The Sannguniang Bayan of Ipil had passed an ordinance banning the entry of Ponzi-like schemes and other unregulated investments in the municipality.
Authored by Councilor Alberto Alcoriza, Jr., the ordinance will eventually bar all investment-taking schemes that either promising high rates of return or offering pre-need like operations.
The measure was enacted, according to Alcoriza, following “the KAPA controversy.”
KAPA is the shorthand for Kabus Padatuon, officially registered with the Securities and Exchange Commission (SEC) as a religious organization but is taking in “donations” from its members who in turn are promised to receive 30 percent interest or “love gifts” every month.
The measure, the councilor said, seeks to protect the people from Ponzi-like schemes and other similar operations.
According to Wikipedia, Ponzi scheme is “a fraudulent investing scam promising high rates of return with little risk to investors.” The Ponzi scheme is named after a swindler named Charles Ponzi, who developed an elaborate scheme defrauding its members in 1919.
In principle, Ponzi scheme was paying the return of investment to early investors with the investment of new investors. It is similar to a pyramid scheme in the sense that both schemes are using new investors’ money to pay the early investors.
Both schemes, either Ponzi or pyramiding, will eventually cranks out when new investors will come in trickle and funds dry up.
“The ordinance was aimed not only on Ponzi-like schemes but also other unregulated investments which offer pre-need like services to its members,” he added.
During the public hearing, several “pre-need like” programs were identified such as burial assistance for members of cooperatives and associations in the municipality.
A program is pre-need like when its members contribute regularly to the general fund with a promise that when a member dies, his or her immediate surviving family will receive burial assistance and other death benefits.
The organizations offering pre-need like services are registered with government regulatory body such as Cooperative Development Authority (CDA) or SEC.
It was not clear, however, if the registrations of these organizations are authorizing them to venture into investment-taking and pre-need like services.
Alcoriza, whose last term ended on June 30, is looking into the next set of members of the Sangguniang Bayan to “follow through the approved ordinance for implementation.” (jm)