Slap on the wrist decision
He
By: Raul J. Palabrica - @inquirerdotnetPhilippine Daily
Inquirer / 08:38 PM April 04, 2013
The first criminal conviction under the Securities
Regulation Code (or Republic Act 8799), which was
enacted in 2000, was a big letdown to investors,
market participants and financial regulators.
In 2003, Asian Capital Equities Inc., a stock brokerage
firm owned by Francisco Borromeo, collapsed due to
mismanagement and failure to comply with
regulatory standards.
The Securities and Exchange Commission filed
criminal charges against Borromeo for selling and
trading a client’s stocks without his consent; using
fictitious and dummy accounts; selling a client’s
stocks and not remitting the proceeds of the sale to
him; maintaining two books of accounts, and failure
to comply with capital requirements.
Some P100 million worth of stocks and funds are
believed to have been misappropriated. The exact
amount could not be determined because the audit
conducted on the brokerage was hampered by
missing transaction records.
If these offenses were committed under
circumstances outside of the stock market, Borromeo
would have faced charges for large scale swindling (or
estafa) and falsification of private and commercial
documents which carry stiff prison penalties.
In January 2005, after going through a convoluted
investigation process at the Department of Justice,
the cases were filed in court.
Arraignment
The criminal proceedings slowed down because
Borromeo made a disappearing act. He could not be
located at his last known address in his native Cebu
where his family reportedly enjoys strong political
influence.
The SEC repeatedly sought the assistance of the
Philippine National Police for the service of the arrest
warrant against him.
After being on the lam for two years, probably
drained from being a fugitive from justice for so long,
Borromeo emerged in 2007 and entered a “not
guilty” plea to the charges against him.
For unknown reasons, he had a change of heart.
withdrew his claim of innocence and admitted the
violation of his fiduciary duties and responsibilities to
his clients.
In the wake of that admission, the judge ordered him,
by way of punishment, to pay a fine of P2.1 million, or
the equivalent of 2 percent of the estimated value of
the stocks and cash his brokerage firm defrauded its
clients.
Undoubtedly, the penalty is a drop in the bucket. Or
chicken feed (patuka sa manok, as gamblers would
probably describe it).
Manuel Amalillo, Coco Rasuman and their fellow con
artists would probably have a nice laugh if they learn
about the decision. Yes! It’s more fun in the
Philippines.
Discretion
Legally, there is nothing wrong with the decision. The
SRC states that any person who violates its provisions
shall, upon conviction, “suffer a fine of not less than
P50,000 nor more than P5 million or imprisonment of
not less than seven years nor more than 21 years, or
both,” at the court’s discretion.
The law gives the court some leeway in the
imposition of penalties on securities-related crimes
depending on the underlying circumstances.
Her Honor must have been in a forgiving or charitable
mood when she decided on Borromeo’s punishment.
No prison term, not even a day. Just a fiddling fine of
P2.1 million. Not the maximum imposable fine of P5
million, or 5 percent of the misappropriated amount.
Unless a higher court overturns the decision, the
judge’s exercise of her discretion in the appreciation
of the facts of the cases against Borromeo should be
respected.
Unfortunately, the “slap on the wrist” decision has
sent disturbing signals to capital market participants.
A stockbroker admits to defrauding his clients
millions in pesos and all he gets is a miniscule fine
that can be easily be sourced from the proceeds of
the crimes themselves?