RGS WORLD MARKETING CORP.

Securities and Exchange Commission COMMISSION EN BANC Republic of the Philippines Department of Finance IN THE MATTER OF: RGS WORLD MARKETING CORP. SEC CD0 Case No. 02-22-082 (EIPD), ENFORCEMENT AND INVESTOR PROTECTION DEPARTMENT Movant. X -X CEASE AND DESIST ORDER agents and any and all persons, conduit entities and subsidiaries claiming and acting for and in its behalf, from selling, encumbering, conveying, or disposing any of its properties and/or assets without the prior written authority from the Commission. registered with the Securities and Exchange Commission (the immediately cease and desist from engaging in the sale and/or offer of and offerings, as it does not have the license to solicit, accept or take investments, and the securities that it is selling/offering are not "Commission"); and (b) prohibiting directing RGS WORLD MARKETING CORP., its directors, officers, operators, representatives, salesmen, unregistered securities, and to remove or take down their online posts WORLD MARKETING CORP., its directors, officers, operators, representatives, salesmen, agents and any and all persons, conduit entities and subsidiaries claiming and acting for and in its behalf, to Department (EIPD) praying that an order be issued (a) directing RGS (the "Motion") filed by the Enforcement and Investor Protection This resolves the Motion for Issuance of a Cease and Desist Orderi THE PARTIES tasked, among others, to investigate, institute and administrative actions against persons and entities engaged in the sale and/or offer of unregistered securities without the requisite license issued by the Commission.2 The EIPD is one of the Commission's operating departments prosecute 2 Section 2-2(c)(1-c), Rule II, Part I of the 2016 SEC Rules. 1 Filed on 7 February 2022. CERtIFIEd tRuE CoPy or SEC OG THE DOCUMENTS ON RECORD PAGL N PAGES E In the. Of: RGS WORLD MARKETING CORP. SEC CD0 Case No. 02-22-082 Cease and Desist Order Page 2 of 12 laws, having been issued a Certificate of Incorporation on 10 December at the 2/F Bargain Square Building Cor. San Juan-Gonzaga Street, Barangay WORLD"] is a corporation duly organized and existing under Philippines 2020, with Company Registration No. CS202069716. Its principal office is 12 (Pob) Bacolod City, Negros Occidental. RGS WORLD MARKETING CORP. (hereinafter referred to as "RGS BALICO SALARDA, HENJE NOBLE CUADRA, AND RYAN C LADOING. are RODOLFO GARCIA SALARDA, JR., LEAH PASIS SALARDA, RODELYN The incorporators, stockholders and first directors of RGS WORLD RELEVANT FACTS of RGS WORLD for possible violation of the relevant provisions of Implementing Rules and Regulations (SRC-IRR). received3, alleging that RGS WORLD is engaged in investment-taking activities, the EIPD formally conducted an investigation on the operations Republic Act No. 8799 (the "Securities Regulation Code" or "RCC") and its Acting on the reports, inquiries and complaints that were Name No. 2240745) on 14 October 2020 with the Department of Trade and Industry.4 showed that RGS WORLD is engaged in the sale of unregistered securities WORLD were already soliciting investments from the public through RGS without the requisite license from the Commission. The EIPD alleged that prior to its incorporation in 10 December 2020, the incorporators of RGS ONLINE SHOP/RGS ONLINE MARKETING and RGS Foundation (the "Affiliate Entities") which are entities that were registered (with Business The investigation of the EIPD yielded pieces of evidence which inspection and surveillance operation on the investment-taking activities Negros Occidental and the Western Visayas areas, the EIPD issued a separate Memorandum dated 18 and 25 January 2021 to the SEc Bacolod City Extension Office (SEC BACEO) and the SEC Iloilo City Extension of RGS WORLD.5 Office, respectively, requesting for assistance to conduct an ocular Considering that RGS WORLD is operating in the province of investigation that was conducted, that RGS WORLD is soliciting BACEO on the matter which found, based on the independent On 08 February 2021, the EIPD received the written report of SEC 4 Pars. 10 and 11 of the Motion 5 Annexes "C" and "D" of the Motion 3 Annex "B" of the Motion THE DOUMENTS ON RECORD CERTIFIED TRUE COPY OI SES OGG AGE M Intho of: RGS WORLD MARKETING CORP SEC CDO Case No. 02-22-082 Cease and Desist Order Page 3 of 12 amount of investment and the guaranteed returns, but also photos investments from the public, allegedly to further its product distribution BACEO's report also disclosed that the directors, agents, promoters and] prospective investors to invest in RGS WORLD by advertising not only the showing investors who actually received their pay outs.6 business, and promising investors with guaranteed high returns. The SEC existing investors of RGS WORLD are using their Facebook accounts, as well as the Facebook accounts of the Affiliate Entities, to entice the form of investment contracts consisting of a compensation plan that prospective investors may choose, to wit: concluded that RGS WORLD is selling/offering unregistered securities in Consequent to the conduct of its investigation, the EIPD alleged and Compensation ComPlan D ComPlan B ComPlan A ComPlan C Plan Investment (PhP) Amount of 10,000 20,000 1,000 5,000 80,000 17,500 35,000 Return (PhP) 3,500 Non-monetary 1 sack of rice Frozen goods 11kg of rice 20kg of rice Return referring and/or recruiting more members. returns and benefits by becoming a member of the company by paying corresponding to the ComPlan chosen. Moreover, an existing member- investor may earn additional bonuses, incentives and products by the membership fee which is the required investment amount Prospective investors get to avail of RGS WORLD's guaranteed is soliciting from the public is used in furtherance of its marketing and rice, eggs, the EIPD substantiated its allegation that RGS WORLD is not Entities have no License to Operate (LTO). engaged in a legitimate distribution business by submitting in evidence the FDA Certification dated 18 March 2021 which confirmed that the products claimed to be distributed by RGS WORLD and its Affiliate distribution operations of certain products i.e. soap, liniment, poultry, In relation to the claim of RGS WORLD that the investments that it not received the goods/products promised to them.7 receiving numerous complaints from investors of RGS WORLD who claimed that they have not been paid their guaranteed return, and have During the course of the investigation, the SEC-BACEO started ""), Billy Melgarejo Capague et. al. (Annexes "M", "N", "O", "P",Q""R,ap (S?, anRogelynY O Lavadia and Jared Roy Regodos (Annex "T") " Complaints of Joan Jalandoni (Annex "I"), Robert Faciolan (Annex "J"), Jerald Salvaria et. al (Annex Annex "E" of the Motion THE D CUMENTS ON RECORD AG PAGFS In the matter of: RGS WORLI SEC CD0 Case No. 02-22-082 Cease and Desist Order MARKETING CORP. Page 4 of 12 Sections 8 and 12 of the SRC, and has not been issued a Permit to Sell Securities. confirmed that RGS WORLD has not registered any securities pursuant to by the EIPD confirmed that RGS WORLD is not a registered issuer of mutual funds, exchange traded funds and proprietary/non-proprietary shares or membership certificates and timeshares. Finally, the Certification of the Markets and Securities Regulation Department (MSRD)10 which was also obtained and submitted in evidence by the EIPD while RGS WORLD was registered as a corporation on 10 December 2020, it has not been issued a secondary license as a Lending Company, Broker and/or Dealer of Securities, Dealer in Government Securities, Investment Adviser of an Investment Company, Investment House and Transfer Agent. The Certification of the Corporate Governance and Finance Department (CGFD)9 on the other hand, which was submitted in evidence Registration and Monitoring Department (CRMD)8, which confirmed that The EIPD also secured the relevant Certification from the Company of the investing public. sell and/offer securities, which were also unregistered, that the EIPD came to this Commission seeking the issuance of a CDO for the protection It is on the basis of RGS WORLD's lack of the required licenses to ISSUE Whether the issuance of a cease and desist order against RGS WORLD is Warranted based on the findings and evidence presented by the EIPD. RULING The Commission finds the Motion meritorious. provides that it has no authority to solicit or accept investments from the public, to wit: RGS WORLD as stated in its Articles of Incorporation, specifically At the outset, the Commission notes that the primary purpose of supplements, cosmetics, beauty products and any related food and wellness products through wholesale or retail within and outside of the Philippines. "To engage in business of selling, marketing, promotion, distribution of food or non-food products or commodities, food * Annex "U" of the Motion. * Annex "W" of the Motion 10 Annex "V" of the Motion CERTIFIED TRUE COPY OI SEC OC THE DO UMENTS ON RECORD PAGE 8 N PAGF In the matter of: RGS WORLD MARKETING CORP. SEC CDO Case No. 02-22-082 Cease and Desist Order Page 5 of 12 take investments/placements from the public neither shall it issue investment contracts." (Emphasis supplied) Provided that the corporation shall not solicit, accept or also of the relevant provisions of the SRC and its IRR. establish that RGS WORLD is selling and/or offering unregistered requisite license from the Commission, in violation not only of its AoI but substantial evidence, the Commission holds that the EIPD was able to securities in the form of investment contracts to the public without the After carefully considering the Motion which was supported by follows: Relative thereto, Section 3 of the SRC defines "securities" as "SEC. 3. Definition of Terms. or electronic in character. It includes: 3.1. "Securities" are shares, participation or interests in a and evidenced by a certificate, contract, instrument, whether written corporation or in a commercial enterprise or profit-making venture X X X subscription;" (Emphasis supplied) profit sharing agreement, certificates of deposit for a future (b) Investment contracts, certificates of interest or participation in a follows: Moreover, an "investment contract" is defined in the SRC-IRR as promise of profits. whenever a person seeks to use the money or property of others on the efforts of others. An investment contract is presumed to exist (collectively "contract") whereby a person invests his money in a common enterprise and is led to expect profits primarily from the An investment contract means a contract, transaction or scheme even if the promoter receives nothing more than a broker's investors "pool" their resources, creating a common enterprise, commission."11 (Emphasis supplied) A common enterprise is deemed created when two (2) or more registered with the Commission in the form of an approved Registration be sold or offered for sale within the Philippines if the same are not Statement and a Permit to Offer/Sell issued in favor of the applicant, to Wit: Section 8.1 of the SRC categorically provides that securities cannot 11 Rule 26.3.5 of the Implementing Rules and Regulations of the SRC. CERTIFIED TRUE COPY OF SE. OG PG THE DO X UMENTS ON RECORD (v EE In the matter of: RGS WORLD MARKETING CORP. SEC CD0 Case No. 02-22-082 Cease and Desist Order Page 6 of 12 (Emphasis and underscoring supplied) approved by the Commission. Prior such sale, information on the securities, in such form and with such substance as the Commission may prescribe, shall be made available to each prospective purchaser. "SEC. 8. Requirement 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 securities that are required to be registered with the Commission for the protection of the investing public, to wit: Commission,12 the Supreme Court ruled that investment contracts are In the case of Power Homes Unlimited v. Securities and Exchange markets depend on the investing public's level of confidence in the system." (Emphasis supplied) cannot protect the investing public from fraudulent securities. The strict regulation of securities is founded on the premise that the capital must be registered with public respondent SEC, otherwise the SEC "As an investment contract that is security under R.A. No. 8799, it a profit through the efforts of the promoter or of someone other than themselves.14 money in a common enterprise with the expectation that they would earn scheme whereby a person (1) makes an investment of money, (2) in a solely from the efforts of others. Investment contracts have been used and adopted in various situations where individuals were led to invest common enterprise, (3) with the expectation of profits, (4) to be derived American origin. It traces its roots from the US Supreme Court case Securities and Exchange Commission v. W.J. Howey Co.13 where the Court stated that an investment contract is a transaction, contract, or The concept of an investment contract in the Philippines is of control over his or her funds and submits their control to another for the common enterprise; (3) with expectation of profits, (4) primarily from efforts of others. Under this definition, whenever an investor relinquishes Commission,15 where the Supreme Court ruled that an investment Commission, must be proved to be (1) an investment of money; (2) in a used in Power Homes Unlimited Corporation v. Securities and Exchange contract in our jurisdiction, to be a security subject to regulation by the The concept of an investment contract was thereafter adopted and 13 328 U.S. 293, 66 S. Ct. 1100, 90 L. Ed. 1244, 163 A.L.R. 1043 (1946). to be solely through the efforts of another party, Rule 26.3 of the 2015 IRR of the SRC-replaced the qualifier with "primarily", acknowledging that an investment contract may still be present where the individual who placed the money exerted a small amount of effort in an attempt to earn the profits. 15 G.R. No. 164182, 26 February 2008. 14 Ibid. Although the definition as stated in the Howey Case qualified that the earning of profit was expected 12 Note 24, Supra. ERTIFIED TRUE COPY O THE D INAT 'TS ON RECORD M In the matter of: RGS WORLD MARKETING CORP. SEC CD0 Case No. 02-22-082 Cease and Desist Order Page 7 of 12 purpose of deriving profits from them, he or she is in fact investing in a security.16 because it has no license to carry out the same. and so holds, that RGS WORLD is unlawfully engaged in the sale and/or offer of unregistered securities in the form of investment contract Applying the foregoing to the instant case, this Commission finds, the ComPlans that they paid for. availed of i.e. P1,000 for ComPlan A, P5,000 for ComPlan B, the complaints received by the EIPD which showed that member-investors were claiming the guaranteed returns for required amounts corresponding to the ComPlan that were P10,000 for ComPlan C, and P20,000 for ComPlan D. In this case, the actual investment of money was substantiated by First, RGS WORLD required its investors to invest the distribution business which, in reality, does not exist. Second, The EIPD was able to show that the investment scheme of RGS WORLD involves the pooling of the resources existing investors. This is the common enterprise that is being sustained by the investments received by RGS WORLD from the public, although the same is masked by a product consisting of the moneys of its investors which are actually utilized to satisfy and pay the guaranteed returns of its to 300% of the investment, plus products and bonuses. Third, RGS WORLD's investors expect to receive a guaranteed monthly return in an amount ranging from 250% Finally, RGS WORLD's investors need not do anything except to entrust their money to the former, whose directors, them their guaranteed return. officers, agents and promoters operate the business and give operations are being published online through the social media in the form of investment contracts considering that its business platforms. RGS WORLD's investment scheme involves public offering of securities Moreover, the evidence presented by the EIPD also shows that 2015 IRR of the SRC as follows: Public offering of securities is defined under Rule 3.1.17 of the SEC OC 16 Investment Co. Institute v. Camp, 274 F. Supp. 624 (D. D.C. 1967). THE I CERTIFIED TRUT COPY Of M N RECORD In the matter of: RGS WORLD MARKETING CORP. SEC CD0 Case No. 02-22-082 Cease and Desist Order Page 8 of 12 shall be presumed to be a public offering: presentation of securities for sale through any of the following modes "3.1.17. Public offering is any offering of securities to the public or to anyone, whether solicited or unsolicited. Any solicitation or X X X 3.1.17.3 Advertisement or announcement in radio, television, communication;"17 (Emphasis supplied) communication telephone, electronic technology communications, or any other information forms of is offering compensation plans publicly through its official website and social media platforms, i.e., Facebook, to potential investors without prior registration. Here, the evidence submitted by the EIPD shows that RGS WORLD the SRC provides, thus: Relative to a valid issuance of a CDO, Section 64 of investors or is otherwise likely to cause grave or irreparable injury or prejudice to the investing public." (Emphasis supplied) "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 necessity of a prior hearing if in its judgment the act or practice, unless restrained, will operate as a fraud on requisites that must be complied with for a cease and desist order can be validly issued: Under the afore-quoted provision, there are two (2) essential 1 There must be a conduct of a proper investigation or verification; and 2 There must be a finding that the act or practice, unless investing public.18 restrained, will operate as a fraud on investors or is otherwise likely to cause grave or irreparable injury or prejudice to the gathered and submitted in support of its Motion showing the unauthorized investment taking activities of RGS WORLD. conducted a proper investigation as evidenced by the various documents Anent the first requisite, the records disclose that the EIPD July 20, 2006. 18 Securities and Exchange Commission vs. Performance Foreign Exchan 17 Rule 3.1.17 of the Implementing Rules and Regulations of the SRC. e Corporation, G.R. No. 154131 TRTTIEF 1. THE DOCUMEN TS ON REGORD In the matter of: RGS WORLD MARKETING CORP SEC CDO Case No. 02-22-082 Cease and Desist Order Page 9 of 12 WORLD employed fraud when its directors, representatives and promoters made it appear to the public that it is investment plans are registered with the Commission and that it is authorized to sell, offer and deal with securities. The second requisite is likewise present considering that RGS officers,agents, held that fraud is a generic term that covers any act calculated to deceive, thus: In People of the Philippines vs. Mateo, et al.19, the Supreme Court conduct, by false or misleading allegations, or by concealment of that which should have been disclosed which deceives or is intended to deceive another so that he shall act upon it to his legal injury." (Emphasis supplied) truth and includes all surprise, trick, cunning, dissembling and any unfair way by which another is cheated. On the other hand, deceit is the false representation of a matter of fact, whether by words or "Fraud, in its general sense, is deemed to comprise anything involving a breach of legal or equitable duty, trust, or confidence justly reposed, resulting in damage to another, or by which an undue and unconscientious advantage is taken of another. It is a generic term embracing all multifarious means which human ingenuity can devise, and which are resorted to by one individual to secure an advantage over another by false suggestions or by suppression of calculated to deceive, including all acts, omissions, and concealment grave or irreparable injury to the investing public, thus: after a finding of a violation of the SRC that will likely defraud or cause the Supreme Court emphasized the need for a prompt issuance of a CDO selling/offering unregistered securities operates as a fraud to the public prejudice to the investing public.20 This finds support in the case of Securities and Exchange Commission vs: CJH Development Corp.21 where which, if unrestrained, will likely cause grave or irreparable injury or Moreover, this Commission holds that the act of RGS WORLD in is obliged to protect. provision, as any delay in the restraint of acts that yield such results can only generate further injury to the public that the SEc from a verified complaint from an aggrieved party. A prior hearing is also not required whenever the Commission finds it appropriate to issue a cease and desist order that aims to curtail fraud or grave or irreparable injury to investors. There is good reason for this issued by the SEC motu proprio, it being unnecessary that it results "The law is clear on the point that a cease and desist order may be 20 Section 64 of the' Securities Regulation Code. 21 (G.R. No. 210316, November 28, 2016) 19 G.R. No. 210612, October 9, 2017 GERTIEIED TRUE COPY OI SEC OG THE D UMENTS ON RECORD I In the matter of: RGS WORLD MARKETING CORP SEC CDO CaSe No.02-22 Cease and Desist Order Page 10 of 12 2 (Emphasis supplied) The act of selling unregistered securities would necessarily approved by the SEC and that prior to such sale, information on the securities, in such form and with such substance as the SEC may prescribe, shall be made available to each prospective buyer." by making it appear that respondents have authority to deal on such securities. Section 8.1 of the SRC clearly states that securities shall not be sold or offered for sale or distribution within the Philippines without a registration statement duly filed with and operate as a fraud on investors as it deceives the investing public until the requisite registration statement is duly filed with and approved by the Commission. offer and/or sale of securities in the form of investment contracts or any and any and all persons, conduit entities and subsidiaries claiming and acting for and in its behalf, are hereby ordered to IMMEDIATELY CEASE AND DESIST from engaging in the unlawful/unauthorized solicitation, others of the same nature, as discussed in this Cease and Desist Order. RYAN C LADOING, officers, operators, representatives, salesmen, agents CORP., its directors namely RODOLFO GARCIA SALARDA, JR., LEAH PASIS SALARDA, RODELYN BALICO SALARDA, HENJE NOBLE CUADRA, AND WHEREFORE, premises considered, RGS WORLD MARKETING to act as solicitors, information providers, salesmen, agents, brokers, Desist Order. The Commission will institute the appropriate administrative and criminal action against any persons or entities found dealers or the like for and in their behalf its behalf, are likewise directed to CEASE their internet presence relating to the transactions and investment scheme covered by this Cease and officers, operators, representatives, salesmen, agents and any and all persons, conduit entities and subsidiaries claiming and acting for and, in BALICO SALARDA, HENJE NOBLE CUADRA, AND RYAN C LADOING, RODOLFO GARCIA SALARDA, JR., LEAH PASIS SALARDA, RODELYN Further, RGS WORLD MARKETING CORP., its directors namely herein may have interest, claim or participation, whether directly or subsidiaries claiming and acting for and in its behalf from transacting any business involving funds in its depository banks, and from transferring, or personal, including bank deposits, if any, of which the named persons disposing, or conveying in any manner, any and all assets, properties, real CUADRA, AND RYAN C. LADOING, officers, operators, representatives, salesmen, agents and any and all persons, conduit entities and MARKETING CORP., its directors namely RODOLFO GARCIA SALARDA, JR., LEAH PASIS SALARDA, RODELYN BALICO SALARDA, HENJE NOBLE Finally, the Commission hereby PROHIBITS RGS WORLD THE DOCUMENTS ON RECORD CERTIFIED TRUE COPY OT 0 YC In the matter of: RGS WORLD MARKETING CORP. SEC CDO Case No. 02-22-082 Cease and Desist Order Page 11 of 12 indirectly, under their custody, to ensure the preservation of the assets of the investors LADOING, (b) cause the posting of this Order in the Commission's Rules of Procedure of the SEC. copy of this Order to RGS WORLD MARKETING CORP., its directors namely RODOLFO GARCIA SALARDA, JR., LEAH PASIS SALARDA, website, and (c) the publication of the same in a newspaper of general circulation as provided for under Section 4-2, Rule IV, Part I of the 2016 RODELYN BALICO SALARDA, HENJE NOBLE CUADRA, AND RYAN C. The EIPD of the Commission is hereby DIRECTED to (a) serve a DAYS from receipt of this Cease and Desist Order. report, by way of pleading, to the Commission En Banc WITHIN TEN (10) The EIPD is FURTHER DIRECTED to submit a formal compliance appropriate action. Information and Communications Technology Department of this Commission, the Bangko Sentral ng Pilipinas, the Department of Trade and Industry, the National Privacy Commission and the Department of Information and Communications Technology for their information and and Monitoring Department, Market and Securities Regulation Department, Corporate Governance and Finance Department and the Let a copy of this Order be furnished to the Company Registration receipt of this Order. Respondent may file a verified Motion to Lift the CDO to the Commission En Banc thru the Office of the General Counsel, within five (5) days from Part II, Rule IV, Section 4-3 of the 2016 Rules of Procedure of the SEC, the In accordance with the provisions of Section 64.3 of the SRC and FAIL NOT UNDER PENALTY OF LAW. SO ORDERED. Pasay City, Philippines; 1 March 2022. MM EMILIO B. AQUINO Chairberson SE( OG CERtIFIFd tRuF CoPY oF UMENt'S ON RECORD In the matter of: RGS WORLD MARKETING CORP. SEC CDO Case No. 02-22-082 Cease and Desist Order Page 12 of 12 X EPHYRO LUIS B. AMATONG Commissioner JAVEY PAUL D. FRANCISCO Commissioner KEWM Commissioner I LESTER K.LEE KARLO|S BELLO Commis$ioner SE OG PGE THE DOCUMENTS ON RECORD CERTIFIED TRUE COPY OF M PAGES B