R&L Investments, one of the oldest brokerages in the Philippines, apparently put too much trust in one of its employees. Either that, or was extremely lax in its internal auditing processes. The brokerage was forced to shutter its doors November 11 after 50 years of doing business, due to the revelation that millions of dollars had been embezzled by a worker who needed to cover his extreme gambling habit. R&L’s stock position has now been almost completely eroded.
Marlon Moron stole over $13.87 million worth of client stock held by the company across an eight-year period. Securities investigators are now digging deeper to find out how extensive the damage may actually be. They believe that Moron’s actions may have also affected other brokerages and expect to learn that millions more have gone missing.
The Philippine Daily Inquirer points out that the company has already filed a suit against Moron, adding that he has been taken into custody. A statement from R&L indicates that the firm is working with its customers to “determine how Mr. Moron was able to intentionally and deliberately deceive our company, its auditors, and other regulators for such an extended period of time,” adding, “At present, our priority is to dialogue and collaborate with the clients affected by Mr. Moron’s fraudulent activities, as well as to coordinate closely with the Philippine Stock Exchange and its regulatory organizations.”
Given the extensive embezzlement, it’s difficult to understand how the company could have passed an audit at the end of last year. However, that is apparently the case, since Capital Markets Integrity Corp. (CMIC), which operates as a watchdog for the Philippine Stock Exchange, indicates that audit firm KL Siy & Associates gave the company a positive review of its financial statements last year.
The Securities and Exchange Commission (SEC) isn’t pleased with how things have developed. It is now watching CMIC’s investigation and may take additional action. The SEC said in a statement last Thursday after the theft was uncovered, “The investigation should also provide clarity as to how such transactions could have slipped past multiple control measures.” The 2015 Securities Regulation Code requires broker-dealers to carry out security reviews each month in order to provide proper oversight and look for any accounting anomalies.
Moron reportedly figured out how to transfer shares of the stock inventory into a private account and then sell them on his own. It isn’t known how he spent the money or how much he sold the shares for. R&L, which is now managed by the children of the firm’s founder following his passing in 2017, has acknowledged the theft and said that it would sell off assets to try to cover all losses.
