The Securities and Exchange Commission (SEC) has revoked the license of New Seataoo Corporation and Seataoo Information Technology OPC due to significant violations of securities regulations and misrepresentation of their business operations.

According to the notice posted on SEC’s website dated June 10, 2024, the agency’s Enforcement and Investor Protection Department (EIPD) initiated an investigation into Seataoo following numerous inquiries and complaints from the public in April 2023. The complaints indicated that Seataoo was soliciting and collecting money from individuals under the guise of investments, without the proper registration and license required by law.

According to the SEC, Seataoo operated an investment scheme through its e-commerce platform, which was marketed as a dropshipping service. While it allowed prospective sellers to choose products and set up online stores, the platform itself handled transactions with buyers. The investigation revealed that Seataoo’s model required sellers to upfront the cost of the products they wanted to sell through the platform. This raised concerns as sellers were essentially pre-paying for inventory without guaranteed sales.

Issues with Seataoo's operations

The SEC identified several critical issues with Seataoo’s operations:

1. Unauthorized Solicitation of Investments: Seataoo was found to be engaging in the sale of unregistered securities. The company solicited investments from the public without the necessary registration, violating Section 8 of the Securities Regulation Code. This unauthorized investment solicitation was disguised as an e-commerce business model, leading many to believe they were simply participating in a legitimate dropshipping platform.

SEC. 8. Requirement of Registration of Securities. – 8.1. Securities shall not be sold or offered for sale or distribution within the Philippines, without a registration statement duly filed with and approved by the Commission. Prior to such sale, information on the securities, in such form and with such substance as the Commission may prescribe, shall be made available to each prospective purchaser.
Section 8 of the Republic Act (R.A.) No. 8799 – The Securities Regulation Code

2. Serious Misrepresentation: The SEC charged Seataoo with serious misrepresentation, claiming the company falsely presented its business model. While it advertised itself as an e-commerce and dropshipping platform, its primary activity involved soliciting investments, which misled the public and caused significant financial harm.
3. Violation of Financial Products and Services Consumer Protection Act: Seataoo was also found to be committing investment fraud, a violation of Section 11 of Republic Act No. 11765, also known as the Financial Products and Services Consumer Protection Act. The company’s operations resembled a Ponzi scheme, where returns to earlier investors were paid from the contributions of new investors.

Section 11. Investment Fraud. – It shall be unlawful for any person or persons to commit investment fraud as defined in this Act. Any person who commits investment fraud shall be subject to the penalties under Section 73 of Republic Act No. 8799 and the administrative sanctions under Section 16 of this Act.
- Section 11 of the Republic Act (R.A.) No. 11765 – An Act Affording More Protection to Consumers of Financial Products and Services

3. Engaging in Ultra Vires Acts: The SEC noted that Seataoo’s activities extended beyond what was allowed under its Articles of Incorporation. The company engaged in unauthorized activities by soliciting investments, which were not part of its registered corporate purpose.

Despite being given multiple opportunities to present its business model and submit required documentation, Seataoo failed to provide satisfactory evidence to the SEC. This lack of compliance and transparency further reinforced the decision to revoke the company’s license.

In addition to revoking the company’s license, the SEC also imposed a fine of one million Philippine pesos (PHP 1,000,000.00) for “offering securities to the public without prior registration and license from the commission.” The company’s incorporators and directors were also fined one million Philippine pesos (PHP 1,000,000.00) each.

Source/s:

• Order of Revocation – New Seataoo Corporation / Seataoo Information Technology OPC. Securities and Exchange Commission Philippines. Posted on June 10, 2024. [Web]

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