SEC opens new office unit to regulate fintech industry

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The Securities and Exchange Commission (SEC) announced on Friday, July 30, the launch of a new office unit to regulate the fintech industry to promote financial inclusion and protect consumers and investors.

Photo from Freepik.com

The PhiliFintech Innovation Office (PIO), under its Corporate Governance and Finance Department (CGFD), will focus on the regulation of the use of fintech, or financial technology, in the Philippines.

The PIO is mandated to perform the following:

  • 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
  • Capacitate the SEC with expertise to effectively regulate fintech activities and promote an innovative culture in the corporate sector.

“Integral to our mission of championing the business sector, the capital market and the investing public, is fostering innovation,” SEC chairperson Emilio Aquino said in a statement.

Aquino said the agency 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,” he said.

Regulating innovative trading markets and technology-based ventures is part of the mandate of the SEC, as provided under Republic Act No. 8799, or the Securities Regulation Code.

The SEC previously supervised the registration and granting of licenses for non-traditional securities and instruments through its Non-Traditional Department, which was later abolished following the creation of the Insurance Commission in 2010.

The SEC has since delegated the regulation of non-traditional securities and fintech initiatives to other departments and treated them on a case-to-case basis.

To better prepare the country for fintech innovation, the SEC created the PIO to give greater regulatory focus on the industry.

The Philippines ranked 44th out of 158 countries in the United Nations Conference on Trade and Development’s Readiness for Frontier Technologies Index. It also placed second in information and communications technology deployment, skills, research and development, industry activity and access to finance among a host of countries.

The PIO will facilitate the processing of the registration of new fintech companies along with the appropriate department of the agency.

It will likewise serve as the first point of contact for existing fintech companies, which have been operating without proper regulation or authorization, or which will introduce new fintech products.

The PIO is also tasked to document, analyze, and understand fintech business models and their possible impacts on the market and its participants.

With this, the SEC said it will be able to formulate and execute regulatory responses geared toward protecting investors and market participants, while concurrently promoting the growth of fintech firms.

Prior to the creation of the PIO, the SEC has been issuing rules and regulations in response to new technologies emerging in the market.

In 2019, the agency issued the Rules and Regulations Governing Crowdfunding, which allowed startups and small and medium-sized enterprises greater access to funding. It approved the country’s first crowdfunding portal, Investree Philippines Inc., on Dec. 22, 2020.

The SEC Philippines also approved in 2020 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 – 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.

“As it supports new and emerging business concepts, the Commission is cognizant of the risks that come with innovations,” Aquino said. “To manage the risks, the Commission embeds safeguards in every policy action and further intensifies its enforcement and education campaigns to protect not only investors and other financial consumers, but also the integrity of the business sector.”

In 2019, for instance, the Commission issued SEC Memorandum Circular No. 18, Series of 2019 to define and prohibit unfair debt collection practices amid increasing complaints against online lending operators.

It also issued SEC Memorandum Circular No. 19, Series of 2019 to require financing and lending companies to register their online lending platforms.

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