SEC urges caution when investing in initial coin offerings

THE country’s corporate regulator is asking the public to be cautious against initial coin offerings (ICO), noting the virtual currencies involved in such transactions are not guaranteed by any central bank nor backed by any commodity.

In an advisory posted Monday, the Securities and Exchange Commission (SEC) told the public to be vigilant when investing in ICOs.

“If a promoter, issuer, broker, or salesman guarantees returns, if a potential investment sounds too good to be true, or if you are pressured to act hastily, please exercise utmost caution and diligence and be wary of the risk that your investment might be lost,” the SEC said.

ICOs are typically used by start-ups to raise capital. Here, the company issues a percentage of the virtual currency it holds to interested buyers in exchange for fiat currency, another virtual currency, or another asset or security.

Virtual currencies, meanwhile, are described by the SEC as a “digital representation of value issued and controlled by its developers and used and accepted among the members of a specific community of users.”

Popular virtual currencies include bitcoin, valued at $15,056 by Tuesday afternoon, ethereum ($1,211), and ripple ($2.39).

The SEC said virtual currencies transacted in ICOs have a “strong possibility” to fall under its jurisdiction, as per Section 3.1 of the Securities Regulation Code (SRC) which defines what items are considered as securities.

With this, companies undergoing an ICO should register with the SEC and file the necessary disclosures to protect the interests of the investing public.

“Where the scheme involves the sale of securities to the public, the SRC requires that the said securities offered are duly registered and that the appropriate license and/or permit to sell securities to the public are issued to the corporation and/or its agents, pursuant to the provisions of Section 8 and 28 of the SRC,” the commission said. —