THE MFT Group of Companies (MFT Group), along with its principals, is asking the Securities and Exchange Commission (SEC) to confirm the “automatic lifting” of a cease and desist order (CDO) in connection with loan transactions entered into by shareholders of its limited partner.
In an omnibus motion filed with the SEC on March 8, 2024, MFT Group’s lawyers, cited the SEC’s Enforcement and Investor Protection Department’s (EIPD) failure to file its Comment on time and the SEC En Banc’s failure to resolve the motion with the mandatory 10-day rule under its Rules of Procedure as the basis to declare that the temporary CDO previously issued is now deemed lifted.
The timeline of events stated in the motion shows that the SEC issued the CDO on January 16, 2024, accusing the MFT Group of selling unregistered securities. In response, the company filed a Motion to Lift the CDO on January 23, 2024. The SEC asked the EIPD to comment or oppose by February 13, but it did not respond within the specified deadline.
MFT Group then filed a notice to withdraw their motion to lift on February 8, which was not approved until February 22. The EIPD eventually filed its opposition to lifting the CDO on February 29, or sixteen (16) days past the deadline, without proffering any justification. The SEC in turn had ten (10) days from February 13, or until February 23 to resolve the Motion to Lift CDO with or without EIPD’s comment. It has already been ten (10) days since the automatic lifting of the CDO, so MFT claims there is nothing more to make permanent.
Atty. Estrella Elamparo, MFT Group’s spokesperson explained, “How can the SEC resurrect and even make permanent a long-dead CDO? To do so would be highly anomalous and oppressive to MFT.”
Part of what the CDO restrains is any transaction in the bank accounts of the parties concerned, including their personal bank accounts. In a recent hearing with the Court of Appeals where the SEC was summoned, the SEC admitted it had no authority to freeze bank accounts. The SEC representative merely explained that the CDO is only addressed to MFT and the other respondents—not the banks.
However, in a separate Order, the SEC clarified that the CDO is not just addressed to respondents but to the public—which includes banks. “Verily, the SEC is disregarding its own pronouncements and flouting its own rules,” said Elamparo.
Elamparo also expressed concerns about the SEC’s recent actions, claiming that they would violate the Anti-Graft and Corrupt Practices Act. The lawyer cited Section 3(E) of the law, which considers graft any act by a public official that causes undue injury to a private person or entity via manifest partiality, and which she believes is clear in this case.
“Perhaps it should be made clear that with each day that the bank accounts are frozen with no authority, the various businesses of MFT Group are severely crippled, and individual creditors and employees cannot get paid,” Elamparo pointed out.
“Indeed, if the EIPD is taking up the cudgels for the creditors and wants them to get paid, the CDO produces the exact opposite effect. Because of the bank freeze, none of the creditors are currently being paid.”
The SEC cannot continue to trample its procedural rules and must declare the CDO to be automatically lifted.
