Not Over Yet

PhilippineBusiness.com.ph
Volume 12 No. 6 – Industry

In July, three months after Pacific Plans filed for rehabilitation at a Makati City Regional Trial Court in April, another firm joined SEC’s list of ailing pre-need companies. Platinum Plans, majority-owned by the Salas family, had its license to sell fixed-value and open-ended educational plans suspended after it ran into liquidity problems. According to the SEC, Platinum Plans had an ARL of P470.1 million in December 2003 as against trust fund assets of P219.9 million, resulting in a trust fund deficiency of P250.2 million.

Asian Diamond Plans, another pre-need firm, is facing criminal raps from the SEC. Unlike CAP and Pacific Plans, the company was charged for committing “fraudulent, deceptive, and manipulative practices” in violation of pre-need rules. The SEC found the company made it appear they complied with the minimum paid-up capital of P100 million. Preliminary investigations showed the company window-dressed its accounts and created fraudulent entries to conceal the deficiency of its paid-up capital.

Nine other firms are also on the SEC’s watch list, but the commission clarifies that not all of these have liquidity problems. These firms are being monitored because they sell open-ended plans, considered to be the bone of contention of the pre-need mess.

The controversy has had an impact on the industry as a whole. While educational plans constitute less than a third of the total number of plans sold, the decline still poses concerns to surviving pre-need firms, which must overcome the crisis of confidence that is slowly creeping into the industry.

Investors in pre-need firms face SEC scrutiny

Manila Bulletin
April 11, 2005
Byline: ANA MARIE MACUJA

Investors buying into pre-need companies should be placed under thorough review by the Securities and Exchange Commission (SEC), an official from the corporate regulator said.

According to an official from the SEC, investors should undergo a background check to make sure they are legitimate and really have the funds to run a business.

The official said this is a loophole that needs to be addressed considering the possibility that there may be individuals or companies that will pose as investors but will actually just drain a companys funds.

The official added this was the case of Asian Diamond, Inc., a financially troubled pre-need firm which allowed the entry of a Singaporean national, Bryan Wee Poh Aun in 2002.

The new investor committed to revive the companys business and infuse the necessary funds to make the company in compliance with the paid-up capital requirement of the Commission.

However the takeover of the management led by the Singaporean national proved to be a wrong move for the company as Asian Diamonds finances were even drained by the new investor, the SEC official said.

In fact, an Oversight Committee earlier formed by the SEC has recommended for the filing of criminal charges against Bryan Wee Poh Aun and other responsible officers of the company.

The failure of Asian Diamond to get another investor and replenish its funds within the required period caused the company to be liquidated. This was the decision made by the Oversight Committee which was later approved by the SEC.

Given these circumstances, the SEC official said the entry of a potential foreign investor into Vantage Pension should be placed under review. “There should be a background check on this foreign investor,” the official said.

“The problem is as long as there is money, we think it is ok already. Then we find out that they are just a shell company. This is one area that the SEC should look into. Sad to say this is one of the weak areas of the current rules. This should be addressed, maybe the Insurance Commission will be the one to handle this. We would make this as one of our inputs to them when they takeover the pre-need industry,” the official added.

Vantage Pension was once an active pre-need firm but decided to suspend its operations in the 1990s. Now the company wants to resume its operations in the light of an investor coming in.

But in order to resume its operations Vantage Pension has to put up P50 million in paid-up capital as required under the New Pre-Need Rules.

The SEC rules provide a P100 million paid-up capital requirement for companies selling three plan types(education, pension and life), P75 million for companies selling two plan types and P50 million for those selling only one plan type.(AMM)