The Securities and Exchange Commission (SEC) has enjoined Building Our Success Stories Network, Inc. (BOSS Network) from luring investors into a fraudulent investment scheme posing as a multi-level marketing program.
In an order issued on June 18, the Commission directed BOSS Network to immediately cease and desist, under pain of contempt, from further engaging in the sale and/or offering for sale of securities until the requisite registration statement is duly filed with and approved and the corresponding permit to sell is issued.
The SEC further ordered BOSS Network to refrain from transacting any business involving funds in its depository banks, and from transferring, disposing, or conveying in any manner all related assets to forestall grave damage and prejudice to all concerned and to ensure the preservation of the assets for the benefit of the investors.
The cease and desist order covers the corporation’s directors and officers, namely Rommel Q. Tabaniag, Raquel G. Argote, Ramon C. Tabaniag, Jojie O. Servan and Ailyn Marigh F. Lim, as well as representatives, salesmen, agents and all persons claiming and acting for and in their behalf.
The order also extends to 101Upper Class Corporation, which operates the unauthorized investment scheme called BOSS Ultimate Program (BOSS UP) in collaboration with BOSS Network.
Appropriate administrative and criminal actions await those acting as solicitors, information providers, salesmen, agents, brokers or dealers for BOSS Network and 101Upper Class, the SEC warned.
The Commission issued the cease and desist order after finding BOSS Network to have solicited investments from the public under a scheme promoted in social networking sites as a multi-level marketing program for personal care products.
Under the scheme, BOSS Network offers packages priced from P1,500 to P382,500. The starting package includes two perfume bottles and two bars of whitening soap, while the top-tier bundle comprises 510 units for each product.
The packages come with Universal Bonus Pool shares that entitle member-investors to earn P2,250 to P707,625 in addition to bonuses they are promised for recruiting more people into the scheme.
Member-investors also earn points from buying the packages offered and from recruiting people. The points supposedly correspond to incentives such as all-expenses-paid trips abroad, as well as luxury timepieces and cars.
The scheme constitutes the sale and/or offer of securities in the form of investment contracts, whereby a person invests money in a common enterprise and is led to expect profits primarily from the efforts of others, according to the SEC.
“It is clear that BOSS Network is soliciting investments from the public in the guise of operating a multi-level marketing business, with a promise of guaranteed high return of investment,” the Commission noted.
Section 8 of Republic Act No. 8799, or The Securities Regulation Code, provides that 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 SEC.
BOSS Network registered as a corporation in March 2018 primarily “to engage in direct selling of goods and merchandise to consumers.” However, its certificate of incorporation explicitly provided that “the corporation shall not solicit, accept or take investments/ placements from the public neither shall it issue investment contracts.”
Accordingly, BOSS Network must first register the investment contracts or other securities it intends to offer and obtain the corresponding permit to sell such securities from the SEC, in accordance with The Securities Regulation Code.
Certifications from the concerned departments of the Commission showed BOSS Network has not secured the requisite license to sell or offer for sale investment contracts and other securities.
In the case of SEC vs. CJH Development Corp., the Supreme Court ruled that the act of selling unregistered securities would necessarily operate as a fraud on investors as it deceives the investing public by making it appear that the company has authority to deal on such securities.
“Thus, in the absence of a secondary license, BOSS Network should be restrained from offering or selling securities in the form of investment contracts,” the Commission concluded.
In the course of its investigation, the SEC Enforcement and Investor Protection Department (EIPD) further found that two of BOSS Network’s incorporators submitted and used invalid Tax Identification Numbers.
The Commission also took note how BOSS Network’s business model partakes of the nature of a Ponzi scheme, an investment fraud where the purported returns to existing investors are sourced from the contribution of new investors.
The articles of incorporation of BOSS Network reveals the corporation’s capitalization amounted to P1.5 million only while member-investors are guaranteed monthly returns ranging from 50% to 87% of the amount invested.
“Clearly, BOSS Network’s business model and capitalization cannot sustain the promised returns on investment, especially if no new investors will come in,” the SEC noted.
“Payouts for investors are financed from investments of new recruits/investors. This is a fraudulent scheme which will likely cause grave or irreparable injury or prejudice to the investing public.” (PRESS RELEASE FROM SEC)
Categories: Press Release