SEC issues 8 tips versus ponzi schemes


BAGUIO CITY  – The Securities and Exchange Commission (SEC) recently issued another warning to the public against various individuals and corporations in the city who are soliciting investments from the people to sustain and maintain their operations that are covered with alleged Ponzi schemes.

Lawyer Annie Gonzales Tesoro, director of SEC Baguio extension office, said the public must take into consideration eight reminders before investing in the operation of individuals and corporations to prevent them from being divested of their hard earned money.

“A Ponzi scheme is a type of investment fraud wherein an operator promises high financial returns that are not expected from traditional investments.  Instead of investing the victims’ funds, the operator pays the original investors with the money given by subsequent investors.  Usually, enough money is returned to the original few investors to make them believe that profits are actually realized.  These original investors then are expected to “recruit” new investors, with their testimonials that they have indeed received their “profit,” Tesoro stressed.

She said some of the features of Ponzi investment schemes are that the individual or corporation has No SEC Registration, or with SEC Registration but NO secondary license to act as broker or dealer in securities; the individual or corporation Offers or guarantees a huge profit in a very short period and the individual or corporation Utilizes a binary network (i.e. upline and downline) to earn commissions.

Furthermore, Ponzi investment schemes are also characterized by a Provision for a lock-up period where an investor cannot touch the investment (i.e. 60 days); Assures pay-off of investments in a short time; Uses high pressure methods to convince investors to reinvest their earnings; Unknown principal office, address, founders, directors or officers and Orientation seminars are conducted informally.

“These investment schemes ordinarily collapse as fast as they are created while leaving its investors behind and unable to recoup their investments,” Tesoro added.

She explained a A company engaging in a Ponzi scheme is engaged in unauthorized offering, solicitation and placement of investments from the general public without the necessary license.

According to her an entity may show the public a registration certificate from the SEC or the DTI, but this certificate of registration is not the authority of these entities to engage in the unauthorized selling of securities.

“Securities are shares, participation or interests 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.  The essential trait of a security is that it is a participation in a profit-making venture with various elements,” she said.

She disclosed the elements are An investment of money, in a common enterprise, with an expectation of profits and primarily from efforts of others.

Tesoro appealed to the public t report any offer of investment made by persons or entities using similar modus operandi to the SEC for appropriate enforcement actions.

It can be recalled that numerous concerned citizens from the different provinces in the Cordillera had been inquiring from the website of Herald Express on the legality of the operation of some companies operating in their places that collect from the people huge investments in exchange for huge interests among others.

By Dexter A. See