Photo credit: Boracay Capital Holdings

It seems like the curtains have fallen on Boracay Capital Holdings Inc., as the Securities and Exchange Commission (SEC) has officially revoked its Certificate of Incorporation. The company, registered in September 2022, is now under fire for allegedly duping investors through unregistered investment contracts, promising high returns and passive income.

The Red Flags

Boracay Capital, operating out of Makati City, presented itself as an investment company involved in real estate and securities. Sounds legit, right? The catch? They weren’t playing by the rules. The SEC's Enforcement and Investor Protection Department (EIPD) started investigating the firm after rumors surfaced about Boracay Capital offering investment opportunities that promised significant returns. The problem? They were offering these so-called opportunities without the proper registration.

In simpler terms: they were selling investments that weren’t approved by the SEC. That’s a big no-no.

A “Show Cause” Moment

After uncovering the unauthorized investment activities, the SEC issued a *Show Cause* order in February 2024, essentially asking Boracay Capital to explain why their business license shouldn’t be pulled. The SEC’s investigation revealed that Boracay Capital had been enticing the public, mostly through social media, to invest in their "high-yielding" schemes. They even went as far as encouraging people to invest a minimum of Php 5 million into stocks, investment funds, and bonds.

Boracay Capital’s Weak Defense

When the SEC gave Boracay Capital a chance to defend itself, the company claimed that their website—where these alleged investment opportunities were being advertised—was "under construction" and that any misleading information was unintentional. But the SEC wasn’t buying it. They found that Boracay Capital’s website was accessible during the investigation and that the company's actions amounted to a clear admission of wrongdoing.

What Went Wrong?

Boracay Capital’s downfall boils down to misrepresentation. They claimed to be an investment company, yet they were offering unregistered securities, which is illegal under the Securities Regulation Code (SRC). By doing so, they were engaging in "ultra vires" acts, meaning they were operating outside the bounds of what they were legally allowed to do.

Not only were they breaking the law by selling unregistered securities, but they were also violating multiple sections of the SRC, including provisions that prohibit fraudulent transactions and selling securities without proper licensing.

The Verdict

The SEC found enough evidence to revoke Boracay Capital's registration for engaging in fraudulent investment activities and misrepresenting their business to the public. Under the SRC and the Revised Corporation Code, companies are only allowed to operate within the purpose stated in their Articles of Incorporation, and Boracay Capital clearly overstepped its bounds.

In a nutshell, the SEC’s decision is a stern warning to other companies: if you're going to sell investment opportunities, make sure you're playing by the rules.

What Now?

For investors who fell into Boracay Capital’s trap, this serves as a reminder to always check if a company is registered with the SEC before investing. As for Boracay Capital, the game is over—at least for now.