Philippines – SEC R&L Investment Takeover

Philippines – SEC R&L Investment Takeover

On 15 November 2019, PHI SEC ordered CMIC takeover of R&L Investments.

  • Ordered Capital Markets Integrity Corporation (CMIC) to take over the operations of R&L Investments, to protect affected customer accounts on 14 November 2019.
  • Following the stock brokerage’s collapse allegedly due to unauthorized transfers of proprietary, client shares worth about P700mn into an account with another brokerage.

Operations Takeover

  • The rules provide that an exchange or SRO taking over a failed trading participant shall immediately arrange for another trading participant to take over outstanding contracts.
  • Relating to securities, notify affected customers of such action and subsequently provide them with the opportunity to transfer accounts to another trading participant.
  • Also, the exchange or SRO shall settle the failed trading participant’s liabilities to customers through the sale of the latter’s trading rights and other trade-related assets.
  • Exchange or SRO to inform failed trading participant’s accredited trust fund of takeover
  • Inform customers they may claim compensation for losses from trading participant’s accredited trust fund, subject to validation of claims by exchange/SRO and trust fund.


  • PHI SEC also ordered CMIC to take other necessary actions to protect customer accounts including, but not limited to the preservation of the assets and books and records of R&L investments, to execute acts or documents necessary or appropriate.
  • In addition, it directed CMIC to determine the various violations of the provisions, rules and regulations possibly committed by R&L Investments, its officers and employees.
  • CMIC shall submit a report and recommendation to the SEC markets and securities regulation department within 7 days from the conclusion of its audit before 20 December.
  • To institute administrative or criminal action against responsible persons if warranted.
  • The findings of CMIC, however, shall not preclude the commission from continuing its own examination, investigation, or filing of any action against R&L Investments.


  • The SEC issued the order, after establishing that the financial condition of R&L Investments has so deteriorated that it cannot readily meet the demands of its clients.
  • In its 2018 audited financial statements, R&L Investments booked client securities worth P738,897,290 but the client portfolio only amounted to P132,255,939.
  • The number of missing securities will result in net negative equity of P559,825,378.
  • A special audit by CMIC revealed R&L Investments inflated number of client shares.
  • R&L Investments nominee Lucy Linda D. Lee first reported the discovery of the discrepancy to the PSE on 31 October 2019 after it was brought to her attention.
  • In a letter on 4 November, Ms. Lee said Mr. Moron and his wife went to R&L Investments’ office on 1 November and admitted to unauthorized transfer of shares to Venture Securities.
  • Settlement officer Mr. Moron supposedly admitted to forging reports to conceal actions.

Special Audit

  • On 8 November 2019, CMIC commenced a special audit of the pertinent books and records of the involved parties, it also placed R&L Investments under involuntary suspension.
  • PDTC, meanwhile, deactivated the sweeping of share balances from R&L accounts.
  • SEC ordered R&L Investments to preserve its books, records and assets for regulators.
  • The commission will continue monitoring the investigation conducted by CMIC.