MANILA, Philippines (UPDATE) - The Securities and Exchange Commission (SEC) on Wednesday filed a complaint against individuals who were allegedly behind the price manipulation of shares of agribusiness firm Calata Corp.
The SEC filed a complaint-affidavit at the Department of Justice (DOJ) against 12 individuals for market manipulation under the Securities Regulation Code.
The 12 were identified as Michael Ilustre Angeles, Carmelo dela Cruz Bunag, Arnold Ryan Daquiz Dellosa, Richie Ramille Isip, Arnold Daquiz Martin, Gary Lincoln Calixtro Taboso, Dennis Philippe Valencia Vistan, Zandro Jose Sigfrido Laki Zulueta, Juvy Ocampo, King Bryan Sulit, Alvin Morfe and Sheryl Sia.
Zulueta was identified as the chief executive officer of Absolute Traders, the financial adviser hired by Calata for its initial public offering (IPO) last May.
Conspiracy in trading
The individuals named in the SEC case allegedly conspired with each other when they traded Calata shares from May 23 to July 2012, "to intentionally and unlawfully raise the price of the said shares artificially through such illegal schemes as 'painting the tape,' 'hype and dump,' and other methods for their own profit."
Shares of Calata skyrocketed 225.85% from its opening price of P7.35 to a peak of P23.95 on June 4. The sharp increase in its share price raised eyebrows, since Calata did not make any significant disclosures that would have raised its share price.
Isip, Taboso, Vistan and Zulueta, who were among those who traded the largest volumes of Calata shares, were found to have been shareholders of Calata before the IPO.
"All the findings reached by the EPD (SEC's enforcement and prosecution department) through its investigation, which are consistent with the reports made by IPSD and CMIC (Capital Markets Integrity Corp.), lead to the conclusion that, respondents engaged in high-frequency, high-volume buying and selling transactions and several EQ-trades for the purpose of artificially raising the price of CAL shares which they eventually dumped on the market at a profit," the SEC said.
The 12 respondents bought 72.41 million shares, which accounted for 32.95% of the volume of Calata shares bought during the period. The SEC noted this was six times Calata's IPO volume of 36.01 million shares.
They also used multiple brokers for trading Calata shares, namely Sunsecurities, Nieves Securities, Tower Securities, HDI Securities, Venture Securities and Unicapital Securities. The highest volume of shares traded during the period were through Nieves Securities and Sunsecurities.
"Undoubtedly, the concerted efforts of respondents, in executing multiple buy transactions through Sun Securities, Nieves Securities and Tower Securities resulted in their purchasing 32.95% of the total volume of shares bought during the subject period, gave the impression to the public that CAL was being heavily traded at the PSE. This naturally induced the public to invest in the same which only served to artificially increase its price. Verily, through this scheme, respondents unlawfully engaged in "painting the tape," the SEC said.
'Hype and dump'
The SEC also found the respondents engaged in "hype and dump". Brokers said the respondents would call them multiple times a day, sometimes as much as 20 times, to post various buy orders with different prices.
"Clearly, this scheme falls under the definition of "hype" or engaging in buying activity at increasingly higher prices for the purpose of raising share prices which is explicitly prohibited under the SRC. After the respondents achieved record peaks for the price of CAL shares, they started dumping their shares to the public by selling them at price levels above their acquisition price," the SEC said.
The respondents were also found to have used EQ trades to distribute the shares they held either pre-IPO or through their "painting the tape" and "hype" buying activities, to give the impression that shares were being traded by different owners.
"Through this scheme, respondents were able to sell 86,988,200 CAL shares or 38.47% of the total shares sold for the subject period and enjoyed a net gain of P216,054,949.65 which provided them with more funds to continue manipulating the price of CAL shares even beyond the subject period, as they did in fact still continued to buy and sell shares afterwards," the SEC said.
Based on the investigation, respondents Angeles, Bunag, Dellosa and Martin were found to lack the financial capacity to fund the million pesos worth of Calata transactions.
For instance, Angeles' address is located in a depressed area populated with informal settlers, while Bunag's address is also in a depressed area in Makati.
On the other hand, the SEC said Isip, Taboso, Vistan and Zulueta, who held several millions of Calata shares pre-IPO, can have the financial capability to fund the trading of shares in the scheme.
"Given their vast experience and knowledge in the stock trading industry, being affiliated with Absolute Traders, respondents Zulueta and Taboso possess the technical know-how to plan and implement the scheme to manipulate the price of CAL shares through 'hype and dump,' 'painting the tape' and other manipulative devices," the SEC said.
The SEC also included "various John and Jane Does" in the criminal complaint "who may have provided the funds for the trades of the respondents and/or aided or abetted in the commission of the crime herein charged, and whose identities and addresses where they may be served with summons and other processes of this honorable office have yet to be identified."