SEC approves Philippines first crowdfunding platform

MANILA, Philippines — The Securities and Exchange Commission (SEC) has approved the country’s first crowdfunding platform, a joint venture between the Gotianun-owned Filinvest Development Corp. and Investree Singapore Pte.

In its meeting last Dec. 22, the SEC en banc approved the application of Investree Philippines Inc. to operate as a funding portal and act as a crowdfunding intermediary.

Under the Securities Regulation Code, securities shall not be sold or offered for sale or distribution without a registration statement duly filed with and approved by the SEC.

However, the SEC allows exemption from registration of crowdfunding securities provided that the issuer, intermediary and investors comply with the rules covering crowdfunding.

Under the rules, a crowdfunding intermediary may be a registered broker, investment house or funding portal, which mediates the offer and sale of crowdfunding securities through an online, electronic platform.

The authority granted on Investree, valid for one year, would allow Investree to connect small, medium and emerging enterprises with banks and other lenders.

The SEC will review Investree’s registration during the first 11 months for possible extension.

Crowdfunding is a fundraising activity typically conducted through an online platform for startups and small and medium enterprises.

The process essentially involves three parties – the entrepreneur or project initiator; the supporters or those willing to fund the business idea or project; and the platform or moderating organization that brings the entrepreneur and supporters together to realize the business idea or project.

Funding raised through the platform can be in different forms. One is donation-based, where supporters pool their resources to support a charitable cause; or reward-based, where supporters give money in exchange for a “reward,” which is usually a product produced by the project initiator.

Another method is lending-based, where supporters lend money to the entrepreneur and receive a legally binding commitment to repay the loan at predetermined time intervals and interest rate.

Another form is equity-based, where supporters invest in shares sold by the entrepreneur and receive a share of the profits in the form of a dividend or distribution, subject to the entrepreneur’s discretion.

Of the different types of crowdfunding methods, Investree will operate as a lending-based platform. Thus,  crowdfunding activities will involve banks or qualified buyers as lenders, and will be limited to small, medium and emerging enterprises as borrowers.

Lending-based and equity-based crowdfunding activities involve the offer of securities in the form of debentures or shares. As such, they are subject to securities regulation in many jurisdictions.