Broker faces 14-years behind bars, P1-M fine for market manipulation
By Keren Concepcion G. Valmonte
THE Pasig City Regional Trial Court Branch 67 has sentenced broker Johnny S. Yap, former president, sales manager, and director of Solar Securities, Inc., to 14 years of imprisonment and was ordered to pay P1 million for a “reprehensible” market manipulation.
The decision came 22 years after the Securities and Exchange Commission filed a complaint involving the trading of the stocks of the then-listed company Best World Resources Corp. (BW).
“The SEC filed a criminal complaint against Yap, who was then the president, sales manager, and director of Solar Securities, after the brokerage was found to have committed wash sale transactions composed of 142 buy and sell orders for stocks of BW during the months of June and October 1999,” the commission said in a statement.
Wash sales operations are sale transactions wherein the buyer and the seller share the same beneficial owner of the stocks. These transactions will not result in changes in beneficial ownership, which is a violation of the Securities Regulation Code’s (SRC) Section 24.1 (a)(1).
The section also prohibits “false or misleading appearance of active trading” in listed securities.
In August 2000, the SEC formed a special operations group to investigate the case. It found that the brokerage has had wash sales transactions.
“Solar Securities’ transactions were wash sales not only because the brokerage was both the buyer and the seller in all the 71 buy order and 71 sell order transactions, but also because the offers and bids were made at very close intervals,” the SEC said.
The court also concluded that the involved transactions did not lead to changes in beneficial ownership.
It further said that as Solar Securities’ compliance officer, Mr. Yap has the responsibility to ensure that the brokerage was compliant with rules and regulations for trading activities. Mr. Yap himself admitted to executing some of the transactions.
The brokerage did not earn or incur commission from the transactions.
At the start of 1999, shares in BW at the Philippine Stock Exchange were being traded for 80 centavos each. These were “thinly and/or inactively traded” for less than one peso each from January 1998 to September 1998.
By May 1999, the trading price of BW stocks was at P6.60 apiece, increasing daily by nine percent.
“Shares in the company steadily increased in that year and by October, BW shares had reached a price of P12.50 each, the same time as when Solar Securities executed its wash sale transactions,” the SEC said.
BW shares continued to rally despite the company incurring losses of P10.84 million in 1999.
“No other conclusion may be reached but that these series of trade transactions were executed with the intention of creating a false or misleading appearance of active trading or misleading appearance with respect to the market of BW shares,” the court ruling said.
An arrest warrant has since been ordered against Mr. Yap.
BusinessWorld has reached out to Solar Securities and Mr. Yap’s counsel for comment.
The case is the SEC’s fifth conviction under the SRC since it was enacted in 2000, with previous convictions involving fraudulent investment scams.
