Grand Alliance of Business Leaders Association, Inc.

EC Building,EDSA,GreenhillsMandaluyong City Securities and Exchange Commission Republic of the Philippines Department of Finance In the Matter of: LEADERS ASSOCIATION,INC GRANDALLIANCE OF BUSINESS SEC-CDO Case No.11-14-014 ENFORCEMENTANDINVESTOR PROTECTION DEPARTMENT, Petitioner X ORDER Temporary Cease and Desist Order (CDO dated 10 November 2014 filed on even date by the Enforcement and Investor Protection Department EIPD) of this Commission against GRAND ALLIANCE OF BUSINESS LEADERS ASSOCIATION,INC.(hereinafter GABAI Pending consideration by the Commission En Banc is an Ex-Parte Motion for Issuance of January 2010under SEC Registration No. CN201020246 with its primary purpose stated in its Articles of Incorporation as follows Respondent GABAI is a non-stock,non-profit corporation registered with the SEC on 08 To promote and foster a healthy and harmonious relationship among the To represents (sic the members in all aspects which may directly or to sic bind the members together to promote the sic friendly business leaders. indirectly affect their business interest. competition and to maintain among the members the spirit of friendship, unity and cooperation. Ex-Parte Motion For Issuance of Cease and Desist Order,AnnexBand C Id.Annex B dAnexC In reCRAND ALLIANCE OF BUSINESS LEADERS ASSOCIATION,INC Page 2 of7 SEC-CDO Case No.11-14-014 To acquire through donations, or grants or any conveyance permitted by To work for the advancement of the general welfare of the business law, financial support or materials relevant to the realization of the effective implementation of socio-economic projects specially (sic in the leaders through the adherence to responsible citizenship, particularly in the field of entrepreneurship and economic enterprises. To do and perfom all other acts and deeds for the accomplishment of the objectives of the-association. foregoing purposes. Edano Street, Barangay 9, Lucena City. Records of the Commission show that the principal office of GABAI is located at 28 Section 5d of the Securities Regulation Code SRC Commission launched an investigation into the operations of GABAI pursuant to its power to "regulate, investigate or supervise the activities of persons to ensure complianceas provided in According to the factual antecedents as presented by the EIPD in its Ex-Parte Motion, the the Mayor of the City of Lucena, Roderick Alcala, stated that the public should exercise extreme caution before they invest their hard-earned money in relation to investments schemes dated 27 October 2014 entitled Lucena dads warn public against investment schemewherein promising high returns. The article featured GABAI as a high-yielding investment scheme and illustrated the mechanics for investors to profit through a minimum investment of Three Hundred and Fifty Pesos (Php350.00 and a maximum of Thirty Five Thousand Pesos Php35,000.00 The maximum investment yields Fifteen Thousand Pesos (Php15,000.00) every week as long as the principal remains with GABAI The EIPD attached a photocopy of a newspaper article from the Philippine Daily Inquirer conduct a surveillance operation on the GABAI principal office as well as to gather more information about the GABAI investment scheme. The EIPD Investigative Team (Team headed to Lucena City on 06 November 2014 to early as 2010 but only gained notoriety within the recent months. According to them GABAI is SLMCBased on the reporis gathered by CA Alcala and his staff from several investors of allegedly operating under the umbrella of the Southern Luzon Multipurpose Cooperative GABAI.the scheme consists of the following steps Alcala CA Alcalaand his staffthe Team discovered that GABAI started its operations as Through an interview with the City Administrator of Lucena City, Mr. Anacleto C Republic Act No.87992000 Id., Annex "A 4 Id, Annex "C id., AnnexD SEC-CDO Case No. 11-14-014 Page 3 of 7 In reGRAND ALLIANCE OF BUSINESS LEADERS ASSOCIATION,INC 1 GABAI gives the investor the option to invest from Three Hundred Fifty Pesos (Php350.00) to Thirty Five Thousand Pesos (Php35,000.00) per day. Upon payment of the investment option chosen, a passbook is issued to the investor with a hand written record of the latter's investment. 3.Every week, the investor would then earn 40% return on his investment.Hence, an investment of Thirty Five Thousand Pesos (Php35,000. would yield Fifteen Thousand Pesos(Phpl5,000 4. Further,the investment with GABAI is categorized into accounts equivalent to points even vchicles, redeemable also with GABAI.e.g. Three Hundred Fifty Pesos which are convertible to goods ranging from food items,furniture and appliances and Php350.00=One1account=One1point President of GABAI, and Mr. Renato Naynes, an investor of GABAI, in a local television show concurrent head of the Public Information Office of Lucena City. called Pag-usapan Natinhosted by Mr.Arnel Avila,the Executive Assistant of the Mayor and The Team was also provided a copy of a television interview of Mr. Luzardo Lucido the public. Instead, Mr.Lucido said that GABAI is only into normal merchandising.Mr. Pesos Php28,000.00. Mr.Naynes also mentioned that his transactions are written in a passbook issued by SLMC/GABAI to investors where it is stipulated that investors will receive a 40% Naynes,on the other hand, offered his experienc declared that for the Thirty Five Thousand Pesos (Php35,000.00 which he had put in the SLMC/GABAI for two (2 wecks,he has received 100 points (which he exchanged for 4 sacks rebate or return on investment every week. Mr. Naynes also stated that at the time of the weekly payout,SLMC/GABAI inquires if the investor is withdrawing.pertaining to the principa of riceas part of the Balik TangkilikProgram of SLMC/GABAI,and Twenty Eight Thousand In the said intervicw,Mr. Lucido stated that GABAI is not accepting investments from satisfied investor of SLMC/GABAI and amount put into SLMC/GABAI also took exception to the 40% return on investment mentioned during the above interview and said that the returns may vary in percentage. However, when pressed as to where paid to SLMC/GABAI as investment"and kept pertaining to the said amounts as pay ins.He SLMC/GABAI will be sourcing the amounts to be returned to the investors.Mr.Lucido was Bureau of Internal Revenue (BIR,said that he was not prepared for the influx of funds and is vague.Mr.Lucido, when asked about the compliance of SLMC/GABAI with different government agencies, particularly the Cooperative Development Authority (CDA and the In the same interview,Mr. Lucido took exception to the characterization of the amount Please refer to Footnote 6. Supra, Note 7. Ex-Parte Motionp.3 IdCD of the televised interview conducted by Mr.Arnel Avila in the showPag-usapan Natinwith Mr. Luzardo Lucido and Mr. Renato Naynes SEC-CDO Case No. 11-14-014 Page 4 of 7 In re:GRAND ALLIANCE OF BUSINESS LEADERS ASSOCIATION,INC now doing his best to comply with all the necessary registration and reporting necessary in relation to SLMC's and GABAP's operations.12 present at that time and that there have been no officers present since 05 November 2014. Further, there has been no advice as to when business operations would resume.i3 duty in the principal office of GABAI,they were informed that there were no officers of GABAI When the Team inquired about making possible investments with the security guard on 03 November 2014.The said investors provided the Team with Application Forms for membership to the SLMC and to GABAI5The Kasunduanwith the SLMC,and a document for the Balik-Tangklilik Programl7 of SLMC-GABAI containing the point system for the money for the opportunity to earn 40% return on their investment.18 release of their pay-outs from their investments and that some of them have been waiting since accounts of the investors and the items redeemable. Further, many of the people in line were from ncighboring cities who ventured to the GABAI office with the intention of investing their residential address of Mr. Lucido, observed a considerable number of people waiting in line Upon inquiry with those in line, they found out they were investors of GABAI awaiting the The Team, during their inspection of the principal office of GABAI, which is also the several posters showing items which the investors may redeem from their accumulated accounts. The Team continued their inspection of the premises of GABAI, took photographs of of the Commission issued a Certificate dated 07 February 2012 to the effect that GABAI is not a registered issuer of securities under Section 8 and 12 of the SRC.20 Upon request of the EIPD,the Corporation Governance and Finance Department (CGFD Pursuant to Section 3.1b of the SRC,the term securities"is defined as follows "SEC. 3. Definition of Terms. commercial enterprise or profit-making venture and evidenced by a certificate contract,instrument, whcther written or electronic in character.It includes 3.1.Securities are shares, participation or interests in a corporation or in a XXX 1Ex-Parte Motionp.3,par.7. IdAnnex H Id.AnnexD + id. Annex T 20Id.Annex 12 Ibid.for Supra,Note 12 5 idAnnex Id.AnnexG 4d.Annex E SEC-CDO Case No.11-14-014 Page 5 of 7 n re GRAND ALLIANCE OF BUSINESS LEADERS ASSOCIATION,INC sharing agreement, certificates of deposit for a future subscription; b Investment contracts, certificates of interest or participation in a profit XXX Implementing Rules and Regulations of the SRC in this wise In this connection,an investment contract has been defined in Rule 3.lG of the to expect profits primarily from the efforts of others. "G.An investment contract means a contract, transaction or scheme (collectively "contract"whereby a person invests his money in a common enterprise and is led 1. An investment contract is presumed to exist whenever a person seeks to use the money or proper of others onthepromiseofprofits. 2.A common enterprise is deemed created when two 2 or more investors pool their resources, creating a common enterprise, even if the promoter receives nothing more than a broker's commission." Commission, In the case of "Power Homes Unlimited Corporation v. Securities and Exchange 3 2 the Supreme Court held that an investment contract in our jurisdiction must be profits,(4 primarily from efforts of others in order to be considered as a security properly proved to be 1 an investment of money,2in a common enterprise,3with expectation of subject to the registration under and regulation of the SEC. the above-mentioned elements. Firstly, the investors entered into an agreement with GABAl that investors will receive 40% rebate or return on investment. The relations between the membership to GABAI and the payment of the amount corresponding to the mermber's which involves investment of money. The investors are then given an option as to the amount they want to invest with GABAI ranging from Three Hundred Fifty Pesos (Php350.00 to Thirty Five Thousand Pesos (Php35,000.00) with a promise of a 40% return on their investment every week as long as the principal amount of investment remains with GABAI. There is a weekly pay-out of profits which the investors claim in the GABAI principal office.22 From the television intervicw with Mr. Naynes,he stated that the passbook issued by GABAI to those who give a investors and GABAI recognize that mutual obligations arose for the parties concerned after the investment,proving the existenee of a contract, transaction or scheme to satisfy the first element. paid-in amountnot only contains a record of the paid-in amount but a stipulation to the effect The above circumstances surrounding the operations of GABAI show the presence of all the show Pag-usapan Natinwith Mr. Luzardo Lucido and Mr. Renato Naynes. 2G.R.No.164182,26 February 2008 22 Annex AandDof the Ex-Partc Morion and CD of the televised interview conducted by Mr.Arnel Avila in SEC-CDO Case No. 11-14-014 In re: GRAND ALLIANCE OF BUSINESS LEADERS ASSOCIATION,INC Page 6 of deposited by the investors are pooled together under the control of GABAI, specifically for the expansion and promotion of the corporation to attract new investors. Secondly, there is investment in a common enterprise as all the amounts that are invested with GABAI, werepromised a return of investment ranging from 20%-40% thereof as is apparent from a the television interview with Mr.Naynes,a satisfied investor, b interviews conducted by the EIPD with the investors waiting in line at the GABAI principal office for their weekly pay-out,and c reports gathered by CA Alcala and his staff. Thirdly, as to the element of expectation of profits, the investors, for the amounts investment. The investors merely have to deposit with GABAI the amounts they have decided to invest and need not do anything to earn a profit from the investments made, The investors have no participation in the management of their remittances and deposits. GABAI without the investors having to participate in the business operations after making their Lastly, with respect to the fourth element, the profits arise solely from the efforts of to by the investors are investment contracts which are therefore securities required to be registered with SEC. Accordingly, the foregoing are indications that the investment scheme of GABAI agreed or sold to the public in order to afford the latter protection from investing in worthless securities as is provided in Section 8 of the said law.23 The SRC is explicit that securities must be registered with the SEC before being offered representatives, salesmen, agents and any and all persons and entities claiming and acting for and further engaging in the business of selling securities until the respondent has complied with the GRAND ALLIANCE OF BUSINESS LEADERS ASSOCIATION,INC.is engaged in the business of selling securities without the proper registration issued by this Commission in in THE respondent's behalf,are hereby ordered to immediately CEASE and DESIST24 from requirements of law and its implementing rules and regulations. violation Section 8 of the SRC, the respondent their respective officers directors WHEREFORE, premises considered, there being a prima facie evidence that respondent 23 Sec.8-Requirements of Registration of Securities.8.1. Securities shall not be sold or offered for sale or distribution within the Philippines, without a registration statement duly filed with and approved by the Commission. x x x" (emphasis ours) 24 SRC Section 64. Cease and Desist Order.64.1.The Commission, after proper investigation or verification motu proprio, or upon verified complaint by any aggrieved party,may issue a cease and desist order without the investors or is otherwise likely to causc grave or irreparable injury or prejudice to the investing public. necessity of a prior hearing if in its judgment the act or practice, unless restrained, will operate as a fraud on In Te GRAND ALLIANCE OF BUSINESS LEADERS ASSOCIATION,INC SEC-CDO Case No.11-14-014 Page7of7 information and appropriate action. Let the Cooperative Development Authority be furnished a copy of this Decision for branches, if any, of GABAI, published in a newspaper of general circulation and posted in the Commission's internet website. Further, let copies of this Order be posted at the entrance of the main office and/or Commission, the parties subject of this Cease and Desist Order may file a motion for the lifting thereof within five (5) days from receipt hereof, otherwise the same shall be made permanent. known as the Securities Regulation Code and Section 10-3 of the 2006 Rules of Procedure of the In accordance with the provisions of Section 64.3 of Republic Act 8799, otherwise FAIL NOT UNDER PENALTY OF LAW SO ORDERED. Mandaluyong City,20 November 2014 TERESITA J.HERBOSA Chairperson MANUEL HUBERTO B.GAITE Commissioner ANTONIETA F.IBE Catrnica deana Commissioner EPHYRO LUIS BAMATONG Commissioner AWA BLAS JAMES G.VITERBO Commissioner Official Business