SEC Admin Case No. 05-10-117 First Asia Client Depository Services, Inc.

Republic of the Philippines

Department of Finance Securities and Exchange Commission

SEC Bldg., EDSA Greenhills, Mandaluyong City

IN THE MATTER OF:

FIRST ASIA CLIENT DEPOSITORY SERVICES, INC. For: Revocation of Corporate SEC Admin Case No. 05-10-117

Registration ENFORCEMENT AND PROSECUTION DEPARTMENT,

Petitioner.

Wat.b DECISION

PLIr WaPDT For consideration is the instant Petition for Revocation of Corporate Registration

brevity) dated 26 May 20101 filed by petitioner Enforcement and Prosecution Department C`EPD," for brevity) of the Commission. ("Petition," for brevity) of First Asia Client Depository Services, Inc. ("First Asia," for

Presidential Decree No. 902-A (`PD 902-A," for brevity), as amended, for fraud in the procurement of its certificate of registration consisting of use of fictitious addresses for its incorporators. The Petition is anchored on First Asia's alleged violation of Section 6(I)(1) of

UP bYm Petition, Summons and Order in a newspaper of general circulation and for posting thereof on the SEC website. In an Order dated 31 May 2010, the Commission ordered the publication of the

On 07 July 2010, the EPD submitted its Compliance with the Order for publication.

To date, First Asia has not filed its Answer or any responsive pleading in the instant case.

N Compliance and Enforcement Department ('CED'3, hence documents pertaining to the case refer to the EPD by its original name. 2 At the time the email complaint was fited, the Enforcement and Prosecution Department was known as the I Filed on even date.

In the Matter of First Asia Client Depository Services, Inc. SEC Admin Case No. 05-10-117

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FACTS OF THE CASE:

First Asia is a stock corporation registered with the Commission since 15 March 2006 under SEC Reg. No. CS200604053.

The names, nationalities and addresses of the incorporators listed in its Articies of Incorporation are as follows:

Name Nationality Address

Hebron Tagle Filipino Purok 5, Upper Bicutan, Taguig City

Jim Orian Allan Toble Alma Conde Filipino Filipino Filipino Kagawad St." Batasan Hills, Quezon Sinagtala St., Batasan Hills, Quezon City Kelayan St., Talayan, Quezon City. City

Priscilo Tanilon Filipino Giloctog, Barili, Cebu City

The instant Petition arose from an email dated 31 March 2008 by a certain Mr. Ray McEihinney (`McElhinney," for brevity) addressed to the EPD requesting an investigation into the alleged boiler room activities of a _corporation named Goodwin Capital Management Corporation ('Goodwin," for brevity).3

McElhinney, a resident of Dubai, United Arab Emirates, claimed that he was "hard sold" to buy into two US companies, namely Global Media Productions, Inc. and Saviour Energy Corporation for a total of US$82,900 by a certain George Spencer of Goodwin. Initially, McElhinney did not have any probiems with his investments since the value of the stocks at the time was increasing. Subsequently, McElhinney received a letter from Spencer informing him that the investment portfolios of Goodwin would be handled by Sovereign Global Trading, a company based in Japan, and iost touch with Spencer ever since. Sometime later, he was contacted by a certain Paul Lauretta of Bayside Equity, persuading him to sell his 16,000 shares in the two companies for US$15-17 each share which he only bought for US$2.80 a share. He grew suspicious when Lauretta (and several other callers) asked him to deposit US$40,000 in a trust account by way of security because Goodwin had not yet transferred the stock certificates in his name.

3 Records, pp. 75-76. A Id.

SEC Admin Case No. 05-10 In the Matter of First Asia Client Depository Services, Inc. Page 3 of 8

that Goodwin was using the following address for mailing: In another email dated 17 June 2008,5 McElhinney informed the EPD that he found

Suite 605 G/Floor Island Plaza Salcedo First Asia Client Depository Services, Inc. 101 I.P. Leviste St., Salcedo Village, Makati City

Acting on the email, EPD formed an investigating team to investigate First Asia.

Asia at 118 Perea Street, Legaspi Village, Makati City for the purpose of conducting a surveillance and ocular inspection of the activities and premises of the company. On 08 August 2008, the investigating team proceeded to the principal office of First

investigating team: The following is excerpted from the field investigation reporti of the EPD

"Upon the arrival at the destination, we noticed that the building name at Building). We proceeded to the reception area and asked the guard on duty if First Asia is one of the occupants of the building. The guard said that no such company occupied the building. 118 Perea Street is not Business Center but LTA (Lorenza A. Arroyo

XX

We then proceeded to the other room that does not have a company Xxx Ms. Sonia Carmelo, the one in-charge at that time positively identified six (6) months and she does not have any information about the name. As we went inside, we noticed that the small room was further divided into several cubicles, each of which has two (2) telephone lines. telephoned a certain Atty. Jose Angelito Bulao to verify that information. First Asia as one of the former occupants of one of the cubicles. She then She said that according to Atty. Bulao, First Asia's contract was only for company after the contract had lapsed."

explained that First Asia did not actually occupy the premises. Instead the correspondence. She receives all the letters and then she calls First Asia to pick it up. There was no actual business operation that took place. The When the business expands and needs bigger space for its operation, the address of the building was merely utilized for First Asia's business company did not even meet their (sic) client there. She further explained that that is what the company does, i.e., to accommodate small and newly organized companies and allow its address to be used as a company address in exchanae for the so-called "monthiy rental fees" When asked how the business of First Asia operates, Ms. Carmelo

6 Id., pp. 63-65. S Records, p. 66.

In the Matter of First Asia Client Depository Services, Inc. Page 4 of 8 SEC Admin Case No.05-1

address. xxx" company terminates the lease contract and looks for its official business

Information Sheet (`GIS') for the years 2007, 2008, 2009 and in its 2008 and 2009 Audited Financial Statements (`AFS", for brevity). The principal office address is the same one used by First Asia in its General

First Asia.9 In connection with the said investigation, the team also personally served Articles of Incorporation and the 2009 GIS. Notices Requiring Appearance at an Examination ('Notices' dated 01 August 2008, upon each of the directors/incorporators at their respective addresses as appearing in the The investigating team conducted several fieid investigations into the activities of

Hebron Tagle, Jim Orian and Allan Toble.1 The investigating team then procured the relevant barangay certifications. Notices were sent again by registered mail, but these were not served due to insufficient addresses of the incorporators/directors.11 This can be However, the notices were not served for failure to locate the exact addresses of

summarized, to wit:

A SUMMARY OF THE RESULTS OF THE RESENDING OF NOTICES

Name Nationality Address Certification Barangay Registered Mail Notices via

Hebron Tagle Jim Orian Alian Toble Priscilo Tanilon Aima Conde Filipino Filipino Filipino Filipino Filipino Kagawad St. Batasan Hills, Kelayan Purok"5, Upper Taguig City Quezon City Sinagtala St., Batasan Hills, Quezon City Quezon City Giloctog, Barili, Cebu City St. Bicutan, Talayan, located . 16 Not a bonafide I located. 14 address 18 resident12 Cannot Cannot No such be be Insufficient Not sent Manila19 Insufficient address1 address13 address Insufficient Party moved to

2 Id., pp. 59-62. 11 Id., pp. 51-54. 19 Id., p. 54. 7 It should be noted that in the Articles of Incorporation, the principal office address declared by First Asia 3 Records, pp. 2-50, and 77-84 12 Id., p. 56. 13 Id., p. 53. 14 Id., p. 58. 16 Id., p. 57. 17 Id., p. 51. 18 Id., p. 55. therein is only "118 Perea St., Legaspi Village, Makati City.' 15 Id., p. 52. 10 Id.

In the Matter of First Asia Client Depository Services, Inc SEC Admin Case No.05

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Likewise, on 05 November 2008, the investigating team conducted surveillance at the address declared by First Asia in its 2007 Audited Financial Statement (i.e., 9532 Akle cor. Kamagong Street, San Antonio Village, Makati City), on the assumption that First Asia merely changed its office address. However, upon verification, the investigating team learned that only Relliance US Corp. was ever a tenant of the building, and that upon

that they were not familiar with the company First Asia.20"Thus, EPD posits that the interview with the employees of RMPG Hospital Supply, another occupant, the iatter stated company did not occupy and was never an occupant of the building.

Based on the foregoing findings, the EPD initiated the instant Petition, alleging that "these fictitious addresses is (sic) evidence alone that there is prima facie proof of misrepresentation amounting to fraud committed by respondent First Asia.n21

ISSUE:

The sole issue for consideration is whether or not the corporate registration of First Asia should be revoked based on fraud in the procurement of its certificate of registration.

RULING:

The petition is impressed with merit.

Section 6(I)(1) of PD 902-A, as amended provides:

the Commission shall possess the following powers: "Section 6. In order to effectively exercise such jurisdiction,

the franchise. or certificate of registration of corporations, partnerships or associations, upon any of the grounds provided by law, including the following: i) To suspend, or revoke, after proper notice and hearing.

1) Fraud in procuring its certificate of registration. XXX

A corporation's Articles of Incorporation is in essence the document defining the

license to exist. A corporation "owes its life to the state, its birth being purely dependent On its will. n22 charter of a corporation and its relations with the State, to which it owes its privilege of

Corporate Law (2010 edition), at 12. 21 Id., p. 6. 20 Records, p. Tayag vs. Benguet Consolidated, Inc. 26 SCRA 242 (1968) at 242, cited in C.L. Villanueva, Philippine

In the Matter of First Asia Client Depository Services, Inc. SEC Admin Case No.05 Page 6 of 8

A corporation's charter "evidences the agreement by which a stockholder consents

liabilities, and also the nature and extent of the powers conferred on the corporation."23 It to be bound. It measures and determines the stockholder's rights, obligations and

cannot be over-emphasized that under the Corporation Code of the Philippines24 c'Code,1 for brevity) the names, nationalities and residences of the incorporators of a corporation are required by law, to be stated in the Articles of Incorporation, and the same is likewise acknowledged before a notary public as the free, voluntary act and deed of the incorporators therein.25 The statement of the residences is required to show that majority of the incorporators are residents of the Philippines as mandated by Section 10 of the Code. The requirement gains more significance in light of the fact that the incorporators, who, as in this case, usually act as the first set of directors, may be held personally liable for certain acts or omissions under Section 3126 of the Code.

The Articles of Incorporation must then be evaluated and approved by the

can be issued its certificate of registration.27 By the same token, the same certificate of Commission to be in accordance with the requirements under the law before a corporation

registration can be suspended or revoked if the Commission determines that there was fraud attendant in the procurement of the same.

Incorporated vs. Nonesio Rivera, SEC Case No. 02-94-4869 (December 26, 1995): As previously ruled by the Commission in the case of Urban Poor of Pasig

"(t)he fraud mentioned in Section 6, paragraph I, subparagraph 1

of a certificate of registration of a corporation, partnership or of P.D. No. 902-A as amended as one of the grounds for revocation

association refers to fraud attendant in the registration of the corporation, partnership, or association and the same must be contained or connected with the documents and/or papers presented to this Commission for the registration of

supplied) the said corporation, partnership or association." (Emphasis

In the instant case, it is clear that among the incorporators, Alma Conde used a fictitious address in the Articies of Incorporation and made it to appear valid and legitimate in order to deceive the Commission into approving the same. This fictitious address is the same one used in the GIS submitted by First Asia for the years 2007, 2008

23 Fletcher Cyc. Corp. (Vol. 7A) $3634, 224, citations omitted. 24 Batas Pambansa, Blg. 68 (1980). 25 See Sections 11, 14 and 15 of the Code. vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad "SECTION 31. Liability of directors, trustees or officers. -- Directors or trustees who willfully and knowingly

therefrom suffered by the corporation, its stockholders or members and other persons.xxx" 27 See Sec. 17 of the Code. their duty as such directors or trustees shall be liable jointly and severally for all damages resulting faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with

SEC Admin Case No. 05 In the Matter of First Asia Client Depository Services, Inc. Page 7 of 8 Y

and 2009, where Alma Conde is also listed as the Vice President.28 Thus, it is undeniable that there is clearly an intent to defraud the Commission by misrepresenting that the address used in the Articles of Incorporation and the subsequent filings of the corporation is valid, when it actually does not exist. As certified by Virginia C. Ongtauco, Barangay

Barangay Talayan."9 Chairman of Barangay Talayan Council, Quezon City, "there is no such address here in

filings with the Commission. In the Articles of Incorporation, the principal office address Likewise, there is an inconsistency in the addresses provided by First Asia in its

provided therein is: "118 Perea Street, Legaspi Village, Makati City." However, in the

Iocated at "9532 Akle cor. Kamagong St. San Antonio Village, Makati City."30 Moreover, "8F LTA Business Center, Perea Street, Legaspi Village, Makati City." In the 2007 Audited Financial Statement submitted by First Asia, it stated that its registered office address is 2007, 2008 and 2009 GIS submitted by First Asia, the principal office address stated is:

upon verification by the EPD, the office addresses indicated therein were not occupied by the company.31

general public. Had the Commission known of such falsities, the registration of First Asia Evidently, there is an apparent intention to defraud the Commission and the

would not have been approved.

"A corporation as known to Philippine jurisprudence is a creature without any existence until it has received the imprimatur of that state acting according to law. It is

suspend or revoke the registration of a corporation for fraud in procuring the same, the logically inconceivable therefore that it will have rights and privileges of a higher priority than that of its creator."3 32 Pursuant to the statutory authority of the Commission to

Commission thus holds that First Asia Client Depository Services, Inc. violated Section 6(D)(1) of PD 902-A and thus, appropriate sanctions must be imposed.

28 Records, pp. 39-40, 47-48, 81-82. Upon verification with SEC i-View, the same address was likewise used 30 Parenthetically, First Asia cites 24 January 2007 as its date of registration in its 2007 and 2008 Audited Financial Statements which is contrary to its date of registration on 15 March 2006. 31 Id., p. 7. 32 See Note 22, supra at 5. 29 Records, p. 36-50 and 77-84. in the 2011 GIS submitted by First Asia to the Commission.

SEC Admin Case No. 05-10-117 In the Matter of First Asia Client Depository Services, Inc. Page 8 of 8

WHEREFORE, premises considered, the Certificate of Registration of FIRST ASIA CLIENT DEPOSITORY SERVICES, INC. (SEC Reg. No. CS200604053) is hereby REVOKED.

Let a copy of this Decision be furnished the Company Registration and Monitoring Department for its implementation and/or any appropriate action.

Information Department and all the Extension Offices of this Commission for dissemination to the general public. Lastly, let copies of this Decision be furnished the Economic Research and

SO ORDERED

Mandaluyong City, 12 January 2012.

TERESITA J. HERBOSA

Chairperson

A

MA. JuAnitA e. cuetO RAUL J. PALABRICA

Commissioner Commissioner

MANUEL O B.GAITE EL Y

Commissioner mmtssioner