TVI Express Holidays Philippines, Inc.

XT SEC Building, EDSA, Greenhills, Mandaluyong City Securities and Exchange Commission Republic of the Philippines Department of Finance In the Matter of: PHILIPPINES, INC., TV EXPRESS HOLIDAYS DEPARTMENT, ENFORCEMENT AND PROSECUTION Movant. FOR: Issuance of Cease and Desist SEC-CDO CASE NO. 04-13-011 Order X ORDER Department (EPD) of this Commission against TVI EXPRESS HOLIDAYS PHILIPPINES, INC. (TVI Express). and Desist Order (CDO) dated 8 April 2013 filed by the Enforcement and Prosecution Pending consideration before the Commission is a Motion for Issuance of a Cease and compensation plan package, to the extent permitted by law.,2 SEC Registration No. CS201017609. Its primary purpose is "to engage in an online engines that offers high quality travel and leisure, providing business and training tools, distributorship and network marketing by linking access to various booking and search direct selling business through an automated" marketing system, independent TVI Express was incorporated with the Commission on 27 October 2010' under February 2013, it received a Memorandum from the Cagayan de Oro Extension Office Memorandum came with a Letter from the Office of the City Mayor of Tandag City which stated that TVI Express victimized several persons who are teachers in Tandag (CDO Extension Office) of the Commission containing information that TVI Express is allegedly operating a pyramid scheme in Tandag City, Surigao de Sur.3 In its Motion for Issuance of Cease and Desist Order, the EPD alleged that on 25 The 3 Id. par. 3, Annex "C" (Memorandum of the CDO Extension Office dated 18 February 2013). 2 Id., Annex "A" (Articles of Incorporation of TVI Express). I Motion, par. I. TVI EXPRESS HOLIDAYS PHILIPPINES, INC. SEC-CDO Case No. 04-13-011 ENFORCEMENT AND PROSECUTION DEPARTMENT Page 2 of 9 X- City.4 The Letter from the Office of the City Mayor of Tandag City was likewise accompanied by a Handwritten Statement signed by the eleven (11) teachers. to invest in TVI Express by its promoters, Rey Pedrosa and Dorothea Waje. 6 They were (1) year, they will receive more than USD $10,000.00.7 As a result of which, they promised that, after six months, their investment will double and that, after more than one invested between Php 13,000.00 to Php 66,000.00 in TVI Express.8 The teachers stated that, after a more than a year, they have not received anything from TVI Express and they are demanding the return of their investment. In the Handwritten Statement, the teachers explained that they were encouraged money with TVI Express. Application form that was filled out by Rebecca Banggoy Biol, who is one of the teachers. 10 The Handwritten Statement likewise attached a deposit slip" showing that the to TVI Express' BDO bank account no. 1380361611 which represents an investment of amount of Php 117,600.00 was deposited by Rebecca Banggay Biol on 18 October 2011 The teachers attached to the Handwritten Statement a copy of the Distributor's on the actions taken by the latter and for assistance in collecting the affidavits of the teachers narrating in detail their experience with TVI Express.13 described the experience of the teachers in investing with TVI Express.14. Moreover, it was recommended in the Preliminary Report that an Advisory be issued against TVI received on 20 March 2013 a Preliminary Report from the CDO Extension Office which On 26 February 2013, the EPD requested the CDO Extension Office for an update In response, the EPD -I fd., par. 1o, Annex "T" (Preliminary Report dated 13 March 2013). Id.. par. 5, Annex "E" (Handwritten Statement dated 29 January 2013). 1 Id., Annex "F" (Copy of the Distributor's Application Form). I1 Id., Annex "G" (Deposit Slip ). 4 Id., par. 4, Annex "D" (Mayor's Letter dated 7 February 2013 is in response to SEC Office Order No. I2 Id., par. 21. I3 Id., par. 7. 5. Id.. par. 5, Annex "E" (Handwritten Statement dated 29 January 2013) 9 Id. d Id., Annex "E" (Handwritten Statement dated 29 January 2013) 680, Series of 2012, directing all Extension Offices to coordinate with Local Government Units, law enforcement offices and non-government organizations in collecting and gathering information regarding the occurrence of investment scams in their area of responsibility). SEC-CDO Case No. 04-13-011 TVI EXPRESS HOLIDAYS PHILIPPINES, INC. ENFORCEMENT AND PROSECUTION DEPARTMENT Page 3 of 9 Joint-Affidavitl"of the teachers, including Rebecca Banggay Biol, stating their Express and a further investigation be conducted to support the potential issuance of a Cease and Desist Order. experience with TVI Express. 15 Moreover, the Preliminary Report was accompanied by a In their Joint-Affidavit, the teachers stated the following: having been duly sworn to in accordance with law, hereby depose and say: "We, Rebecca B. Biol, Evelyn R. Berdos, Lilian L. Gabole, Marivic V. Diaz, Yvonne E. Novo, Nelsa E. Bangoy, Susana A. Balubtin and Marivic L. Cabilan, all of legal age, married and residents of Tandag City, Surigao del Sur, after 01. Sometimes [sic] on the month of October 2011, Brgy. Kagawad Rey how to invest in the TVI Express; Pedrosa, Dorothea Waje and Shempee Quinonez introduced themselves as representatives of TVI Express for Mindanao and made a demonstration on 02. During the presentation, they convinced us to invest Php 16,800.00 per share, after six months every share will gain a proceeds [sic] of Php 32,000.00 then, after one year we received 10,000.00 U.S. Dollar [sic]; 03. We are convinced to [sic] invest at said TVI Express in cash and received by to award any amount and they only promised to refund our capital them. After six months we claimed the proceeds of our share, but they failed investment in the event that TVI Express failed to award; 04. After one year, we claimed our again our expected 10,000.00 U.S. dollar [sic] and/or return the capital amount we have invested, but they still fails new investors submitted to TVI Express [sic]; [sic] to award and return, for the reasons [sic] that we have no [sic] recruited +6 Id., Annex "J" (Joint Affidavit). I' d 05. We are [sic] surprised of [sic] the reasons made by them, considering that during their presentation there was no agreement that if we cannot acquire SEC-CDO Case No. 04-13-011 TVI EXPRESS HOLIDAYS PHILIPPINES, INC. ENFORCEMENT AND PROSECUTION DEPARTMENT Page 4 of 9 new investors, the TVI Express will not award the proceeds of the investment [sic]; 06. Despite of [sic] repeated demand [sic] made to [sic] return the capital we have invested, they still fail [sic] and refuse [sic] to return the same; 07. Thus we believed that the amount we have invested to [sic] TVI Express which was received by Brgy. Kagawad Rey Pedrosa, Dorothea Waje and personal use and benefit; Shempee Quinonez were misappropriated and converted to their own 08. We executed this joint affidavit to apprise the proper authorities concerned and Shempee Quinonez. X x x" (underscoring ours.) on the fraudulent act made by Brgy. Kagawad Rey Pedrosa, Dorothea Waje to the effect that TVI Express is not a registered issuer of securities under Sec. 8 and 12 of the Securities Regulation Code (SRC)7 and is not licensed to offer or sell securities to the public. 1: On 6 March 2013, the Corporate Finance Department (CFD) issued a Certificate thousands of Philippine-based individuals. verify that, except for affiant Susana A. Balbutin, all the teachers who executed the Joint. members of TVI Express based on its membership list/database which includes Affidavit, including Rey Pedrosa, Dorothea Waje and Shempee Quinionez, are indeed In the course of the investigation of TVI Express's activities, the EPD was able to Hence, this Motion for Issuance of a Cease and Desist Order. commercial enterprise or profit-making venture and evidenced by a certificate, contract, Securities are "shares, participation or interests in a corporation or in a 18 Motion, par. 9, Annex "H" (CFD's Certification dated 6 March 2013). +9 Id., par. 12, Annex "K" (TVI Express Membership list). :7 Republic Act 8799 (2000) SEC-CDO Case No. 04-13-011 TVI EXPRESS HOLIDAYS PHILIPPINES, INC. ENFORCEMENT AND PROSECUTION DEPARTMENT Page 5 of 9 I instrument, whether written or electronic in character"20 and includes an investment contract. through the filing by the issuer in the main office of the Commission, of a sworn or distribution within the Philippines, without a registration statement duly filed with and that all securities required to be registered under Subsection 8.1 shall be registered information and documents as the Commission shall prescribe. approved by the Commission. In connection therewith, Section 12.1 of the SRC states registration statement with respect to such securities, in such form and containing such Section 8.1 of the SRC provides that securities shall not be sold or offered for sale An "investment contract"" has been defined as follows: led 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 1. An investment is presumed to exist whenever a person seeks to use the money or property of others on the promise of profits. nothing more than a broker's commission. 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 traces its roots from the US Supreme Court case SEC v. W.J. Howey Co. where the Court (1) makes an investment of money, (2) in a common enterprise, (3) with the expectation of profits, (4) to be derived solely from the efforts of others.23 stated that an investment contract is a transaction, contract, or scheme whereby a person The concept of an investment contract in the Philippines is of American origin. It 22 SRC Rule 3(1)(G), Amended Implementing Rules and Regulations (IRR) of the SRC. 23 328 U.S. 293 66 S. Ct. 1100, 90 L. Ed. 1244, 163 A.L.R. 1043 (1946). 20 Section 3.1., SRC. 21 Section 3.1.(b), Id. SEC-CDO Case No. 04-13-011 TVI EXPRESS HOLIDAYS PHILIPPINES, INC., ENFORCEMENT AND PROSECUTION DEPARTMENT Page 6 of 9 come "solely" from the efforts of others should be liberally construed because a literal its flexible reading is in accord with the statutory policy of affording broad protection to the public. Because of this, it is no longer necessary that the expected profit accrue reading of the requirement "solely" would lead to unrealistic results. It reasoned out that solely from the efforts of others. In another U.S. Supreme Court case, it was held that the element that profits must purpose of deriving profits from them, he or she is in fact investing in a security. Philippines, thus, for example, in Power Homes Unlimited Corporation v. Securities and Exchange Commission25 the Philippine Supreme Court stated that an investment contract in our jurisdiction, to be a security subject to regulation by the SEC, must be proved to be (1) an investment of money, (2) in a common enterprise, (3) with expectation of profits, (4) primarily from efforts of others. Under this definition, whenever an investor relinquishes control over his or her funds and submits their control to another for the The concept of an investment contract has since been transported in the the first element, an investment of money occurs when an investor commits money to an enterprise or venture in a manner that subjects himself to financial loss.27 In the instant packages. The teachers paid a purchase price ranging from Php 13,000.00 to Php 66,000.00. In the case of Rebecca Banggoy Biol, her payment to the investment is proven by her copy of the Distributor's Application form as well as the deposit slip case, the teachers entered into an agreement with TVI Express in the latter's investment scheme which involved the use of investment contracts that are marketed as membership on 18 October 2011. showing that the amount of Php 117,600.00 was deposited in TVI Express' BDO account In the case at bar, the four elements of an investment contract are present. As to Several tests have evolved to determine what constitutes "common enterprise" 2" One of these tests is the horizontal commonality approach. Under this test, the determination of whether a transaction satisfies the commonality element of the modified Howey test enterprise is deemed created when two (2) or more investors "pool" their resources. As to the second element, there is a common enterprise. To reiterate, a common 2 SEC v. Glenn W. Turner Enterprises, Inc, 474 F. 2d 476, 414 U.S. 821, 94 (1973). 27 SEC v. International Mining Exchange, Inc., 515 F. Supp. 1062. 28 In the Matter of Octopus Network, Inc., SEC-PED Case No. 98-2220, 22 May 1998. 25 G.R. No. 164182, 26 February 2008 26 Investment Co. Institute v. Camp, 274 F. Supp. 624 (D. D.C. 1967). SEC-CDO Case No. 04-13-011 TVI EXPRESS HOLIDAYS PHILIPPINES, INC., Page 7 of 9 ENFORCEMENT AND PROSECUTION DEPARTMENT involves an inquiry into whether said transaction involves the joint participation of more than one investor in (i) the investment of funds or (ii) the sharing of profits.? teachers in the same enterprise (i.e., TVI Express). The teachers pooled their funds by each paying a purchase price ranging from Php 13,000.00 to Php 66,000.00 to TVI Express. The pooling of their funds was for a common purpose, the operations of TVI Furthermore, joint participation by investors in the same investment enterprise, achieved by pooling the invested funds for a common purpose, is required in order to satisfy the common enterprise element.30 Express. In the case at bar, there is a joint participation by the investment, or participation in earnings resulting from the use of investors' funds. In investment.31 In this case, there was an expectation of profits on the part of the teachers year, from their investments. In fact, they claimed these amounts when they fell due, as court has meant either capital appreciation resulting from the development of the initial such cases, the said investors are "attracted primarily by the prospects of a return on his because they were promised Php 32,000.00 after six (6) months, and $10,000.00 after a promised. As to the third element, there must be an expectation of profits. By profits, the means that a mere lapse of time guaranteed their receipt of profits. Moreover, the teachers did not participate in the operations of TVI Express or the management of their from the efforts of others. In this case, when the teachers invested their money in TVI that they have to recruit new members in order to gain profits. Express, they were promised the return on their investments, without conditions. This money. The teachers expected their profits to arise from the efforts of TVI Express since they believed that their expectation of profits is unconditional until they were informed Lastly, as to the fourth element, there must be the expectation of profits primarily within the Philippines of securities, i.e., investment contracts, as can be gleaned by the without a registration statement duly filed with and approved by the Commission in violation of Sec. 8.1 of the SRC. Joint-Affidavit of the teachers and the deposit slip to TVI Express BDO bank account, Clearly, TVI Express is engaged in the sale or offering for sale or distribution 29 Id., citing 69 Am Jur 2d citing Stenger v. R.H. Love Galleries, Inc. 741 F2d 144. 30 Id., citing Wasnowic v. Chicago Bd. of Trade 352 F Supp 1066. 31 Power Homes Unlimited Corporation v. Securities and Exchange Commission. TVI EXPRESS HOLIDAYS PHILIPPINES, INC. SEC-CDO Case No. 04-13-011 ENFORCEMENT AND PROSECUTION DEPARTMENT Page 8 of 9 if unabated, is likely to cause grave or irreparable injury or prejudice to the investing issuance of the CDO is justified. Express will operate as a fraud on investors or likely to cause grave or irreparable injury. As earlier stated, TVI Express is engaged in the sale of investment contracts to the teachers who were not paid their promised returns. Worse, the reason provided by TVI Express' representatives is that they failed to recruit additional members. This behavior, public on a massive scale considering TVI Express already has a membership in the thousands. Further, the manner in which the teachers were defrauded into investing with TVI Express could be repeated on a wider scale unto unsuspecting investors. Hence, the Consequently, the issuance of the CDO is justified since the act or practice of TVI its officers, directors, agents, representatives, conduits, assigns, and any and all persons IMMEDIATELY CEASE AND DESIST,32 UNDER PAIN OF CONTEMPT, from connection therewith, soliciting, accepting or receiving from others, money for the claiming and acting for and in behalf and under their authority are hereby ordered to further offering, soliciting, or otherwise offering or selling unregistered securities in the form of investment contracts to the public, such as, but not limited to, investment contracts, pooling of funds, investment trusts, or similar forms, and, in purpose of trading in any futures contract. WHEREFORE, premises considered, TVI Express Holidays Philippines, Inc. the entrance of the main office and/or branches, if any, of TVI'Express Holidays and published in a national newspaper of general circulation. serve this Order on the President, General Manager, Corporate Secretary, Treasurer or In- House Counsel of TVI Express Holidays Philippines, Inc., (b) post copies of the Order at Philippines, Inc. Let a copy of this Order be also posted in the Commission's website The Enforcement and Prosecution Department is hereby DIRECTED to: (a) Department, the Corporation Finance Department and the Economic Research and Information Department for their information and appropriate action. Let a copy of this Order be furnished the Company Registration and Monitoring 32 Section 64.1., SRC. The Commission, after proper investigation or verification, motu propio, or upon prior hearing if in its judgment the act or practice, unless restrained, will operate as a fraud on investors or is otherwise likely to cause grave or irreparable injury or prejudice to the investing public. verified complaint by any aggrieved party, may issue a cease and desist order without the necessity of a SEC-CDO Case No. 04-13-011 TVI EXPRESS HOLIDAYS PHILIPPINES, INC.. ENFORCEMENT AND PROSECUTION DEPARTMENT Page 9 of 9 known as the Securities Regulation Code and Sec. 10-3 of the 2006 Rules of Procedure of the Commission, the parties subject of this Cease and Desist Order may file a request for the lifting thereof within five (5) days from receipt hereof. In accordance with the provisions of Sec. 64.3 of Republic Act 8799, otherwise FAIL NOT UNDER PENALTY OF LAW SO ORDERED. Mandaluyong City; 11 July 2013. TERESITA J. HERBOSA* Chairperson MA. UANITA E. C? JETO ANTONIETA F. IBE et Mauan Commissioner Commissioner MANUEL H Commissioner TO B. GAITE ELADIOM: JALA fmissioner *On Official Travel