SEC approves rules and regulations on crowd-funding

The Securities and Exchange Commission (SEC) has approved the rules and regulations on crowd-funding schemes that allow Small Medium Enterprises (SMEs) to seek up to PHP 50 Million for expansion.

“With the rules and regulations governing crowdfunding in place, the Commission hopes to support recent financial innovations on providing easier access to finance especially for smaller business startups or ventures while ensuring the integrity and fairness of financial systems and the protection of investors,” said Emilio Aquino, SEC chair

The proponents of crowd-funding are exempted from the typical registration requirement as long as they follow the SEC guidelines with the new framework.

• Within a 12-month period, the crowd-funding framework limits the amount securities that can be sold by the issuer to PHP 10 Million to any investor or the general public.
• The limit is higher at PHP 50 Million when they are sold to qualified investors or sophisticated institutional investors.
• Retail investors with an annual income of up to PHP 2 Million will have a limit of 5% maximum of their total income per year
• Retail investors with an annual income of more than PHP 2 Million can buy only up to a maximum of 10% of their total annual income.
• Qualified investors are not included in the limits above
• All crowd-funding transactions must be done through registered intermediaries which should comply with the requirements.
• Issuance of securities must be conducted exclusively through the platform of the intermediary that is registered with the SEC such as Broker-dealers, Investment houses or funding portals.
• A funding portal involved as an intermediary is prohibited from offering investment advice or recommendations, marketing the securities displayed on the platform, compensating people who solicit investments for securities displayed or referenced on its platform or managing investor funds or securities.
• An intermediary must direct the refund of investor funds if an issuer does not complete an offering.
• Issuers must submit annual reports and progress updates disclosing the issuer’s development for achieving the target offering amount.

The SEC may require additional capital in the form of cash or insurance to the proposed or actual operations of the crowdfunding intermediary.

Crowd-funding is a form of seeking fundings for a project or venture by raising many small amounts of money from a large number of people. This is done typically via an online platform.

Source: Inquirer