SEC probes brokerage over illicit stock trades

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THE Securities and Exchange Commission (SEC) announced on Friday it will conduct a probe and verification of brokerage DW Capital, Inc. for alleged violations, one of which is the unauthorized trading of stocks involving five accounts amounting to P2.6 billion.

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On August 10, the Philippine Stock Exchange issued a memorandum imposing a preventive suspension on DWCI, which commenced on August 9.

The Capital Markets Integrity Corp. (CMIC), regulator of the trading participants of the local bourse, also issued a suspension order on the brokerage around midday of August 10, barring the DWCI from directly or indirectly trading on the PSE.

CMIC filed a petition with the SEC on August 18 seeking an order to authorize the CMIC to take over the operations of DWCI. In its petition, CMIC alleged DWCI engaged in unauthorized trading of securities involving five accounts with a total market value of short positions amounting to P2.6 billion as of July 28, 2017.

It said that on August 7, lawyers of the clients of DWCI requested CMIC to prohibit the firm from trading the shares of stock of their clients, and to direct DWCI to preserve the records of transactions pertaining to subject securities.

According to the petition, on August 9 the said clients reported that there were shares of stock that had not been delivered by DWCI to them and therefore these clients were demanding the immediate delivery of these securities. On August 10 CMIC suspended DWCI from trading in all listed securities.

“Thus, on August 18, the Commission instructed the MRSD [Markets and Securities Regulation Department] to conduct an investigation and verification of the allegations contained in the petition,” the SEC said.

Under the Securities Regulation Code, the SEC said it may order an exchange to take over the operation of a failed trading participant for the purpose of preserving and protecting the failed trading participant’s books, records, customer accounts, trade-related assets and settling its liabilities to its customers.

The brokerage firm was thus ordered to submit to the SEC various records that would establish its financial condition, including its 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, among others.

After the order, the DWCI moved to partially quash the subpoena and requested for additional time to comply with the submission of documents, which have yet to be filed as of posting time.

A clarificatory hearing has been set on Tuesday, according to the SEC.

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