SEC to enlist additional firms using crowdfunding portals

The Securities and Exchange Commission (SEC) will venture into working with crowdfunding portals over the next two years, adding 888 firms and franchises that are targeted to be enlisted.

The Department of Finance (DOF) announced on January 24, 2022, that the Securities and Exchange Commission (SEC) will venture into working with crowdfunding portals over the next two years, an article by BusinessWorld reports. It adds that a total of 888 firms of varied sizes - micro, small, medium, large, and those with franchises, are targeted to be enlisted through the said portals. 

SEC Chairperson Emilio B. Aquino explained the commission’s intention to enlist different small and medium enterprises (SMEs) at the local bourse. Thus, the SEC has spearheaded the creation of the Office for the Advancement of Strategic Investments in SMEs (OASIS), which aims to coordinate with government agencies and the private sector to assist SMEs in tapping the capital markets.  

The first crowdfunding portal in the Philippines was approved in December 2020 according to a press release by the SEC. 

Currently, the SEC reports 274 publicly listed firms and three with pending applications this year. 

What is crowdfunding? 

According to its rules on crowdfunding, the SEC defines crowdfunding as “a fundraising activity typically conducted through an online platform and usually for startups and SMEs,” where supporters make their contributions or donations through the platform, and the platforms coordinate and administer the fundraising activities. The SEC identifies four forms: 

Forms of crowdfunding 

  1. Donation-based crowdfunding, where individuals pool their resources to support a charitable cause. 
  2. Reward-based crowdfunding, where individuals give money to a company in return for a reward, usually a product produced by the company. 
  3. Lending-based crowdfunding, where individuals   lend money to a company and receive the company’s legally binding commitment to repay the loan at pre-determined time intervals and interest rate. 
  4. Equity-based crowdfunding, where individuals invest in shares sold by a company and receive a share of the profits in the form of a dividend or distribution, subject to the company’s discretion. 

SEC encourages the public to participate in capital markets 

Furthermore, the SEC intends to develop its financial literacy campaign by cooperating with fund managers and investment houses in over 18 institutions nationwide. A pre-pandemic survey by the SEC estimates that 54 million Filipinos do not participate in the capital markets. The survey found that 66% do not participate because they do not have excess income, while 35% said they would have participated if not for perceived high costs or lack of information. The DOF adds that other reasons given by the survey respondents were the perceived low return on investment and the lack of trust in investment providers. 

The SEC wishes to assist in changing this sentiment by convincing more Filipinos to “place their money in safe and secure investments,” as it fulfills its goal to protect the public from fraudulent ‘get-rich-quick’ schemes and other scams.