SEC stops Wellcons Ponzi-like operation

THE Securities and Exchange Commission has revoked the corporate registration of Wellcons Unlimited Systems Inc. for its “double-your-money” program, which the agency found as akin to a Ponzi scheme.

In an order dated July 5, the Enforcement and Investor Protection Department of the SEC found that Wellcons has been publicly offering and selling securities without the necessary secondary license from the regulator.

In doing so, Wellcons committed an ultra vires act under Section 44 of Republic Act 11232, otherwise known as the Revised Corporation Code of the Philippines.

According to the order, the company’s activities also constituted serious misrepresentation as to what it can do, to the great prejudice of or damage to the general public, a ground for the revocation of a corporation’s certificate of registration under Presidential Decree 902-A.

Wellcons has been offering investment packages worth P2,500 to P13,890 under a program called “Binary System,” with guaranteed returns of up to P9,000 to P32,000 per day.

Members who availed investment packages under the “Binary System” can further earn through Wellcon’s “Pangkabuhayan“(livelihood) program, where they can supposedly double their money within six months based on investment packages worth P1,500 to P5,000.

In addition, Wellcons promised leadership bonuses and referral fees, among others.

Wellcons’s investment scheme involves securities, particularly an investment contract, whereby a person invests his money in a common enterprise and is led to expect profits primarily from the efforts of others, according to the EIPD.

As a form of security, investment contracts must be registered with the SEC before they can be sold or offered within the Philippines, pursuant to Section 8 of Republic Act 8799, or the Securities Regulation Code.

Wellcons may be a registered corporation with the SEC but it has never secured a secondary license from the agency to operate as a broker/dealer of securities, nor is it a registered issuer of any securities.

“Considering that nowhere is it stated in the primary purpose clause of Wellcons in its Articles of Incorporation that it is authorized to engage in the selling or offering for sale of securities to the public, coupled with the fact that it does not have the necessary Permit to Offer and Sell Securities, the activities of Wellcons of selling or offering for sale securities in the form investment contracts is considered an ultra vires act and therefore constitute serious misrepresentation,” the order said.

The SEC said Wellcons’s doubleyour-money scheme through its Pangkabuhayan program resembles a Ponzi scheme, where the profits or payouts taken from incoming investors are paid to existing or earlier investors.