Disclosure Requirements on Advertisements of Financing Companies and Lending Companies and Reporting of Online Platforms

August 6, 2019 CORPORATE GOVERNANCE AND FINANCE DEPARTMENT NOTICE The Commission hereby requests comments on the attached draft Memorandum Circular on Disclosure Requirements on Advertisements of Financing Companies and Lending Companies and Reporting of Online Platforms. Please submit duly signed written comments on the exposure draft to the Corporate Governance and Finance Department of this Commission within ten (10) days from the date hereof, by way of any of the following: Letter Corporate Governance and Finance Department Ground Floor, North Wing Hall, Secretariat Bldg. PICC Complex, Vicente Sotto St. 1307 Pasay City Email [emailprotected] Fax No. (02) 818-5990 All interested parties are requested to use the attached Comments Table in submitting comments and proposed revisions. Issued on August 6, 2019. ATTACHMENTS SEC MEMORANDUM CIRCULAR NO. ____ Series of 2019 TO : ALL FINANCING AND LENDING COMPANIES SUBJECT : DISCLOSURE REQUIREMENTS ON ADVERTISEMENTS OF FINANCING COMPANIES AND LENDING COMPANIES AND REPORTING OF ONLINE PLATFORMS DATE : __________ 2019 WHEREAS , the Commission is aware that Financing Companies (FCs) and Lending Companies (LCs) make their services known through various modes of advertisement, e.g. , television, radio, billboard, websites, social media, etc. (Advertisements) ; WHEREAS , the Commission also notes the proliferation of online lending platforms such as websites and mobile applications that are readily downloadable from mobile application stores (Online Platforms) ; WHEREAS , the Commission has been receiving several inquiries as to the registration and legitimacy of FCs and LCs, especially those that operate through Online Platforms; WHEREAS , the Commission exercises regulatory and supervisory authority over FCs and LCs by virtue of Republic Act No. 8556, or the Financing Company Act of 1998, as amended, and Republic Act No. 9474 or the Lending Company Regulation Act of 2007; WHEREFORE, IN VIEW OF THE FOREGOING , FCs and LCs are hereby required to observe the following in their Advertisements and Online Platforms: SEC. 1. Disclosure . FCs and LCs are required to fully disclose their corporate name, SEC Registration Number and Certificate of Authority to Operate a Financing/Lending Company ( CA ) Number in a conspicuous portion of the Advertisement and Online Platforms. SEC. 2. Advisory. FCs and LCs are required to provide an advisory to their prospective borrowers to study the terms and conditions in the Disclosure Statement before proceeding with the loan transaction. SEC. 3. Registration of Trade Name. FCs and LCs are required to register all their Online Platforms as trade names in accordance with SEC Memorandum Circular No. 13 series of 2019. 1 SEC. 4. Report to the Commission. FCs and LCs are required to submit an Affidavit of Compliance (Form 1 Existing Online Platforms) to the Corporate Governance and Finance Department (CGFD) of the Commission containing a report of all their existing Online Platforms, within ten (10) days from the effectivity of this Circular. Said report shall include, but not limited to, the following information: 1. Name of Online Platform/s; 2. Proof of compliance with Section 3 hereof; 3. Images of the Online Platform/s as they appear to the public; and 4. Illustrations of the Online Platforms showing how the required Disclosure and Advisory shall be displayed. Online Platforms that are to be developed and/or utilized by LCs and FCs shall likewise be reported to the Commission through an Affidavit of Compliance (Form 2 Prospective Online Platforms) , not later than ten (10) days before commencement of the operations of said Online Platform/s. SEC. 5. Penalties. The penalties below shall be imposed for the following violations: a. Non-compliance with Sections 1 (Disclosure) and 2 (Advisory) COMPANY BASIC PENALTY DAILY PENALTY FC P100,000.00 P500.00 LC P50,000.00 P300.00 b. Non-compliance with Section 3 (Registration of Trade Name) COMPANY BASIC PENALTY DAILY PENALTY FC P100,000.00 P500.00 LC P50,000.00 P300.00 c. Non-compliance with Section 4 (Report to the Commission) VIOLATION COMPANY BASIC PENALTY DAILY PENALTY Failure to submit the Affidavit of Compliance (Form 1) containing a report of all existing Online Platforms FC P50,000.00 P400.00 LC P25,000.00 P200.00 Submission of the Affidavit of Compliance (Form 1) with incomplete information/list of all existing Online Platforms FC P50,000.00 P400.00 LC P25,000.00 P200.00 Failure to submit the Affidavit of Compliance (Form 2) containing a report of all prospective Online Platforms that are to be developed/utilized FC P50,000.00 P400.00 LC P25,000.00 P200.00 Commencement of operations of the Online Platform/s without submission of the required Affidavit of Compliance (Form 2) FC P50,000.00 P400.00 LC P25,000.00 P200.00 d. Continuous non-compliance/submission of false or fraudulent sworn statement COMPANY PENALTY FC Subject to the facts, circumstances and gravity of the offense, the Commission, at its discretion, may impose a Fine of not less than twice the basic penalty but not more than P1 Million (1,000,000) Pesos; or Suspension of lending and financing activities for a period of sixty (60) days; or Revocation of Certificate of Authority to operate as a Financing or Lending Company, as appropriate for each circumstance. LC The foregoing penalties shall be without prejudice to any other penalties that may be imposed by the Commission pursuant to Presidential Decree No. 902-A, Republic Act No. 11232, otherwise known as the Revised Corporation Code of the Philippines, and all other relevant laws, rules and regulations being implemented by the Commission, which may include the suspension or revocation of the FC/LC's primary license and/or disqualification of its directors and officers; and further, to the penalties that may be imposed by the courts or other government agencies in the exercise of their respective mandates. This Circular shall take effect fifteen (15) days after complete publication in two (2) national newspapers of general circulation. Pasay City, Philippines, ______________. For the Commission: EMILIO B. AQUINO Chairperson Form 1 Existing Online Platforms Affidavit of Compliance Form 2 Prospective Online Platforms Affidavit of Compliance Comments on the Proposed Memorandum Circular on Disclosure Requirements on Advertisements of Financing Companies and Lending Companies and Reporting of Online Platforms Footnotes 1. Amended Guidelines and Procedures on the Use of Corporate and Partnership Names.