The Securities and Exchange Commission has revoked the certificate of incorporation of Dual Fuel Petroleum Corp. and imposed a PHP2 million penalty after finding the company illegally solicited investments from the public.
In an order, the SEC said Dual Fuel was never authorized to offer investment contracts, noting that its Articles of Incorporation only allowed it to establish, operate, manage, and maintain gas stations, as well as engage in franchising.
“ It is prohibited from soliciting investments from the public and issuing investment contracts,” the regulator said.
The SEC’s Enforcement and Investor Protection Department found that Dual Fuel had been offering unregistered investment contracts through a scheme tied to Legends Petroleum Corporation, a franchising company. Under the arrangement, the public was enticed to become franchise co-owners for a minimum investment of PHP500,000, with the promise of quarterly profits over a 20-year period.
Authorities said the company offered 280 franchise co-owner slots covering eight gasoline stations.
The SEC said the setup bore the hallmarks of a Ponzi scheme, where funds from new investors are used to pay supposed returns to earlier participants instead of being generated through legitimate business operations.
In its order, the SEC said Dual Fuel’s actions went beyond the powers granted under its corporate purpose, making the activity an ultra vires act and a serious misrepresentation.
“Considering that nowhere is it stated in its primary purpose that Dual Fuel Petroleum is authorized to engage in the selling or offering for sale of securities to the public…the activity of [the company] of selling or offering for sale of investments is considered an ultra vires act and therefore constitutes serious misrepresentation,” the order stated.
The latest enforcement action underscores the SEC’s continuing crackdown on entities that lure the public with promises of high returns despite lacking the authority to sell securities or solicit investments.