AMICUS CURIAE

The rules may create an unintended consequence of disincentivizing companies from using crowdfunding.

Crowdfunding (CF) platforms have proven to be a popular way to solicit charitable donations and to raise funds for projects or business ventures. With CF platforms, access to funds has expanded for start-up companies and for micro, small, and medium enterprises (MSMEs).

CF generally refers to the financing method of pooling small amounts of money from a large number of people to finance charitable causes, campaigns, projects, or business ventures.

In line with this developing financial innovation, the SEC proposes to regulate CF activities in the Philippines and released its proposed rules and regulations governing CF ( Rules) for public feedback. The proposal to regulate CF activities in the Philippines is consistent with the direction taken by other countries, such as the United States, Canada, and Singapore, which have already established regulations on CF transactions.

The rules attempt to strike a balance between the dual responsibilities of the SEC to encourage capital formation and to protect investor interests.

To encourage capital formation and in view of the limited character of the public offering through CF, the rules grant exemption for securities sold or offered through CF from the registration requirement under Section 12 of the Securities Regulation Code (SRC).

On the other hand, to protect investor interests, the SEC incorporated disclosure requirements, registration requirements for intermediaries and funding portals, regulatory framework for intermediaries, and post registration requirements for issuers and intermediaries in the Rules, among others.

DISCLOSURE REQUIREMENTS

Those looking to raise funds (Issuer) will be required to disclose, among others, the nature of its business, financial condition, historical reports of operations, the business plan with respect to the CF offering, the risk factors of investing in its projects, the procedure on how to return funds if the target offering is not met, and the procedure to complete or cancel investment commitment.

REGISTRATION REQUIREMENTS

Entities which facilitate transactions involving the offer or sale of CF securities through online electronic platforms will be required to register as a Funding Portal.

An applicant Funding Portal, which should be registered with