Is the chief investment manager of the Social Security System illegally profiting from his position by trading his own stocks using the very same stockbrokers who manage the portfolio of the state-administered pension fund?
SSS commissioner Jose Garbiel La Viña thinks so, and has filed a complaint against the fund’s executive vice president for investments Rizaldy Capulong and three other officers whom he accused of “serious dishonesty and grave misconduct.”
La Viña — known more prominently as the social media manager of the 2016 election campaign of President Duterte — leveled his accusations against the ranking SSS officials in an interview with the Inquirer, shortly after making his allegations public in a televised appearance on Monday morning over the ABS-CBN News Channel.
Apart from Capulong, included in his complaint filed with the Social Security Commission are equities investment division chief Reginald Candelaria, equities product development head Ernesto Francisco Jr. and chief actuary George Ongkeko Jr.
“The first problem is these three guys have a major role in approving stockbrokers and allocating trades,” La Viña said, explaining that this key role in accrediting stockbrokers for the SSS gave them a large degree of leverage with brokerage houses which were lobbying for the coveted account.
The SSS manages almost P500 billion in assets, accumulated through the mandatory monthly contributions of its 35 million members who are employees in the private sector. As much as 30 percent of reserve fund can be invested in the equities market, subject to strict criteria set by the fund’s investment oversight committee which La Viña chairs.
He explained that the previous SSS administration tried to head off potential abuses by officials in the fund’s investments unit by requiring them to declare all their investments and having these approved by their superiors.
“The former commission tried to control the trading. SSS said you can still trade, but you need to get an endorsement from your immediate supervisor,” La Viña said, explaining that Candelaria and Francisco endorsed each other’s stock purchases, while Capulong approved them.
He noted, however, that these stock market trades — which yielded substantial profits for Candelaria and Francisco — were executed by a broker that was also accredited to handle the SSS’s portfolio.
And more critically, these three officials had a direct hand in allocating trades to the many stockbrokers accredited with the pension fund, thus being able to decide which brokerage would enjoy the commissions from the SSS’ buying and selling of shares on the Philippine Stock Exchange.
“They used an SSS-accredited broker for their own [personal] trades,” he said. “It’s a conflict of interest. And our rules [define] conflict of interest as ‘real or apparent’, on its face.”
La Viña pointed out that one stockbroker had claimed to serve only high net worth individuals and corporate accounts, but were found to have been the conduit for the trades of these SSS officials.
“Tell me, are these high net worth individuals?” he said, adding that they even received coveted allocations for shares of companies in the initial public offering stage, which allowed the officials to make returns of “15 percent in one to two weeks.”
Opportunities for returns like this should have been brought before the SSS so that the members’ funds could have been invested as well, La Viña said. “These opportunities belongs to the SSS. It doesn’t belong to you. You have a duty to present the opportunity to the commission.”
Meanwhile, Ongkeko was in charge of keeping tabs on the SSS’ investment managers, and La Viña said the former failed to provide him with complete records about the trading activities of the key officials.
Ongkeko, he said, was grossly negligent for failing to fulfill this duty.
SSS chair Amado Valdez told the Inquirer that the issue is now being investigated by the Social Security Commission, but assured that none of the members’ funds were jeopardized by the alleged malfeasance.
“We also want to know whether there’s any outside influence involved,” he added.
The Inquirer tried to contact Capulong, but he has yet to reply as of press time.
“He’s a bright guy, and I feel sad,” La Viña said of the SSS’ chief investment officer. “But it’s my job. And I have reports that he engaged in the same thing.” /je
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