SEC halts Scentkoworld’s ‘buy and earn’ scheme

SEC halts Scentkoworld’s ‘buy and earn’ scheme

By THEPHILBIZNEWS STAFF

The Securities and Exchange Commission (SEC) has ordered Scentko World Corporation (Scentkoworld) and Brendahl Cruz Holdings, Inc. (Brendahl) to stop soliciting investments from the public through its “buy and earn” program.

The Commission en banc issued the cease and desist order on September 24 against Scentkoworld, its purported parent (company) Brendahl, officers, directors, representatives, salesmen, agents and any and all persons claiming and acting for and in their behalf.

Scentkoworld and Brendahl were further enjoined from transacting business involving the funds in their depository banks, and from transferring, disposing or conveying in any other manner all related assets for the benefit of investors.

The SEC also directed Scentkoworld and Brendahl to cease their internet presence relating to their unauthorized investment-taking activities.

“The Commission will institute appropriate administrative and criminal action against any person/s or entities found to act as solicitors, information providers, salesmen, agents, brokers, dealers or the like for and in behalf of the subject corporations,” the order read.

Evidence gathered by the SEC Enforcement and Investor Protection Department (EIPD) showed that Scentkoworld and Brendahl have sold and offered for sale securities, in the form of investment contracts, to the public without the necessary license from the Commission.

The SEC also discovered that Scentkoworld misrepresented the incorporation of Brendahl to falsely claim that it secured a secondary license from the Commission.

On social media, the respondent further stated that Brendahl would soon buy a rural bank or could even put up its own bank.

However, certifications issued by the Commission’s Corporate Governance and Finance Department and Markets and Securities Regulation Department showed that Brendahl has not obtained any secondary license.

Under its investment scheme, Scentkoworld entices the public to buy perfume and beauty products in exchange for “cash sales rewards” equivalent to 400 percent of the purchase price.

For instance, a member is promised a return of P20,000 for simply buying a package worth P5,000.

A member may receive the promised return in more or less than 30 days, without having to resell the products, depending on how soon Scentkoworld can recruit new members.

Aside from the cash sales rewards, an existing member may receive a referral fee equivalent to 10 percent of the amount invested by the new member.

The “buy and earn” program of Scentkoworld satisfies all the elements of an investment contract, where there is investment of money in a common enterprise with expectation of profits derived primarily from the efforts of others.

Furthermore, the act of Scentkoworld in allowing its members to discuss, orient and make members of the public familiar with its schemes and inviting them to join through Facebook and YouTube constitutes public offering.

In this light, the SEC noted: “Based on the evidence presented, the selling or the offering for sale of securities whether directly or indirectly, in the form of investment contract, without the necessary license or permit will operate as a fraud on investors or is likely to cause grave or irreparable injury or prejudice to the investing public. Thus, they must be restrained.”

Under Section 8 of Republic Act 8799, or the Securities Regulation Code (SRC), securities such as investment contracts shall not be sold or offered for sale or distribution without a registration statement duly filed and approved by the Commission.

Section 28 of the SRC adds that no person shall engage in the business of buying or selling securities in the Philippines as a broker or dealer, or act as a salesman, or an associated person of any broker or dealer unless registered with the SEC.

Those acting as salesman, broker or agent of Scentkoworld and Brendahl may be prosecuted and held criminally liable.

They may face a maximum fine of PHP5 million or imprisonment of 21 years or both, in accordance with Section 73 of the SRC.

The SEC earlier issued an advisory against Scentkoworld and Brendahl. The public may report to the EIPD any information on the respondents’ operations by calling (02) 818-6047.

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