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Probe under way on troubled brokerage

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By Victor V. Saulon, Sub-Editor

THE CAPITAL MARKETS Integrity Corp. (CMIC) has placed R&L Investments, Inc. under involuntary suspension as it continues its probe on the stock brokerage that was reportedly forced to stop operating after an employee allegedly stole stocks from the firm worth more than P700 million.

“CMIC continues its investigation of the issues extant in this case, and has initiated the conduct of special audits of the pertinent books and records of the involved parties and/or trading participants,” CIMC President Daisy P. Arce said in a memorandum addressed to investors and trading participants on Friday.

The suspension order, which is in accordance with Article X, Section 7 of the CIMC Rules, means a ban on the party under probe from exercising its trading right as well as deactivation of its access to the trading system of the Philippine Stock Exchange (PSE).

R&L is also denied access to its account with the Philippine Depository and Trust Corp. and cannot avail of clearing services from the Securities Clearing Corporation of the Philippines.

“Further, all trading participants are requested to promptly inform CMIC of all pending transactions and contracts with R&L, if any. All relevant information and/or inquiries may be sent to info@cmic.com.ph,” said the compliance arm of the PSE.

Separately, the Securities and Exchange Commission (SEC) said it would “closely monitor” the issue as CMIC continues its investigation.

In a statement, the SEC said it was aware of the issue while leaving CMIC to investigate the alleged theft that nearly wiped out the position of R&L.

“The SEC expects CMIC to conduct a thorough investigation to unearth the truth behind the transactions in question, identify all parties involved, and uncover the extent of the damage to the stock brokerage, its clients and the overall market,” the corporate watchdog said in a statement.

It said CMIC acts as the independent audit, surveillance and compliance arm of the stock exchange in line with its mandate to reinforce the confidence of the investing public in capital market institutions.

“The investigation should also provide clarity as to how such transactions could have slipped past multiple control measures. For one, the 2015 SRC Rules requires broker dealers to conduct monthly security examination, count and verification to account for discrepancies,” the SEC said.

As a self-regulatory organization, CMIC enforces Republic Act No. 8799, or the Securities Regulation Code (SRC), and the pertinent rules and regulations. Its powers and functions include the investigation and resolution of violations by trading participants of the securities law as well as trading-related irregularities and unusual trading activities involving issuers.

The SEC said it expects the full rollout of the Name on Central Depository (NoCD) facility of the Philippine Depository & Trust Corp. (PDTC) by the first quarter of 2020 to reinforce the controls and deter similar incidents from occurring in the future.

The NoCD facility allows for the recording of securities at PDTC in the name of individual investors. Most securities at present are recorded in “omnibus accounts” that aggregate the holdings of all investors.

“The creation of sub-accounts under the NoCD arrangement will increase transparency in the trading of securities. It will also give investors a means to monitor movements in their accounts through SMS or email notifications,” the SEC said.

The commission said it was also in talks with PDTC for the creation of a mechanism that will allow the latter to provide monthly reports on a stock brokerage’s position directly to the board of directors.

WEB
Ma. Vivian Yuchengco, a director of the bourse and chairman of the Philippine Association of Securities Brokers and Dealers, Inc., said current investigations are trying to determine the extent of the problem.

“The volume is now about P2 billion-plus selling and this is only P750 million that we’re looking at, so there must be some other people involved,” Ms. Yuchengco said in an interview with ABS-CBN News Channel.

“In R&L, there’s only one employee that’s rogue, but there can be other houses where the same thing is also happening. So we’re checking because they used another broker to sell the shares. So we’re checking all the transactions of that broker to see if it’s only R&L or if there are other brokers involved. That’s why we’re asking all the other brokers to check their books,” she explained.

“The reason for this problem of R&L is they entrusted everything to one person,” she noted.

“You cannot do that in a brokerage.”

Sought for comment, Summit Securities, Inc. President Harry G. Liu said it is the responsibility of those with a stock brokerage to have “organization and control” of their business.

“You need audit — internal, external — you need two signatories. Hindi naman pwedeng isang tao lang (You cannot have just one person) who has all the power,” Mr. Liu said. “Everybody has to follow certain standards.”

He said all aspects of the business should be controlled, while check and balance should be in place, including accounting, internal audit, information technology, backroom operations.

“Then we report to the PSE every month. That should be counter-checked,” he said, adding the report should not be “one and the same — that is standard.”

“Trust is important, but if you start to become lenient, pinapabayaan mo ‘yung kompanya mo, of course, may mangyayari n’yan (you become lax in your company, of course, something will happen). Parang bahay — alam mo naman may magnanakaw, pinapabayaan mong bukas ang pintuan (It’s like your home — when you know there are thieves yet you leave the door open). Of course you are open to mistakes,” he added.

“Something like that is a mistake on the part of the organization of that corporation. That is how I look at it.”

PNB Securities, Inc. President Manuel Antonio G. Lisbona said his firm has “robust safeguards in terms of policies and procedures in place to ensure that our clients are protected.”

“The R&L case is unfortunate, but is not reflective of the PSE nor its trading participants,” Mr. Lisbona said.

“At the very least, in our back office system, we have a ‘maker/checker’ control in place to ensure that no individual can encode, check and approve a transaction. Therefore, there will be several pairs of eyes that will process a transaction. This goes for our parent bank as well.” — with Vincent Mariel P. Galang

The post Probe under way on troubled brokerage appeared first on BusinessWorld.



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Asia Stocks Set For Cautious Start, With Yuan Flat: Markets Wrap

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(Bloomberg) — Asian stocks looked poised for a cautious start to the week as investors mulled China’s latest plans to help its economy counter the impact of the coronavirus outbreak. U.S. equity futures ticked higher.Futures edged lower in Japan and Hong Kong, while Australian shares opened flat after two weeks of gains for global equities. Volumes may be lower than average Monday due to a U.S. holiday; Treasuries won’t trade. China over the weekend unveiled plans for reducing corporate taxes and fees, and letting banks run up more non-performing loans. The head of a hospital in Wuhan, the city at the center of the outbreak, said a turning point has been reached and that new infections are declining, CCTV reported.While investor sentiment improved the past two weeks amid optimism the outbreak may be nearing a peak, new cases outside of China are keeping traders on edge. The head of the International Monetary Fund praised China for its “very aggressive” measures to limit the impact of the disease. Hubei province on Monday reported almost 2,000 new cases and 100 additional deaths.“News on the Covid-19 outbreak will no doubt continue to dominate over the week ahead as investors attempt to assess whether it is being contained or not,” said Shane Oliver, head of investment strategy at AMP Capital Investors Ltd. “Improving global growth and still easy monetary conditions should drive reasonable investment returns through 2020, providing the coronavirus is contained in the next month or so.”Meantime, U.S. equities on Friday eked out gains as data showed retail sales rose for a fourth straight month, underscoring steady consumer spending. Treasuries ended the week with the 10-year yield at 1.58%. American equity and bond markets are closed Monday.Here are some key events coming up:Japan’s economy probably took a hit in the fourth quarter from the sales tax hike and disruptions by typhoons. Consensus is for GDP to contract 3.8% on an annualized quarterly basis, compared with a 1.8% gain in the prior period. That’s due Monday.Earnings season rolls on with results from companies including: BHP Group, Glencore Plc, HSBC Holdings Plc, Walmart Inc. and Deere & Co.U.S. celebrates Presidents’ Day on Monday, with financial markets shut.Minutes of the most recent Federal Reserve meeting are published on Wednesday.Indonesia is expected to cut interest rates on Thursday, following emerging-market peers from Brazil to South Africa which have lowered borrowing costs already this year.These are the main moves in markets:StocksFutures on the S&P 500 added 0.2% as of 8:05 a.m. in Tokyo. The index rose 0.2% on Friday.Futures on Japan’s Nikkei 225 dipped 0.3%.Hang Seng futures slid 0.6%.Australia’s S&P/ASX 200 Index rose 0.1%.CurrenciesThe yen was flat at 109.81 per dollar.The offshore yuan was little changed at 6.9897 per dollar.The Australian dollar rose 0.1% to 67.20 U.S. cents.The euro bought $1.0838, up 0.1%.BondsThe yield on 10-year Treasuries slid three basis points to 1.58% on Friday.Australia’s 10-year yield rose about one basis point to 1.06%.CommoditiesWest Texas Intermediate crude rose 0.2% to $52.15 a barrel.Gold slipped 0.2% to $1,581.30 an ounce.To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.netTo contact the editor responsible for this story: Christopher Anstey at canstey@bloomberg.netFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.



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What’s open (and closed) on Presidents’ Day 2020?

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Presidents’ Day is one of those holidays that falls into a gray area. Some businesses are closed, some are a bit more loose with the hours they expect workers to be at their desks, and others ignore it altogether.

Different states even call it by different names, often honoring different occupants of the Oval Office.

One thing is certain: It’s the first big shopping holiday of the year. Not sure which stores and offices will be open or closed on Presidents’ Day 2019? We’ve got the details and a few informational nuggets about the holiday.

What is Presidents’ Day?

Established in 1885 to honor George Washington, Presidents’ Day is a floating holiday that can take place anywhere from Feb. 15 to Feb. 21. It falls on the third Monday of February.

The day was originally referred to as Washington’s Birthday (a now-ironic name, since the first president was born on Feb. 22), and is still called that in Illinois, Iowa, Massachusetts, Michigan, Louisiana, and New York. Virginia calls it George Washington Day. Five other states call it some offshoot of Washington and Lincoln’s Birthday. And Alabama, for some reason, calls it George Washington/Thomas Jefferson Birthday, despite the fact that Jefferson wasn’t born until April 13.

Are banks open on Presidents’ Day?

Because Presidents’ Day is a federal holiday, most banks will be closed. A major exception to this is TD Bank, which will be open normal business hours.

ATM machines, of course, will still be available for you to get cash or make deposits into your accounts at other banks.

Will there be any mail delivery on Presidents’ Day?

Not from the U.S. Postal Service. That government division will be closed, but UPS and FedEx will both be open, meaning you can expect package delivery as usual for the most part. FedEx Express might have modified service. Check with the company before sending your packages.

Is the stock market open on Presidents’ Day?

The New York Stock Exchange, Nasdaq, and bond markets are all closed on Presidents’ Day and will reopen on Tuesday, Feb. 18.

Are government offices open on Presidents’ Day?

City, county, state, and federal offices are generally closed. Some states also have limited closings on Feb. 12, Lincoln’s birthday.

Which stores are closed on Presidents’ Day?

Presidents’ Day is one of the first big retail events of the year. DealNews says consumers can expect to see savings of up to 70% on computers and up to 60% off for mattresses. Home goods and appliances are also being offered at steep discounts and winter clothing will generally be on clearance.

Pretty much every retailer—from Target to Walmart to Home Depot—will be open on Presidents’ Day and actively trying to woo consumers into the store. Similarly, big grocery chains, such as Harris Teeter, Kroger and Whole Foods, as well as restaurants are largely open. 

More must-read stories from Fortune:

Why China is still so susceptible to disease outbreaks
The rich own stocks, the middle class own homes. How betting it all on real estate is a wealth gap problem
14,000 recalled baby carriers could drop infants on ground
—Stock scammers are using coronavirus to dupe investors, SEC warns
—WATCH: Why CEOs are pessimistic about 2020 business outlook

Subscribe to Fortune’s Bull Sheet for no-nonsense finance news and analysis daily.



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Global economic policy direction hinges on China

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THE BROAD POLICY direction for many of the world’s central banks and governments now hinges on one question: how will the Chinese government respond to the economic shock caused by the coronavirus?

The Communist Party’s elite Politburo has urged the nation to meet its economic targets this year, an imperative that could shake the government’s recent reluctance to fire up large-scale stimulus.

If it translates into an all-out loosening of monetary policy and a ramp up in government spending, key trading partners that have been slammed by the hit to exports, supply chains, commodities and tourism may see short-term pain followed by a rapid snap back.

The economic shock is expected to dominate discussions at this week’s meeting of finance ministers and central bankers at a Group of 20 summit in Riyadh, Saudi Arabia. International Monetary Fund Managing Director Kristalina Georgieva on Friday suggested there may be a need for “synchronized or, even better, coordinated measures to protect the world economy.”

Much depends on which levers China pulls. Near-term options include further cuts to central bank funding rates and more tax relief to hard-hit sectors as well as flush liquidity for the financial system. The emphasis for now remains on not over-doing it, though there are signs the resolve is softening.

The People’s Bank of China could further cut the proportion of deposits banks must hold as reserves. Local governments are being allowed to speed up bond sales to fund infrastructure like highways and health facilities.

Economists from Goldman Sachs Group, Inc. to UBS Group AG and BNP Paribas SA see more easing steps ahead.

Real gross domestic product is now forecast to grow 5.8% this year, according to the median result in a Bloomberg survey, down from 5.9% last month. That would be the weakest in three decades.

The unknown is whether officials will really relax their rigid clampdown on borrowing in an economy where total debt is heading toward 300% of national output, making financial stability a political priority.

“The key for China’s trading partners is not so much the composition of China’s stimulus but, rather, that the stimulus is tailored to reflect the features of the shock.” said Nathan Sheets, a former Fed official who is now chief economist for PGIM Fixed Income.

China’s factories are vital links in the supply chains for multinational companies. Hubei province, an industrial powerhouse with an economy the size of Sweden’s, remains in lockdown while a mix of curbs on factory production and travel remain in place elsewhere too, complicating the task of getting the economy back up to speed.

CHINA EFFECT
HSBC Bank Plc economists led by Janet Henry estimate the hit to tourism revenue will be the biggest drag on Asia. They also highlight China’s role at the center of the global supply chain for electronics will delay a nascent recovery after a prolonged slump.

The Asia-focused lender has cut its 2020 global GDP forecast to 2.3% from 2.5% on the back of the China effect.

Analysis by Tom Orlik at Bloomberg Economics shows that Australia, South Korea, Japan, Singapore, Hong Kong and Thailand are among the most exposed in the region while Brazil, Germany and South Africa are high up the list of global vulnerability.

President Xi Jinping has stressed the hit to growth will be short term and has used opportunities like a half hour phone call with Malaysia’s Prime Minister Mahathir Mohamad to assure the fallout will be contained.

One worry: Because China is experiencing a supply side shock that’s upended production and distribution, a conventional stimulus such as lower interest rates or higher public spending may not be enough to turn things around, according to former IMF chief economist Olivier Blanchard.

“The effects on the rest of the world are likely to be mostly through the disruption of supply chains, and the effect on firms outside of China,” Mr. Blanchard said. “Much more so than the effect through lower exports to China, because of lower growth in China.”

Governments across Asia are already gearing up to respond.

Koichi Hamada, an adviser to Japanese Prime Minister Shinzo Abe, said more fiscal stimulus will be needed if the fall out worsens.

Singapore is poised to roll out extra spending, Malaysia will announce stimulus next month, while Indonesia plans faster spending.

Globally, policy makers including the IMF’s Georgieva Federal Reserve Chairman Jerome Powell say they are closely watching the virus fallout. Among emerging markets, Thailand, Malaysia and the Philippines have already cut their benchmarks and others may follow.

Which is why there’s so much focus on how China responds.

“I would guess the global policy response will be 3/4 on Beijing and 1/4 by the rest of the world,” said Gene Ma, head of China research at the Institute of International Finance. — Bloomberg



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