The Securities and Exchange Commission (SEC) has cautioned the public against investment solicitations involving the establishment of fitness gyms disguised as franchise or co-franchise agreements.
According to the SEC, these schemes typically offer investors a share in the company or in specific gym branches through partnership or co-franchisee contracts. Investors are promised a percentage of profits while the company handles management and operations. Some promoters even guarantee returns, claiming potential losses will be covered by “contingency funds.”
The commission clarified that such arrangements, regardless of how they are labeled, fall under the legal definition of investment contracts or subscription of shares of stock — and are therefore considered securities regulated by the SEC.
Under the Securities Regulation Code, all public offerings of securities must be duly registered with the commission. The sale or offering of unregistered securities is illegal.
The SEC also cited the Financial Products and Services Consumer Protection Act, which prohibits investment fraud, including Ponzi-type operations and similar schemes promising profits sourced from investor contributions without proper SEC authorization.
The agency further warned individuals acting as salesmen, brokers, dealers, or agents for such gym investment schemes that they may face prosecution under the Securities Regulation Code, which carries penalties of up to ₱5 million in fines or imprisonment of up to 21 years.
The SEC urged the public to exercise caution and verify with the commission before investing in similar ventures.
