SEC refines draft rules on initial coin offerings

THE SECURITIES AND EXCHANGE COMMISSION (SEC) has refined its proposed guidelines on initial coin offerings (ICOs) for another round of public consultation in the face of heightened interest in such fund raising.

In a statement issued on Monday, the country’s corporate regulator said it has revised its draft guidelines based on inputs received in the first round of consultations that ended on Nov. 30 last year.

ICOs are defined by the commission as “distributed ledger technology fund-raising operations involving the issuance of tokens in return for cash, other cryptocurrencies, or other assets.”

The proposed rules seek to govern the conduct of ICOs by start-ups or registered corporations in the country, as well as by those based abroad that target Filipinos through online platforms.

Revisions in the draft include additional requirements for an issuer’s prospectus, which should now contain interim financial statements in case the issuer has been doing business for more than a year.

Interim financial statements should also be provided if the prospectus is filed more than 135 days from issuance of audited financial statements.

The revised draft also removed the requirement of submission of proof of ICO team members’ financial capabilities as part of the prospectus.

But the issuer must submit the operations manual, including KYC/AMLA (Know your customer/Anti-money Laundering Act) procedures; a disaster recovery plan; as well as risk and security protocols during the registration proper.

Registration guidelines have been relaxed for security tokens to be issued by foreign companies whose instruments have already been registered in another jurisdiction whose regulator has an information-sharing arrangement with the SEC. Still, the issuer must provide sufficient proof of security tokens registration in another jurisdiction, as well as the

regulatory framework observed. Should the foreign entity fail to comply with these requirements, the SEC will order the issuer to establish a local office instead.

Based on public comments so far, the SEC added a chapter on escrow agents, covering appointment of the escrow agent, its duties and reportorial requirements.

At the same time, the SEC removed the requirement on quarterly progress reports on use of ICO proceeds, as well as semiannual reports on acquired and operating equipment and properties for funded projects.

Should the issuer abandon the project before it is completed, the escrow agent must submit a notice of project abandonment to the SEC.

The SEC’s Markets and Securities Regulation Department is calling on banks, investment houses, the investing public and other interested parties to submit their inputs by Jan. 15. — Arra B. Francia