SEC to crack down on crowdfunding

MANILA, Philippines — The Securities and Exchange Commission (SEC) is tightening the noose on crowdfunding activities as it continues to crack down on unscrupulous individuals who take advantage of other people’s hard earned money.

In a recent interview, SEC chairman Teresita Herbosa said the regulator is now looking at crowdfunding activities that are all over the internet.

“Crowdfunding is asking people to invest in their business,” Herbosa told The STAR.

This could be done by selling shares to people, she said.

For individuals or a corporations, they need to put up a corporation and have a secondary license to be able to sell shares of stock.

Another form of crowdfunding is by borrowing money, which should not be allowed, Herbosa said.

“Nobody can lend money without registering with us as a lending company. Even if it is online, you have to register with the SEC.  Under the Lending Company Act, no individual can engage in lending as a regular activity,” Herbosa said.

Lending to friends and family is allowed, but not on a regular basis, she said.

“If you are going to sell shares to more than 19 people that is already selling your shares to the public. You have to have a secondary license. If it’s 19 people or less, that’s exempted,” she said.

The SEC is set to issue rules on crowdfunding activities in coordination with the Department of Trade and Industry.

She said the SEC would only allow crowdfunding that involves donations.

Crowdfunding gathers investors to fund a venture. It utilizes small amounts of capital from a large number of individuals to finance a new business venture. It makes use of the easy accessibility of vast networks of people via the Internet.

The SEC has been cracking down on bogus lenders as part of the Duterte administration’s campaign against these loan sharks who prey on helpless borrowers by slapping high interest rates on their loans.

 As part of its crackdown, the SEC has filed cases against lenders that are not registered with the agency or have used fake bank documents to make their businesses appear as legitimate.