TRUE to its mandate of promoting financial inclusion and at the same time protect investors and other financial consumers, the Securities and Exchange Commission (SEC) formally launched the Philifintech Innovation Office (PIO) last July 30, via Zoom, under its Corporate Governance and Finance Department (CGFD). The office will specifically focus on the regulation of financial technology (fintech) use in the Philippines.
In the June 16 article entitled “SEC introduces Philifintech Innovation Office,” I said that the PIO aimed 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; create better-informed policies for new and existing fintech innovators; and provide the SEC with expertise to effectively regulate fintech activities and promote an innovative corporate culture.
As SEC Chairman Emilio Aquino noted during the PIO launch: “Integral to our mission of championing the business sector, the capital market and the investing public is fostering innovation.”
“Accordingly, the commission has supported new and emerging business concepts while taking a proactive stance against any excessive risk buildup to ensure market integrity. The Philifintech Innovation Office will be at the forefront of building an enabling regulatory environment for fintech, in particular.”
As a quick background, Republic Act 8799 or the “Securities Regulation Code” provides one of the SEC’s mandates, that of regulating innovative trading markets and technology-based ventures. The SEC also previously supervised the registration and granting of licenses for nontraditional securities and instruments through its Non-Traditional Department, which was later abolished following the creation of the Insurance Commission in 2010.
Since then, the commission has delegated regulation of nontraditional securities and fintech initiatives to other departments and treated this on a case-to-case basis.
With the Philippines 44th out of 158 in the Readiness for Frontier Technologies Index – in the upper middle rank – in the UN Conference on Trade and Development’s 2021 Technology and Innovation Report and second in information and communications technology deployment, skills, research and development, industry activity and access to finance among a host of countries, it is primed for fintech innovation, hence the creation of the PIO to give greater regulatory focus on the industry.
During the virtual press conference, I, as supervising commissioner of the PIO, presented the SEC’s fintech initiatives, the PIO’s mandate, and the vision for the country’s fintech regulatory landscape.
The PIO will facilitate the registrations of new fintech companies along with the appropriate SEC department. It will likewise serve as the first point of contact for existing fintech companies that have been operating without proper regulation or authorization or will introduce new fintech products.
The PIO will document, analyze, and understand fintech business models and the possible impact on the market and its participants. With this, the SEC will be able to formulate and execute regulatory responses geared toward protecting investors and market participants while also promoting fintech firms’ growth.
Before the PIO’s creation, the SEC has been issuing rules and regulations in response to emerging technologies. It issued the Rules and Regulations Governing Crowdfunding in 2019, which allowed startups and small- and medium-sized enterprises greater access to funding. On Dec. 22, 2020, it approved the country’s first crowdfunding portal, Investree Philippines Inc.
In 2020, the SEC also approved the use of the application Bonds.PH and the PDAX DLT platform in distributing retail Treasury bonds to reach small investors including the unbanked. It also cleared the selling of Premyo Bonds and Treasury bonds through the country’s first branchless, digital-only bank – the Overseas Filipino Bank – to cater to Filipinos working abroad.
Meanwhile, the SEC is preparing rules governing digital asset offerings and digital asset exchanges to provide the investing public with more options as well as protect them from the misuse of such emerging assets.
In 2019, the commission issued SEC Memorandum Circular 18, Series of 2019 to define and prohibit unfair debt collection practices amid increasing complaints against online lending operators and SEC Memorandum Circular 19, Series of 2019 to require financing and lending companies to register their online lending platforms.
The SEC likewise supports innovation and risk management by adopting global best practices and participating in global development initiatives as a member of international organizations such as the Global Financial Innovation Network.
With this, I would like to personally congratulate the SEC, under the leadership of Chairman Emil Aquino, and through the dynamic efforts of the Office of Commission Secretary and the PIO’s technical working group, for the successful launch. Rest assured that this is not the end of the SEC’s efforts to foster fintech innovation as we continuously seek measures to further streamline our processes.
To get the full details regarding the PIO, I encourage the transacting public to monitor the SEC website at www.sec.gov.ph and its official Facebook page at www.facebook.com/PhilippineSEC for more information and further announcements.
Kelvin Lester K. Lee is a commissioner of the Securities and Exchange Commission. The views and opinions stated herein are his own. You may email your comments and questions to [email protected]
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