Through deceit, manipulation and devious marketing gimmicks, the price of BW surged 1,462 percent within a single year, before the bubble burst and the scam was uncovered. Because of speculations that Macau casino tycoon Stanley Ho will invest in the firm, the shares of BW rose to as much as P12.50 per share by October 1999 from only 80 centavos in January of the same year.
‘While we are happy that stock market scams are being resolved, albeit very late in the day, new attempts at duping investors, both retail and institutional, are still very much active now.’
Judge Ira Fritzie Cruz-Rojo of Pasig RTC Branch 67 found Yap “guilty beyond reasonable doubt” of violation of the Securities Regulation Code, which prohibits fraud, manipulation and insider trading of any listed company traded in an exchange.
The court ruled that Solar had undertaken 142 counts of “wash sales,” or transactions wherein the buyer and seller of the stock share an owner, for the purpose of creating “false and artificial appearance of stock market activity in the volume and price” of BW.
The court gave weight to the findings of a Special Operations Group formed by the SEC in August 2000, which showed that Solar’s transactions were wash sales not only because the brokerage was both the buyer and the seller in all the 71 buy order and 71 sell order transactions, but also because the offers and bids had been made at very close intervals.
It is to be noted that the BW Resources scandal led to various reforms in the local stock market, so that the bourse will no longer be hit by similar financial debacles. One of these changes is the transformation of the Philippine Stock Exchange from an exclusive old boys’ club to a listed public corporation.
While we are happy that stock market scams are being resolved, albeit very late in the day, new attempts at duping investors, both retail and institutional, are still very much active now. A case in point is Abra Mining and Industrial Corp. ($PSEI: AR), which the SEC and PSE discovered to be violating many laws; it is suspended now, with unwary investors left holding the bag.
Regulators are once again found sleeping on the job, and it may take months or years before the AR caper is resolved. Investor confidence in the stock market has suffered anew, with hopes of recovery no better than relief from the COVID-19 pandemic.
