DAVAO CITY — The Securities and Exchange Commission (SEC) has revoked the corporate registration of Wellcons Unlimited Systems, Inc. for employing a “double-your-money” scheme to illegally solicit investments from the public.
In an order dated July 5, the SEC Enforcement and Investor Protection Department (EIPD) found that Wellcons has been publicly offering and selling securities without the necessary secondary license from the Commission.
In doing so, Wellcons committed an ultra vires act under Section 44 of Republic Act No. 11232, otherwise known as the Revised Corporation Code of the Philippines.
The company’s activities also constituted serious misrepresentation as to what it can do, to the great prejudice of or damage to the general public, a ground for the revocation of a corporation’s certificate of registration under Presidential Decree No. 902-A, according to the order.
Just before the order was issued, the Davao City Anti-Scam Unit (ASU) padlocked the office of the company in Matina Crossing, McArthur Highway after the SEC ordered that its operations be stopped.
Accompanied by personnel of the city’s Business Bureau, the ASU closed down the office of Wellcons after the city government received a copy of the cease and desist order from the SEC-Davao Extension Office (SEC-DEO).
The SEC-DEO earlier verified that the company was also operating in the city as well in other areas within its jurisdiction.
Wellcons’ investment scheme involves securities, particularly an investment contract, whereby a person invests his money in a common enterprise and is led to expect profits primarily from the efforts of others, according to the EIPD.
As a form of security, investment contracts must be registered with the SEC before they can be sold or offered within the Philippines, pursuant to Section 8 of Republic Act No. 8799, or the Securities Regulation Code (SRC).
While Wellcons is a duly registered corporation with the SEC, it has never secured a secondary license from the Commission to operate as a broker/dealer of securities, nor is it a registered issuer of any securities.
“Considering that nowhere is it stated in the primary purpose clause of Wellcons in its Articles of Incorporation that it is authorized to engage in the selling or offering for sale of securities to the public, coupled with the fact that it does not have the necessary Permit to Offer and Sell Securities, the activities of Wellcons of selling or offering for sale securities in the form investment contracts is considered an ultra vires act and therefore constitute serious misrepresentation,” the order read.
The EIPD further noted that Wellcons’ double-your-money scheme through its Pangkabuhayan Program resembles a Ponzi scheme, where the profits or payouts taken from incoming investors are paid to existing or earlier investors.
“[I]n a nutshell, [Wellcons’ scheme is] encapsulated by the saying ‘robbing Peter to pay Paul’– considering that it does not have any underlying legitimate business where it could source its promised return on investments to its investors,” according to the order.
“Wherefore, for violation of Section 44 of the Revised Corporation Code of the Philippines (RCC or R.A. 11232) in relation to Sections 8.1, 28.1 and 26.1 of the Securities Regulation Code (SRC), Section 6 of P.D. 902-A and Section 179(j) of the RCC and Section 5.1(m) of the SRC, the Certificate of Incorporation/the registration of Wellcons Unlimited Systems, Inc. as a corporation is hereby REVOKED.” ###