InvestmentsCrowdfunding

SEC Issues Advisory on PhilCrowd.com Crowdfunding(4-min read)

The Philippines’ Securities and Exchange Commission (SEC) issued an advisory on PhilCrowd last September 7, 2018, but it circulated on social media just last week. SEC is the governing body when it comes to companies (all companies must be registered under SEC). Likewise, it also governs those who solicit investments from the public (SEC issues a secondary license to the company to allow it to solicit investments).

SEC advisory organico

As refresher, PhilCrowd is a crowdfunding platform. Crowdfunding is gaining more popularity in the country as it gives access to retail investors to be able to invest in businesses that otherwise require bigger starting capital. Similar to managed funds such as UITF / mutual funds, it pools smaller amounts from smaller investors, and once the accumulated pooled capital is big enough, then it is invested in various businesses, with the income divided among the many investors. It accepts investments from retail investors, for as low as P2,500 as membership, and a minimum of P25,000 for the investor to select which crowdfunded business s/he desires such as food cart franchise, laundry, agribusiness, etc.

To quote portions of the SEC advisory:

This ADVISORY is prompted by inquiries and reports to the Commission that PHILCROWD.COM is soliciting investments wherein investors paid Two Thousand Five Hundred Pesos (Php2,500.00) as membership fee and become eligible to fund any business they like – from agribusinesses, food franchises, energy, real estate and more. Target returns can range from Five to Fifty Percent (5-50%). Payment of return of investment is done through direct bank deposit or fund transfer to: Banco de Oro – Idea School and BPI – Michael Caya.

The public is hereby informed that based on the records of the Commission, PHILCROWD.COM., is not registered with the Commission as a corporation and/or partnership and is not authorized to solicit investments from the public as it has not secured the necessary license or permit from the SEC as required under Section 8 of the Securities Regulation Code (SRC).

Meanwhile, here is PhilCrowd’s response to the said circular:

(Click here if the Facebook post does not appear).

Knowing SEC, it is trying to do its job to warn the public, before it gets out of hand and someone actually loses money from a run-away scheme. Like it did issue advisories about many companies soliciting investments from the public, and like it did in citing various scams. Otherwise, they will be blamed for not saying anything.

Nonetheless, I also believe that PhilCrowd has a point in that there has to be rules as to how a crowdfunding can operate in the country, and from their Facebook post, they have been trying to work with SEC. Rules must be in place asap so that existing crowdfunding platforms can comply asap as well. Is the SEC saying that given the absence of firmer crowdfunding regulations, no crowdfunding platform can operate in the meantime? Then it has to catch up with the global trends. This is what happened to our transport regulating bodies when Uber and Grab became a hit in the country, our regulations were not ready for such innovation.

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Last I heard was that PhilCrowd is trying to register as a cooperative so it can accept deposits and investments from members, but maybe they realized that becoming incorporated is the best way to go. It’s also not helping that their website philcrowd.com is still under renovation and cannot be accessed, adding more cloud of uncertainty to those who already have exposures with them. Investments are now accepted through Facebook, and their messenger is not as responsive as Juan would want it to be, especially those seeking updates on their placements. PhilCrowd is trying its best though, providing updates from time to time through email and Facebook. Maybe they themselves were not ready with the overwhelming interest with their proposition.

I only know a few people from the group running PhilCrowd, and the few people I know are good people, fellow financial literacy advocates, trying to improve the financial mindset and financial capacities of retail investors. Trying to improve the country. Obviously as an outsider, I cannot vouch for them and for the money invested with them.

Caveat emptor, conduct due diligence before risking your money. Once again, I am not part of PhilCrowd but we have a small exposure with them.

Nonetheless, my previous stand, as mentioned in a previous article about SEC Advisory on Organico, remains:

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!

[…] 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.

I hope the two parties come into an agreement soon enough, and be able to help many Filipinos achieve better financial standing, through the right, legal and legitimate way.

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Click here of a copy of the SEC Advisory on PhilCrowd.

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