SEC’s marching order: Crack down on loan sharks

MANILA, Philippines - When President Duterte came into office in June last year, he gave marching orders to the Securities and Exchange Commission (SEC) to put an end to loan sharks, especially the Indian nationals who are notorious for preying on poor Filipinos.

The SEC, under the leadership of chairman Teresita Herbosa, immediately acted on Duterte’s orders.

And the crack down against such lenders continues until now.

Early this month, the SEC filed charges against 153 individuals including 67 Indian nationals.

The SEC charged them for falsification, perjury and violations of the Lending Company Regulation Act.

According to the SEC, no lending company shall conduct business unless it has an authority to operate. The authority is granted by the SEC.

The minimum paid in capital of any lending company shall be P1 million, the SEC said.

The individuals charged were part of companies which used bank certificates that were fake. It meant they didn’t have the required minimum paid in capital.

SEC commissioner Emilio Aquino, supervising commissioner of the SEC’s enforcement department said the agency would be relentless in prosecuting those submitting fake bank certificates.

“The SEC shall be the complainant. For sure the SEC was indeed misled by the bank certificates as proof of paid in capital,” Aquino said.

Some of the lending companies that were found to be operating illegally are 7 Lions Lending Management Corp., Amsuda Lending Corp., Bhati and Jogi and Swali Lending and Trading Corp. Dr. Verma Lending Corp. and Maan & Bhaker Landing Inc.

Prior to the filing of criminal charges, the SEC moved to suspend some 104 lending companies the past several months for their failure to obtain a Certificate of Authority to operate as a lending company.

The certificate is required under Republic Act No. 9474 or the Lending Company Regulation Act of 2007.

The corporate regulator’s aggressive crackdown on lending companies is part of President Duterte’s directive to weed out informal lenders in the country especially those that prey on individuals who do not have access to banks and other financing.

President Duterte is particularly against 5-6 lenders or those that charge an interest of 20 percent per month, which means that when a borrower borrows P5, he has to pay P6.

The SEC is the lead agency in charge of monitoring lending companies.

Under the law, “no lending company shall conduct business unless granted an authority to operate by the SEC.”

Justina Callangan, director of the SEC’s corporate governance and finance department, said lending entities have been given more than sufficient time to comply with the law, hence, their continued noncompliance warrants their suspension.

“The Commission is one with the President in adopting a tough stance against illegal lending that is why it is pursuing with much vigor all those engaged in it,” she said.

Aside from suspension, a fine of not less P10,000 or imprisonment of not less than six months but not more than 10 years or both, await those who violate the law.

The SEC has also warned informal lenders including loan sharks not to charge unreasonable interest rates or fees, employ harassment tactics in collecting from its borrowers or coerce borrowers to buy on credit or otherwise appliances or other items.

These and other similar activities are just among the acts punishable by law, the SEC said.

Aside from its crackdown on fake lending companies, the SEC also remains tough against the private sector, making sure they practice good corporate governance.

It has been strictly monitoring companies’ submission of Corporate Governance manuals, and annual reports. It is also closely watching the term limits of independent directors of companies.

More importantly, the SEC announced in June that it was finally pushing through with its plan to double the minimum public float for listed companies to 20 percent.

The 20 percent is enough for minority shareholders to be able to secure at least one seat in a company’s board.

It has been a busy time at the SEC so far this year as it continues to keep a close watch on the country’s capital markets.