In a decision dated April 8, the SEC slapped fines of over P560 million against company president James Beloy, directors, the transfer agent and certain shareholders of Abra, the stock market darling of 2021 before it was suspended in March that year.
The SEC’s most serious penalty was the cancellation of Abra’s registration statement and permit to sell securities—a requirement to remain a publicly-listed entity.
This is expected to trigger the company’s involuntary delisting or removal from the Philippine Stock Exchange (PSE).
The investigation into Abra began in 2021 after significant discrepancies were found in the number of company shares lodged with the Philippine Depository and Trust Corp. (PDTC) compared to those listed on the Philippine Stock Exchange.
PDTC acts as the centralized depository of securities such as stocks. Company shares that are lodged and listed should match for accurate record keeping of their ownership.
When the probe was launched, a total of 258.96 billion Abra shares were lodged on PDTC versus 72.94 billion listed on the PSE.
The SEC’s probe found that 169.05 billion unauthorized shares, covering 474 stock certificates, were issued between 2015 to 2019 and traded on the PSE. At the company’s par value of 1 centavo each, the shares were worth around P1.69 billion.
The jump in liquidity helped fuel a price surge of around 280 percent in the midst of the 2021 penny-stock frenzy.
Bloomberg News earlier reported that Abra’s trades, at one point, accounted for 77 percent of the PSE’s market volume.
Violations centered around Section 26 of the Securities and Regulation Code, which deals with fraud and deceit.
Another violation was Section 61 of the Revised Corporation Code, since the company issued the shares without receiving adequate payment, the SEC said.
In a 22-page decision, the SEC said those found liable were Abra president James Beloy; corporate secretary Amelia G. Beloy; directors Conde Claro C. Venus, Carmelo Rafael D. Tansengco, Premy Ann G. Beloy, and Joel G. Beloy; and former director Belinda T. Gaskell.
The SEC’s Market and Securities Regulation Department (MSRD) determined that Abra’s transfer agent, Asian Transfer & Registry Corp., along with its president Arline B. Adeva, corporate secretary Premy Ann, assistant corporate secretary Joseph M. Acuesta, and treasurer Joel, were culpable for breaching Sections 26 and 52.1 of the SRC, as well as Section 36.4.3.2 of the 2015 implementing rules and regulations of the SRC.
It also named several stockholders of Abra Mining, namely Ferdinand U. Collado, Leila V. Collado, Susan May I. Gacelo, Jubileum Air and Sea Logistics, Inc., and Andrei Vincent Freight Services Corp., liable for violations of Section 26 of the SRC.
The SEC said all officers and directors of Abra, its transfer agent, and the stockholders will be barred from serving as registered persons or in any capacity as employees, officers, or directors of a registered financial intermediary supervised by the SEC for five years.
They are also barred from holding positions as officers, directors, or similar roles in any issuer of registered securities.
James, Premy Ann and Joel are siblings. Amelia is the spouse of the former president Jeremias Beloy, who was in his 80s when he died in 2019 and was replaced by James.
The SEC said the Beloys distanced themselves from the scandal by blaming Jeremias for the fraud since the latter supposedly maintained total control of the corporation’s management until his death.
The accused said the fake stock certificates were not manually signed but generated through an autograph device using an embossed signature plate.
They said Jeremias kept the signature machine and plates in a secured vault, which they could not access.
The SEC rejected the defense of the Beloys, which underscored the critical oversight responsibilities entrusted to company directors and management.
“The board of directors is expected to be more than mere rubber stamps of the corporation and its subordinate departments,” the MSRD said.
“It wields all corporate powers bestowed by the Corporation Code, including the control over its properties and the conduct of its business,” it added.
Not exactly, according to Gerard Lukban former commission secretary of the SEC and columnist InsiderPH.
He said the SEC only canceled the company’s registration statement and permit to sell securities, meaning these can no longer be traded on the exchange. Abra’s stockholders will continue to own shares but these will be difficult to sell or transfer once it is delisted.
The SEC’s next challenge is actually collecting the fines since the accused parties could appeal the decision or argue the money has long changed hands.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
