SEC Adm. Case No. 09-07-88 D 1st. Cell Pawnshop, Inc.

Securities and Exchange Commission SEC Bldg. EDSA, Greenhills, Mandaluyong City Department of Trade and Industry Republic of the Philippines

In re:

D 1St CELL PMWNSHOP, INC. Registration with Prayer for Issuance SEC Admin. Case No. 09-07-88 (CED Case No. 07-2859) For: Revocation of Corporate of a Cease and Desist Order

Compliance and Enforcement Department, Petitioner.

DECISION

Revocation of Corporate Registration of D 1st Cell Pawnshop, Inc. ("D 1st Cell'?) filed by the Compliance and Enforcement Department' (`CED," for brevity) of the Commission. For consideration of the Commission En Banc is the Petition for

The pertinent facts of the case are narrated below:

Valencia, Quezon City. issued Certificate of Registration No. CS200606027.2 D 1st Cell was organized primarily to engage in the business of loaning money upon the security of personal property such as jewelry, precious stones and other personal property and to act as a commission agent and general merchant.3 Respondent holds office at No. 24 Granada Street, Villa Ortigas II, Barangay D 1st Cell was registered with this Commission on 18 April 2006 and was

Romuald Paredes requesting assistance in verifying whether the activities of respondent are legal.4 In said letter, the subject activity of respondent is its act of soliciting investments from the public and offering to these investors Sometime in January 2007, CED received a facsimile ietter from one

1 Now known as the Enforcement and Prosecution Department. 3 Annex "B", supra. 4 Annex "D", supra. 2 Annex "A" of the Petition.

http://www.sec.gov.ph +(632) 726 09 31 to 39

SEC Admin Case No. 09-07-88, Page 2 of 7 In re: D ist Cell Pawnshop; Inc. Compliance and Enforcement Department, Petitioner

4% monthiy interest on said investments, which is covered by an investment certificate.

solicitation and acceptance of deposits or placement of investments from the issued on 19 October 2007 ordering respondent D ist Cell, its respective officers, directors, representatives, agents and any and all persons, conduit rendered permanent by virtue of an Order dated 10 January 2008. In the same order, D 1st Cell was ordered to file its reply to the instant petition. To this date, D 1st Cell has yet to file its reply. Thus, D 1st Cell is declared as in prima facie evidence that respondent is engaged in the unauthorized offering, entities and subsidiaries claiming and acting for and in behalf of respondent to immediately cease and desist from further offering, soliciting and accepting deposits or placements of investments from the general public. The CDO was default pursuant to the 2006 Rules of Procedure of the Commission.5 public without license to do so. A Cease and Desist Order (`CDO'? was then Petitioner conducted its own investigation and it found that there was a

certificate of registration of D 1st Cell. The issue in this case is whether there is a valid ground to revoke the

way of enumeration, namely: Under the Securities Reguiation Code' ('SRC", 'securities' was defined by

interests in a corporation or in a commercial enterprise or profit-making venture "SEC. 3. Definition of Terms. '-- 3.1. "Securities" are shares, participation or and evidenced by a certificate, contract, instrument, whether written or electronic in character, It includes:

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(b) Investment contracts, certificates of interest or participation in a profit (Emphasis supplied) sharing agreement, certificates of deposit for a future subscription; xxx.'

"shares, participation or interests in a corporation or in a commercial enterprise or The foregoing provision plainly and broadiy defines the term "securities" as

5 Rule III- Commencement of Action

abovestated period, he shall be considered as in default.xxx SEC. 3-12. Effect of Failure to Answer. -- If the respondent. fails to answer the complaint within the

Republic Act No. 8799 (2000)

In re: D ist Cell Pawnshop, Inc. Compliance and Enforcement Department, Petitioner SEC Admin Case No. 09-07-88, Page 3 of 7

written or electronic in character. profit-making venture and eviuenced by a certificate, contract, instrument, whether

There are set criteria for a security to fall under the SRC:

(3) evidenced by a written or electronic certificate, contract or (2) in a corporation, commercial enterprise or profit-making (1) it must be a share, participation or interest; instrument. venture; and

which is defined in the Amended Implementing Rules and Regulations of the SRC as: One of the instruments considered as a security is an investment contract.

person invests his money in a common enterprise and is led to expect profits primarity from the efforts of others.' "a contract, transaction or scheme (coliectively "contract") whereby a

case SEC v. Howey Co., 328 U.S. 293 (1946) where the U.S. Supreme Court defined such term in this manner: Another definition of the term investment contract can be found in the U.s

contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party, it being immaterial whether the shares in the physical assets employed in the enterprise." enterprise are evidenced by fornal certificates or by nominal interests in the "... an investment contract, for purposes of the Securities Act, means a

investment contract, that is, whether the scheme i::volves an investment of money in a common enterprise with profits to come solely from the efforts of others. The case also laid .down the test in determining whether there is an

following advertisement in its website: D 1st Cell offers or solicits investments from the public by posting the

"Investment Options

Minimum of P50,000.00-P200,000

Interest rate- 5% Monthly Agreement (contract signing), Investment certificate, Postdated checks You can be a dealer of our cellphones and accessories Terms negotiable, maximum of 1 year

'Economic Governance Technical Assistance. Draft Commentary on the Securities Regulation Code, p.

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In re: D ist Cell Pawnshop, Inc. Compliance and Enforcement Department, Petitioner SEC Admin Case No. 09-07-88, Page 4 of 7

P300,000-up

Agreement (contract signing), Investment Certificate, Postdated checks Insured by South Sea Surety bond. 10% insurance, premium should be shouldered by the investor 5% monthly You can be a dealer of our cellphones and accessories" Term negotiable, maximum of 1 year

Bulletin9 which reads: Further, D 15t Cell placed a line ad in the 07 January 2007 issue of the Manila

FREE APPLIANCES"10 "D 1st CELL PAWNSHOP We are:open 4 investors earn as high 4% every mo. for min. P50T-300T "insured" more than 50 Branches Nationwide *SOLID INVESTMENT* Pls. call 4146888; 4144888 ioc. .15 0922-5417699- Head Ofc.

on the foflowing discussion. The above scheme falls within the definition of an investment contract based

entices the prospective investors to part with their money issuing postdated checks represent the monthly interest and the fourth represents the principal investment.11 four percent (4%). Four (4) postdated checks would be issued, three of which representing the corresponding interest and the principal investment. For instance, the investor may opt to invest Php50,000.00 for a fixed term of three (3) months six (6) months or twelve (12) months, the investor will receive a monthly interest of First, there is a contract, transaction or scheme. In the instant case, D 1st Cell

interest. D 1st Cell also promises that the money invested to it will be doubled in two years. with their money and give it to D 1st Cell with the expectation of a return in the form of interest. The minimum investment is Php50,000.00 and wilt earn a 4% monthly Second, there is an investment of money. The supposed investors would part

a pooling of investor resources. D 1st Ceil uses its branches in different parts of the country to solicit investments from the investing public. The proceeds of the investments solicited from the public would be used in furtherance of its purpose, money to make profits for itseif and its investors. From this, it can be said that D 1st that is, to provide additional capita! to pay for the pawned cellphones and to open new branches all over the country.i2 In turn, D 1st Cell was supposed to use the Third, there is a common enterprise. From the operation of D 1st Cell , there is

10 Id, Annex "F. 8 Petition, Annex "G. 11 Investigation Report dated 11 April 2007. 12 Id, supra. 9 Id, Annex "E."

In re: D 1st Cell Pawnshop, Inc. Compliance and Enforcement Department, . Petitioner SEC Admin Case No. 09-07-88, Page 5 of 7 Y

Cell is offering merely opportunities to .contribute money, and the success of an investor is dependent on the success of D 1st Cell's business operations.

wouid expect to receive profits. The investors would do nothing except wait for a their investments and the interest yield. others. The investors merely contributed money, and after three months or so they minimum of three months after which they would receive the principal amount of Fourth, the investor is led to participate in the profits based on the efforts of

the Commission before the same can be offered to the public pursuant to Section 813 of the SRC. Otherwise, the issuing corporation, its officers and agents shall be held liable under Section 54 (i) of the SRC, which provides: Since investment contracts are securities, they must first be registered with

hearing, the Commission finds that: (a) There is a violation of this Code, its rules, or its orders; xxx "SEC. 54. Administrative Sanctions. -- 54.1. If, after due notice and

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( Suspension or revocation of any registration for the offering of securities."

8 and 12 of the Securities and Regulation Code4 ('SRC") and is not licensed to offer or issue securities to the public.15 D 1st Cell aiso did not secure the Commission, D 1st Cell is not a registered issuer of securities under Sections Based on the certification issued by the Corporation Finance Department of

exemption from the registration requirements under Section 1o.2 of the SRC.16

the pertinent portion of which reads as follows: Finally, D 1st Cell vioiated Presidential Decree No. 902-A, as amended.

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

13 usEC. 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 approved by .the Commission. Prior to such sale, information on the securities, in such form and with such substance as' the Commission may prescribe, shall be made available to each

14 Republic Act No. 8799 (2000). 15 Petition, Annex "C". 16 Id. prospective purchaser.

In re: D I$t Cell Pawnshop, Inc. Compliance and Enforcement Department, Petitioner SEC Admin Case No. 09-07-88, Pacre 6 of 7

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, the franchise

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is doing to the great prejudice of or damage to the general public; xxx" 2. Serious misrepresentation as to what the corporation can do or

IS: Based on its Articles of Incorporation, the primary purpose of D 1st Cell

"SECOND: A. That the primary purpose of this corporation is

SECURITIES OF PERSONAL PROPERTIES SUCH AS JEWELRY, PRECIOUS STONES AND OTHER PERSONAL PROPERTY AND A COMMISSION AGENT AND GENERAL MERCHANT" TO ENGAGE IN THE BUSINESS OF LOANING MONEY UPON THE

soliciting investments from the public, whici is beyond the scope of its purpose. Such act is also in contravention of the Certificate of Registration of D 1st Celi which clearly states: In reality, however, what D 1st Cell has been doing is offering or

from the Commission such as, but not limited to acting as: broker or dealer in not authorize it to undertake business activities requiring a Secondary License securities, government securities eligible dealer (GSED), investment advisor of an investment company, close-end or open-end investment company, investment house, transfer agent, commodity/financial futures exchange/broker/merchant other government agencies require a license or permit." financing company, pre-need plan issuer, general agent in pre-need plans and time shares/club shares/membership certificates issuers or selling agents hereof. Neither does its Certificate constitute :as permit to undertake activities for which "This Certificate grants juridical personality to the corporation but does

GRANTED. Accordingly, the Certificate of Registration of D 1st Cell Pawnshop, Inc. is REVOKED. WHEREFORE, foregoing premises considered, the instant petition is hereby

Department and the Company Registration and Monitoring Department for their appropriate action. Let a copy of this Decision be furnished the Enforcement and Prosecution

SO ORdERED

Mandaluyong City, 08 July 2010.

In re: D ist Cell Pawnshop, Inc. SEC Admin Case No. 09-07-88, Page 7 of 7 Compliance and Enforcement Department, Petitioner

JFE B: BARIN Chairpersor.

MA. JuAnitA Ct RAUL J. PALABRICA

Commissioner Commissioner

N

MANUEL HUBE Commissioner ERTO B. GAITE ElAdiO M. Jala Comrhissioner

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