‘Fintech should not be used to scam investors’

Iris Gonzales - The Philippine Star

MANILA, Philippines — The Philippines is primed for financial technology (fintech) innovation, but the Securities and Exchange Commission (SEC) says there is a need to monitor the industry to ensure investor protection.

SEC chairman Emilio Aquino Jr. said fintech must not be used to scam investors or to launder dirty money.

“Fintech players will also be covered persons for AMLA purposes,” Aquino told The STAR when asked about monitoring fintech for money laundering activities.

The SEC said there is a need to strike a balance between promoting innovation and ensuring investor protection.

Speaking at the 15th Regional Leadership Program for Securities Regulators organized by the Monetary Authority of Singapore, in partnership with the Toronto Centre, SEC commissioner Kelvin Lester Lee noted how the pandemic highlighted the role of fintech in making financial services accessible.

Lee is the supervising commissioner of the SEC’s newly launched PhiliFintech Innovation Office.

“We have witnessed the greater importance of fintech in its role in allowing access to financial services despite restrictions on our movements,” he told fellow regulators during the webinar,  “Fintech Beyond COVID-19: What Next?”

“It is with this realization that we, at the SEC, understand that fintech and innovation now play a large role in the Philippine economy,” he said.

Lee said, the Philippines is primed for fintech innovation, citing the 2021 Technology and Innovation Report of the United Nations Conference on Trade and Development, which ranked the Philippines 44th out of 158 counties for readiness for frontier technologies and second for information and communications technology deployment, skills, research and development, industry activity and access to finance.

At the same time, he said regulators such as the SEC would manage the benefits and risks associated with fintech, explaining that the rise of new innovations could bring risks to financial stability, market integrity and investor interests.

“It’s a delicate balancing act. On the one hand, as regulators we don’t want to stifle innovation; in fact, we want to encourage growth. But on the other hand, we need to be aware of the risks, some of which are very uncertain at this point, that may arise by allowing new innovations to operate,” he said.

He said the SEC’s mandate is to protect investors and the possible risks brought by innovations to the investing public.

“We don’t want to unduly expose investors and the public, and the financial system to the risks that can be brought about by improperly vetted innovations,” Lee said.

In regulating fintech in the Philippines, the SEC will adhere to the principle that no one size fits all; adopt an activity-based rather than an entity-based approach; implement principles-based regulations rather than specific rules; and remain technology neutral.

The SEC recently launched the PIO, a new office under its Corporate Governance and Finance Department that will focus on the regulation of the use of fintech in the country.

The new office is mandated to reduce gaps in consumer and investor protection tempered by financial inclusion, integrity, and stability through a dedicated focus on the regulation and growth of fintech activities.

It also aims to create better-informed policies for new and existing fintech innovators and enhance the SEC’s capacity to effectively regulate fintech activities while promoting innovation in the corporate sector.



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