23Sep2018 Update: SEC has also issued an advisory on PhilCrowd. Read more here.
29Jul2018 Update: Read comments on FarmOn Cycle 19 Opening for updates on FarmOn SEC registration.
29Jul2018 Update: Please see comments section on the SEC registration of Organico and their supposed explanation about the investment license. Still, caveat emptor.
Last month, the Securities and Exchange Commission (SEC) issued an advisory about Organico Agribusiness Ventures Corporation (Organico). Oddly, the advisory says that Organico is not registered with SEC as a corporation or a partnership (all companies have to be registered with SEC). In that sense, Organico should not be using “corporation” in their name.
But wait, there’s more. Likewise, the advisory says that Organico is not authorized to solicit, offer and sell investments. To solicit investments, a company should have a secondary license regarding offering investments to the public. Being registered in SEC as a company is one thing, being allowed to offer and sell investments requires a different permit altogether.
Another red flag cited by SEC is the guaranteed investment returns offered by Organico.
Click here for the full copy of the SEC Advisory on Organico Agribusiness.
A quick check on Organico website‘s FAQs mentions this:
Is it OAVC legitimate?
Presently, we are processing all our legal documents like Business Permits, SEC Registration, BIR, and any other government agencies that require to us to obtain.
Personal Disclosure (PD): We don’t have existing investments with Organico.
To be fair, SEC also issued a similar advisory on FarmOn in 2016, basically same contents on not being registered with SEC, and not being allowed to offer investments. Caveat emptor as always every Juan.
Click here for the full text of the SEC Advisory on FarmOn.
Meanwhile here is the reply from the FarmOn website:
Important announcement about the inquiries on the SEC registration of FarmOn.ph.
FarmOn.ph is not a corporation which is not needed to be registered to SEC. Instead it is a sole proprietorship which is registered to DTI. We have license and business permits to operate and legal papers and documents registered to DTI. FarmOn.ph has existing 45 hectares farm located in Isabela and Quirino Province, including the office, which we wanted all investors to visit.
Fair enough? Indeed, being a sole proprietor does not need SEC registration (1 point for FarmOn), it just needs DTI registration which they claim they have. Unfortunately, upon clicking on the link to their permits, it goes to the home page so the link must be broken.
Nonetheless, I don’t think being DTI registered will allow the sole prop business to solicit investments (anyone from DTI care to clarify?) I tried checking DTI’s website but I cannot find anything about investments. All I know is that it is always SEC telling the pubic that a certain entity is not allowed to solicit investments.
Well at the end of the day, it is the responsibility of every Juan to decide where they want to risk their money. The government just functions as a big brother to those who need it. But your money, your rules, your gains and losses.
We sent a message to FarmOn to prominently display their permits but we have not received a reply as of this time.
PD: We do have exposures in FarmOn.
Upon checking PhilCrowd’s website, it seems it is under maintenance. But from what I know, PhilCrowd is registered as a cooperative (hence not supervised by SEC, but by CDA instead) and being a cooperative means it is allowed to accept the public’s money such as deposits and invest it in various vehicles. Nonetheless, since the website is down, there no way to check at the moment the documentations. Will this suffice? Is this a good workaround for Organico and FarmOn if ever?
A quick Google search on “SEC advisory on PhilCrowd” yields no relevant results.
PD: We do have exposures in PhilCrowd.
(23Sep2018 Update: SEC has also issued an advisory on PhilCrowd. Read more here.)
The SEC name inquiry is down at the moment to verify this though. Nonetheless, a quick Google search on “SEC advisory on Cropital” yields no relevant results
PD: We have no exposures in Cropital.
WHAT TO DO NOW?
The patanim and paiwi practice has been in place in our country for the longest time, albeit limited to relatives and neighbors in the provinces so the concept behind the crowdfunding is not totally new. It is more of the medium of distribution that is new. Whereas before it is more of word of mouth among relatives and acquaintances, now it is through the internet, through technology, making it easily accessible and available to a greater number of potential investors. It is not different from how Uber and AirBnb bridges the demand and the supply, acting as the intermediary.
Every Juan who shall invest in these crowdfunding platforms has the right to ask for their permits and registrations.
Does this mean those with no SEC licenses are not legit? Well technically. For now. But, there’s a but, most of them say that their documentations are in the works already. Hopefully, it comes out fast. Hopefully, the crowdfunding groups get to straighten out their documentations. Hopefully, they get to regularize the lacking permits asap.
For now, proceed with caution. Or avoid them completely. No one is forcing you to invest in these. There are other investment options out there. This is just one of the many.
Do you pull out your investments? Up to you. Ever since, we advised every Juan to just put an amount they can afford to lose, especially since this is a relatively new field and that firm government regulations are not yet in place for crowdfunding, as we reminded every Juan here. Do not put all your life savings in these! Don’t put all your eggs in one basket!
Business registration can be tedious (though it’s not an excuse, it can be a hindrance). The government has initiatives to make business registration as easy as possible. But truly, in this country, there are many good businesses out there that are not properly registered, or at least not yet. Usually start-up businesses tend to operate first, then get registered once operations become sustainable.
For us, we’re managing our existing exposures. We think these crowdfunding platforms are great, they are the future. They enable small players to have more investment options. Meanwhile, we cannot fault SEC for doing their jobs in protecting the public’s money. The key is for SEC and the crowdfunding groups to work hand-in-hand on how they come into an agreement the soonest possible time — how to regulate crowdfunding because that is where we are headed. It’s the future. Financial technology a.k.a. fintech folks!
This is like LTFRB being kinda late in managing and knowing how to regulate the TNVS – the future of transport, hence the recent mess and brouhaha in Uber, Grab, etc. Our government is trying to play catch up. Our SEC also has to do a better job in expediting and promulgating the proper rules and measures to ensure that crowdfunding groups do a good job in growing and protecting Juan’s money, while funneling economic activity and funds to sectors that are in dire need of financing – agriculture mostly.
Caveat emptor every Juan. Do your due diligence and research. Manage your exposures. And pray hard that SEC finalizes the rules and framework for crowdfunding soon! Goodluck out there!
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Images from their respective websites.