SEC strengthens fintech supervision

The Securities and Exchange Commission (SEC) seeks to strengthen investor and consumer protection in this age of digitalization and fast-changing financial landscape with the creation of a new office dedicated to the supervision and regulation of financial technology (fintech) operators and emerging innovations.

Aligned with the creation of its PhilFintech Innovation Office (PIO), the SEC is set to issue within this year new rules on online lending and finalize the much-awaited regulatory framework on digital assets offering and the operation of digital asset exchanges.

The PIO, which is under the SEC’s Corporate Governance and Finance Department (CGFD), is mandated to provide safety nets for investors and consumers while promoting financial inclusion, integrity and stability.

The new office also seeks to provide regulatory clarity on emerging technologies, create better-informed policies for new and existing fintech innovators and build up the SEC’s expertise to effectively regulate fintech activities and promote an innovative culture in the corporate sector.

“Integral to our mission of championing the business sector, capital market and investing public is fostering innovation,” Emilio Aquino, chair of the SEC, said in an online briefing during the launch of the PIO on Friday.

“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,” he added.

SEC Commissioner Kelvin Lee said the PIO would facilitate the processing of the registration of new fintech companies along with the appropriate department of the SEC. It will also 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.

Aquino said the SEC did not want to discourage entrepreneurs with bright ideas. “We want them to come to us even before they start to operate,” Aquino said.

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 seeks to formulate and execute regulatory responses geared toward protecting investors and market participants, while concurrently promoting the growth of fintech firms.

To run after violators that do not have physical offices in the country, Aquino said that like what had been done in the past, the SEC would coordinate with counterpart regulators in other jurisdictions.

He recalled the case of KropCoins of controversial local businessman Joseph Calata, whose Hong Kong-based vehicle had been shut down by the Hong Kong’s Securities and Futures Commission and ordered to return funds solicited from a coin offering two years ago. This was after the SEC pointed out that it had issued a cease and desist order against the company.

On the upcoming digital lending rules, Aquino said the existing rules were really meant for brick-and-mortar lending and finance companies. But amid mounting complaints on digital lending, particularly on abusive collection practices, he cited the need to ensure sufficient safeguards.