SEC probes brokerage firm for unauthorized trading activities

The Securities and Exchange Commission (SEC), the country’s regulatory watchdog, is now at the forefront of a probe against the brokerage firm DW Capital, Inc. (DWCI) that allegedly yielded nearly R3 billion from unauthorized trading activities.

There will be a “clarification hearing” on the matter on Tuesday as set by SEC Markets and Securities Regulation Department (MSRD).

It was early this month when the Philippine Stock Exchange (PSE) imposed a preventive suspension on DWCI, shortly followed by a memo from the Capital Markets Integrity Corporation (CMIC) also ordering a suspension on the company. CMIC is the self-regulatory organization (SRO) and the primary regulator of the trading participants at the PSE.

After the suspension order, CMIC then informed MSRD of DWCI’s suspension, triggering the conduct of a special audit on the brokerage. On August 18, CMIC filed with SEC a petition for an issuance of an order to authorize CMIC to take over the operations of DWCI.

“In its Petition for Takeover, CMIC essentially alleges that DWCI has engaged in unauthorized trading of securities involving five accounts which have total market value of short positions in the amount of R2.6 billion as of July 28, 2017,” SEC said in a statement on Friday.

According to CMIC, there are clients who claimed that some shares of stocks have not been delivered to them by DWCI. Thus, these clients demanded the immediate delivery of these securities. SEC then instructed MSRD to conduct an investigation and verification of the allegations contained in the petition.

MSRD eventually issued a subpoena Duces Tecum, which ordered DWCI to submit to SEC various records that would establish the financial condition of the brokerage firm. These records include the following: Customer Master List; Stock Position Report detailed per customer, per stock, per location; Portfolio reports; Transaction Reports; Account Ledgers; Statement of Accounts; Confirmation Invoices; Customer Account Information Forms, etc. (MBM)