Public warned vs investment scams

By Dolly Yasa

 

BACOLOD City – The Securities and Exchange Commission (SEC) cautioned the public against companies enticing investors in get-rich-quick schemes.

The SEC noted the rising number of complaints and messages on investment scams from the public.

SEC-Bacolod Information Officer Clyde Linaja-Padilla said the public is further reminded not to be swayed by entities presenting them the green registration certificate while claiming that since they are SEC-registered, they can now do whatever they want, and this includes soliciting or offering investments to the public.

Such registration with the SEC only grants juridical personality to the corporation but it does not authorize it to issue, sell or offer for sale securities to the public, Padilla said.

While these entities may claim that they are not offering investments to the public, it is best to know whether the same is an investment contract or not.

Applying the Howey Test in determining whether an investment contract exists, the following elements must concur: (1) a contract, transaction, or scheme; (2) an investment money; (3) investment is made in a common enterprise; (4) expectation of profits; and (5) profits arising primarily from the efforts of others.

Moreover, another test can be employed to determine whether the scheme used is pyramiding or not.

The test to determine the same is through Koscot Test which comprises the following elements: (1) payment of money to the company; (2) the participant receives the right to sell a product (or service); (3) the participant receives compensation for recruiting others into the program; and (4) the compensation is unrelated to the sale of products (or services) to the ultimate user.

“We learned that here in Bacolod City, Murcia, La Castellana and some parts of Negros Occidental, there is a certain corporation allegedly enticing the public to invest with a promise of high interest after a certain period. This corporation presents to the public its Certificate of Registration and Affidavit of Accuracy of Contents in allegedly soliciting the investment and introducing its business. This corporation claims to have products to sell but in its advertisements, it only shows its ‘pay-out scheme’ and no products were introduced,” a SEC statement said.

“Lastly, the public is advised to always check with the SEC of the status of the corporation.  The hotlines and emails of SEC Bacolod is always open and responds within reasonable time to queries from the public and its clients.”