PHL still waiting to secure IOSCO full membership

THE PHILIPPINES may have to wait another year to acquire full membership in the International Organization for Securities Commissions (IOSCO).

Securities and Exchange Commission ( SEC) Chairperson Teresita J. Herbosa, in a Nov. 3 interview, cited the need to amend Republic Act No. 8799 or the Securities and Regulation Code ( SRC) first to comply with the requirements of the IOSCO.

“We’re really resigned to the fact that we cannot be a full member of IOSCO without the amendment of the law, so we’re now proposing amendments to the SRC, which include IOSCO-compliant provisions,” Ms. Herbosa said.

IOSCO develops and promotes standards for securities regulation. It also facilitates the integration of securities markets through a Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (MMoU).

The Philippines, through the SEC, counts among the 126 ordinary members of IOSCO. The regulator, however, has yet to sign the MMoU issued in May 2002.

In 2005, the international body required all members with primary responsibility for securities regulation within their jurisdictions to either sign the global framework for enforcement cooperation or commit to becoming signatories thereof.

A member “must demonstrate their ability to provide assistance to other regulators in enforcement investigations” prior to becoming a full signatory of the MMoU, according to information IOSCO posted on its Web site.

In this light, the SEC is pushing for the amendment of the SRC to gain access to every document or record needed in investigations relating to securities, among others, Ms. Herbosa noted.

The regulator is looking to submit proposed changes to the measure, which then President Joseph E. Estrada signed into law in July 2000, to Congress before the year ends.

“These amendments to the SRC may be passed by next year. That one would probably be faster than the [proposed amendment of the] Corporation Code because it is an IOSCO requirement,” Ms. Herbosa said.

Asked if the Philippines can become a signatory of the MMoU and subsequently a full member of IOSCO thereafter, the SEC chairperson replied: “Yes, I hope so.”

Ms. Herbosa further noted that signing the international agreement will allow for the active participation of the Philippines in the Asia Region Funds Passport ( ARFP) scheduled for implementation next year.

The ARFP led by Australia, New Zealand, South Korea and Singapore will open the domestic market to investment offerings from the region and vice versa. The Philippines has signed its commitment to the initiative last year, when it hosted the AsiaPacific Economic Cooperation.

The amendment of the SRC is among the ongoing initiatives of the SEC to strengthen its capacity to protect investors in the country.

Recently, the corporate regulator unveiled an intensified crackdown on illegal lending following President Rodrigo R. Duterte’s pronouncements against loan sharks, particularly those engaged in the “five- six” scheme that imposes a 20% interest on short-term borrowings.

The SEC has since received even more inquiries from the public, Ms. Herbosa said, citing a group of teachers seeking to validate the primary registration of a certain entity and its license to extend loans to the public.

The exorbitant interest rates could have actually resulted from the lenders’ need to recover their capital, at the least, given the high incidence of loan defaults, Ms. Herbosa noted.

“The rate there actually is 40% pay and 60% do not. That’s the reason for the high interest rates — this is just my theory — they have to spread the risk. So, those who pay actually bear the burden and that’s the reason why, as a lender, you have to charge high interest.”

Still, such a situation cannot supposedly justify the imposition of unreasonably high interest rates.

“That’s why we really have to find a solution but the right solution is not only to crack down but the solution really is to find other sources of funds for borrowers,” Ms. Herbosa said, citing microfinancing and crowdfunding as alternatives.