CLIENTS of three pre-need firms under the embattled Legacy Group of financial services firms should not expect to get their money back in full, the Securities and Exchange Commission (SEC) said on Wednesday.
In an open letter to plan holders of Legacy Consolidated Plans, All Asia Corp., Scholarship Plan Philippines, the SEC advised them “not to expect the claims under their plans to be paid in full.”
SEC said that as of December 31, 2008, the three pre-need firms have set aside a total of P360 million in trust funds with various banks. The trust fund is supposed to cover actual obligations to the clients when the plan they have invested in—either for education, pension or memorial—matures.
However, the P360 million—which is supposed to be in cash, invested in real estate, government securities, shares of stocks and other investments—is not enough to cover the companies’ total obligations to clients, the SEC wrote.
The corporate regulator added that these assets may even be worth less than P360 million since these have to be sold based on market rates.
The SEC has supposedly ensured that pre-need firms set aside enough trust funds to cover real-time obligation to the plan holders through strict enforcement of accounting and valuation standards determined by actuaries.
However, the industry has lobbied for a more lax enforcement of these standards citing reasons ranging from market volatilities and insurance-like treatment of what are currently considered investment products. Actuarial valuation for insurance, which the Insurance Commission regulates, is more strict than investment products, which the SEC regulates.
The pre-need industry remains under the regulatory care of SEC, which has been blamed for the mess that pre-need firms, particularly the Legacy firms, now find themselves in.
The SEC said it hopes to pay all the Legacy clients proportionate sums from the sale proceeds of the assets in Legacy’s trust fund not later than April 30.
SEC has extended the deadline for Legacy clients to file claims to March 31. SEC said Legacy submitted a list of more than 14,000 plan holders.
After the filing of claims, SEC said they still need to validate these claims and will notify the clients by mail.