Rules and Regulations Governing Crowdfunding (CF)

July 8, 2019 SEC MEMORANDUM CIRCULAR NO. 14, S. 2019 SUBJECT : Rules and Regulations Governing Crowdfunding (CF) NOTICE In recognition of the recent financial innovation of raising funds for a venture or business using internet platforms, the Commission formulated rules on crowdfunding in accordance with the Securities Regulation Code (SRC) and international practices and standards. PREAMBLE WHEREAS, it is the policy of the Commission to encourage investments and active public participation in the capital market, foster good governance and ensure protection of investors; WHEREAS, the continuous advancement of information and communication technology and the globalization of financial markets facilitate innovative financial environment, which includes fund raising through internet platforms such as crowdfunding; WHEREAS, crowdfunding will help raise capital and resources for small and local business start-ups or ventures, given standards set by these Rules ; WHEREAS, crowdfunding will provide alternative investment opportunity for the investing public; WHEREAS, Section 8 of the SRC provides that securities shall not be sold or offered for sale or distribution within the Philippines, without a registration statement duly filed with the and approved by the Commission; CAIHTE WHEREAS, Section 10.2 of the SRC provides that the Commission may exempt securities transactions from registration requirement if it finds that registration is not necessary in the public interest or for the protection of the investors such as by reason of small amount involved or the limited character of the public offering; WHEREAS, Section 32.2 (a) of the SRC prohibits brokers, dealers, salesmen and associated persons of broker or dealer from making, creating or operating, or enabling another to make, create or operate, any trading market, otherwise than on a registered Exchange, for the buying and selling of any security, except in accordance with the rules and regulations that the Commission prescribes; WHEREAS, Section 37 of the SRC promotes national economic development and competitiveness in the market and directs the Commission to promulgate rules for the registration and licensing of innovative and other trading markets for innovative securities, securities of small, medium, growth and venture enterprises and technology-based ventures; WHEREAS, Section 72 of the SRC authorizes the Commission to issue, amend and rescind rules and regulations as may be necessary or appropriate, including rules and regulations defining accounting, technical, and trade terms used in the SRC, and prescribe forms in which information shall be set forth in registration statements, applications, and reports to the Commission. For this purpose, the Commission may classify persons, securities, and other matters within its jurisdiction, prescribe different requirements for different classes of persons, securities, or matters, by rule or order, conditionally or unconditionally exempt any person, security, or transaction, or class of persons, securities or transactions from any or all provisions of the SRC ; WHEREAS, it is essential to ensure that crowdfunding shall operate in a manner that is consistent with investor protection, and in the interest of the public, market integrity and transparency; NOW THEREFORE, the Commission hereby issues and promulgates the following Rules Governing Crowdfunding and the transactions and persons involved therein. ARTICLE ONE General Provisions CHAPTER ONE Definitions SECTION 1. Applicability and Coverage . These rules shall be known as the "Rules and Regulations Governing Crowdfunding (CF)." These rules shall primarily govern the operation and use of equity-based and lending-based CF by registered persons such as brokers, investment houses, funding portal, and issuers and investors who participate in CF through an online platform. Crowdfunding through means or medium other than online electronic platform is not within the coverage of these Rules , hence, the usual requirements under the SRC shall apply. DETACa SECTION 2. Definition of Terms. For purposes of these Rules , the following definition of terms shall apply unless the context otherwise requires: A. Crowdfunding refers to the offer or sale of securities of a limited scale usually for start-ups, micro, small and medium enterprises (MSMEs) done through an online electronic platform. B. Crowdfunding intermediary or intermediary refers to a registered broker, investment house, or funding portal which mediates offer and sale of crowdfunding securities through it online electronic platform. C. Crowdfunding platform or platform is a program or application accessible via the Internet or other similar electronic communication medium through which a registered broker or a registered funding portal acts as an intermediary in a transaction involving the offer or sale of securities. D. Investor refers to any person or entity that seek to make, are making, or have made an investment in an investment vehicle with the expectation of achieving profit. E. Issuer refers to the originator, maker, obligor, or creator of the security which shall be registered with the intermediary. F. SRC refers to the Securities Regulation Code under the Republic Act No. 8799. G. Commission refers to the Securities and Exchange Commission. H. Start-up refers to an organization, company, venture or project which is at the initial phase of a business cycle. I. MSME as defined in Republic Act (R.A.) 9501 or the Magna Carta for MSMEs , is "any activity or enterprise engaged in industry, agribusiness, and/or services, whether single proprietorship, cooperative, partnership or corporation whose total assets, inclusive of those arising from loans but exclusive of the land on which the particular business entity's office, plant and equipment are situated, shall have value falling under the following categories: Micro: not more than P3,000,000 Small: P3,000,001-P15,000,000 Medium: P15,000,001-P100,000,000" J. Securities are shares, participation or interests in a corporation or in a commercial enterprise or profit-making venture and evidenced by a certificate, contract, instruments, whether written or electronic in character. It includes: (a) Shares of stocks, bonds, debentures, notes evidences of indebtedness, asset-backed securities; (b) Investment contracts, certificates of interest or participation in a profit sharing agreement, certifies of deposit for a future subscription; (c) Fractional undivided interests in oil, gas or other mineral rights; (d) Derivatives like option and warrants; (e) Certificates of assignments, certificates of participation, trust certificates, voting trust certificates or similar instruments; (f) Proprietary or nonproprietary membership certificates in corporations; and (g) Other instruments as may in the future be determined by the Commission, as defined under Section 3 of the Securities Regulation Code (SRC). aDSIHc K. Registered persons are entities such as brokers and investment houses with fiduciary responsibilities engaged in buying and selling of securities for the account of others. i. Brokers refer to persons engaged in the business of buying and selling of securities for the account of others. ii. Investment houses refer to enterprises engaged in the underwriting of securities of another person or enterprise, including securities of government and its instrumentalities, among others. L. Retail investor is a person who is not a Qualified Investor. M. Funding portal is an intermediary organized and registered as a corporation to facilitate transactions involving the offer or sale of CF securities through online electronic platform. Funding portal does not : i. Offer investment advice or recommendations; ii. Solicit purchases, sales or offers to buy the securities displayed on its platform; iii. Compensate employees, agents, or other persons for such solicitation or based on the sale of securities displayed or referenced on its platform; or iv. Hold, manage, possess, or otherwise handle investor funds or securities. N. Persons associated with a crowdfunding intermediary are any partner, officer, director or manager of a crowdfunding intermediary (or any person occupying a similar status or performing similar functions), any person directly or indirectly controlling or controlled by such crowdfunding intermediary, or any employee of a crowdfunding intermediary, except that any person associated with a crowdfunding intermediary whose functions are solely clerical or ministerial shall not be included in the meaning of such term. O. Nonresident funding portal is a funding portal incorporated in or organized under the laws of a jurisdiction outside of the Republic of the Philippines, or having its principal place of business in a place not located in the Republic of the Philippines. P. Qualified investor is a person who is a Qualified Buyer as defined under the 2015 SRC IRR Rule 10.1.3 , which are the following: i. Bank; ii. Registered investment house; iii. Insurance company; iv. Pension fund or retirement plan maintained by the Government of the Philippines or any political subdivision thereof or managed by a bank or other persons authorized by the Bangko Sentral ng Pilipinas to engage in trust functions; v. Investment company; or vi. Such other person as the Commission may by rule determine as qualified buyers, on the basis of such factors as financial sophistication, net worth, knowledge, and experience in financial and business matters, or amounts of assets under management. ETHIDa For the purposes of Section 2.O.vi. above, such other persons that the Commission may by rule determine as qualified buyers shall comply with the requirements of the 2015 SRC Rule 10.1.11 . Q. Registrar of qualified buyers are authorized registers which have been granted the appropriate secondary license by the Commission to act as Registrar upon proper application and compliance with registration requirements under the 2015 SRC . R. Sensitive personal information are information that can be used to distinguish or trace an individual's identity, either alone or when combined with other personal or identifying information that is linked or linkable to a specific individual. S. Material information is any fact or information that may result in a change in the market price or value of any of the Issuer's securities, or may potentially affect the investment decision of an investor. CHAPTER TWO Exemption from Registration of Securities SECTION 3. Eligibility for Exemption from Registration of Securities. An issuer may offer or sell securities under these Rules without the need for registering said securities under Section 12 of the SRC, provided that: A. The issuer is an entity organized under the laws of the Philippines or a Filipino natural person, and accredited and/or accepted by a crowdfunding intermediary to utilize its platform; B. The aggregate amount of securities that can be offered and sold by issuer within a 12-month period shall comply with the following limits: i. Offering of securities with an aggregate value of up to Ten Million Pesos or Php10,000,000.00 within a 12-month period can be offered and sold to any investor ; ii. Offering of securities with an aggregate value of above Ten Million Pesos or Php10,000,000.00 but not exceeding Fifty Million Pesos or Php50,000,000.00 within a 12-month period can only be offered and sold to Qualified Investors . C. The aggregate amount of securities sold to any investor across all issuers in securities crowdfunding during the 12-month period shall not exceed the following limits set forth: i. Retail Investors with income of up to Two Million Pesos or Php2,000,000.00 per year may purchase securities through a Crowdfunding Intermediary in a maximum value of 5% of their total income per year. ii. Retail Investors with income of more than Two Million Pesos or Php2,000,000.00 per year may purchase securities through a Crowdfunding Intermediary in a maximum value of 10% of their total income per year. iii. Qualified Investors are not subject to the limits set forth above, provided that the Qualified Investor complies with 2015 IRR Rule 10.1.3 and 2015 IRR Rule 10.1.11 . D. The issuance of securities is conducted through an intermediary that complies with the requirements for intermediaries and the related requirements under these Rules, and the issuance of securities is conducted exclusively through the intermediary's platform; and For purposes of calculating aggregate amount of securities offered and sold by an issuer under Section 3 (B) above and determining whether an issuer has previously sold securities within a 12-month period, issuer shall include all entities controlled by or under common control with the issuer and any predecessors of the issuer. cSEDTC Similar crowdfunding done through medium other that online electronic platform may not avail of this exemption from registration of securities under Section 12 of the SRC . ARTICLE TWO Crowdfunding Intermediary Requirements As defined in Section 2, crowdfunding intermediaries refer to brokers, investment houses, and funding portals mediating sale and resale of crowdfunding securities. Article Three details funding portal eligibility and disclosure requirements. CHAPTER ONE General Requirements for Intermediaries SECTION 4. Registration of Crowdfunding Intermediary . No person shall act as an intermediary in a crowdfunding transaction unless he is registered as (i) a broker pursuant to the requirements of Section 28 of the SRC , or (ii) an investment house under the Investment Houses Law and its Implementing Rules and Regulations , or (iii) a funding portal in accordance with the requirements of Section 34 Registration of Funding Portals. In applying for registration as a crowdfunding intermediary, the applicant shall specifically signify in the application his intention to conduct the activities of a crowdfunding intermediary, either singly or in concert with others, prior to engaging in said activities through SEC Form CF-I and the submission of the requirements. An applicant to register as a crowdfunding intermediary before the Commission shall satisfy the following criteria: A. The applicant shall demonstrate that it is capable to operate an orderly, fair and transparent market in relation to the offer and sale of securities through its electronic facilities; B. The applicant's board, chief executive, controller, and any other person who is primarily responsible for its operations, are fit and proper and have not i. willfully violated any provision of these Rules , the SRC and its rules , any rule, regulation or order made hereunder, or any other laws administered by the Commission, or in the case of a registered broker has failed to supervise, with a view to preventing such violation, another person who commits such violation; ii. willfully made or caused to be made a materially false or misleading statement in any application for registration or report filed with the Commission or a self-regulatory organization, or has willfully omitted to state any material fact that is required to be stated therein; iii. failed to satisfy the qualifications or requirements for registration prescribed under Article Two of these Rules Crowdfunding Intermediary Requirements , and any related provisions in the SRC and its rules ; iv. been convicted, by a competent judicial or administrative body of an offense involving moral turpitude, fraud, embezzlement, counterfeiting, theft, estafa, misappropriation, forgery, bribery, false oath, or perjury, or of a violation of securities, commodities, banking, real estate or insurance laws; v. been enjoined or restrained by a competent judicial or administrative body from engaging in securities, commodities, banking, real estate or insurance activities or from willfully violating laws governing such activities; SDAaTC vi. been subject to an order of a competent judicial or administrative body refusing, revoking or suspending any registration, licensed or other permit under these Rules , the SRC and its rules , and any other laws administered by the Commission; vii. been subject to an order of a self-regulatory organization suspending or expelling him from membership or participating therein or from association with a member or participant thereof; viii. been found by a competent judicial or administrative body to have willfully violated any provisions of securities, commodities, banking, real estate or insurance laws, or has willfully aided, abetted, counseled, commanded, induced or procured such violation; or ix. been judicially declared insolvent. For purposes of this subsection, the term "competent judicial or administrative body" shall include a foreign court of competent jurisdiction and a foreign financial regulator. C. The applicant's Board will be able to ensure the crowdfunding intermediary complies with all the requirements under the SRC and its Rules , including any directive or any term or condition imposed by the Commission; D. The applicant will be able to manage risks associated with its business and operation including demonstrating the processes and contingency arrangement in the event the applicant is unable to carry out its operations; E. The applicant shall establish and maintain policies and procedures to monitor crowdfunding activities in its platform and ensure compliance with these Rules ; F. The applicant will appoint at least one lead person as required under Section 5 Appointment of Lead Person ; G. The applicant will be able to take appropriate action against a person in breach including directing the person in breach to take any necessary remedial measure; H. The operational framework, policies and procedures of the intermediary shall make satisfactory provisions i. for the protection of investors and public interest; ii. to ensure proper functioning of the market; iii. to promote fairness and transparency; iv. to manage any conflict of interest that may arise; v. to promote fair treatment of its users or any person who subscribe for its services; acEHCD vi. to promote fair treatment of any issuer, or potential issuer, on its portal; vii. to ensure proper regulation and supervision of its users, or any person utilizing or accessing its portal, including suspension and expulsion of such persons; viii. to provide an avenue of appeal against the decision of the crowdfunding operator; and ix. the applicant has sufficient financial, human, and other resources for the operation of crowdfunding activities, at all times. I. Before the applicant is allowed to fully operationalize the platform, the Commission may require among others: i. The intermediary to provide an IT assurance regarding the system readiness; and ii. A written declaration by the intermediary's internal auditor or lead person confirming that the intermediary has, in relation to the crowdfunding market: a. Sufficient human, financial and other resources to carry out operations; b. Adequate securities measures, systems capacity, business continuity plan and procedures, risk management, data integrity and confidentiality, record-keeping and audit trail, for daily operations and to meet emergencies; and EcTCAD c. Sufficient IT and technical support arrangements. For purposes of this rule, users mean issuers, investors, potential investors who have the authority to use or access a crowdfunding intermediary's platform. SECTION 5. Appointment of Lead Person. A crowdfunding intermediary shall appoint at least one Lead Person who shall be the chief executive of the intermediary or any person who is primarily responsible for the operations and financial management, by whatever name he is called. At all times, the Lead Person shall undertake the role of the main contact person for the purpose of liaising with the Commission and perform any duty as may be directed by the Commission. Any vacancy in relation to the position of a Lead Person shall be filled within one month from the date of resignation or the date of effectivity of resignation of the former Lead Person in compliance with this Chapter. SECTION 6. Training of Lead Person and Persons Associated with a Crowdfunding Intermediary . A crowdfunding intermediary shall ensure that the Lead Person and Persons associated with the crowdfunding intermediary undergo relevant trainings with regard to crowdfunding activities and its related activities. SECTION 7. Management of Conflict of Interest . A crowdfunding intermediary shall establish a framework which sets out policies and procedures to effectively and efficiently manage conflicts of interest including potential conflicts of interest which may arise in the course of the intermediary carrying out its functions. Such conflicts shall be managed in a timely manner. The intermediary and its officers are prohibited from providing any financial assistance to investors to invest in the securities offered on or through its platform. The intermediary is prohibited from providing any funding to issuers or investing in any of the security offered on or through its platform. Notwithstanding the paragraph above, officers of the intermediary are permitted to invest subject to the intermediary having in place appropriate process and procedure to manage conflict of interest. CHAPTER TWO Ongoing Obligations SECTION 8. Disclosure of Extent of Review Activities . A crowdfunding intermediary shall disclose the extent of its review, due diligence exercise, and/or risk assessment activities carried out on prospective issuers, including its disclosures, intending to use its crowdfunding platform. The scope of the review and due diligence exercise by a crowdfunding intermediary shall include taking reasonable steps to: A. Conduct background checks on the issuer to ensure fit and properness of the issuer, its board of directors, senior management and controlling owner; B. Verify the business proposition of the issuer; C. Carry out assessment on the issuer's creditworthiness; and D. Ensure the issuer's disclosure document lodged with the crowdfunding intermediary is verified against public records and any available third-party sources. In compliance with the requirements of paragraph A above, the crowdfunding intermediary shall require the submission of NBI Clearance of the issuer, its board of directors, senior management and controlling owner among other things. HSAcaE SECTION 9. Monitoring and Compliance. A crowdfunding intermediary monitors and ensures compliance, by itself, its officers and staff, the issuers and users, of the SRC and its Implementing Rules and Regulations , the Rules and Regulations Governing Crowdfunding, its own Rules and Regulations as prescribed under Section 4.H of these Rules (Requirement for Operational Framework, Policies and Procedures) , and other rules and conventions that would be prescribed by the Commission. SECTION 10. Immediate Notifications to the Commission . A crowdfunding intermediary shall immediately notify the Commission of: A. Any irregularity or breach of any provision of the SRC, its Rules , of these Rules , including any alleged or suspected violations of any law or guidelines in relation to money laundering and terrorism financing by its participants; B. Any material change in the information submitted to the Commission; and C. Any matter which adversely affects or is likely to adversely affect its ability to meet its obligations or to carry out its functions under these Rules . SECTION 11. Information on Platforms . A crowdfunding intermediary shall disclose and display prominently on its platform, any relevant information relating to its crowdfunding activities including A. Information relating to issuer as specified under Article Four Issuer Requirements ; B. Issuer disclosures and other Issuer submissions, including Offering Statement, Annual Report and Progress Update; C. Information on how the crowdfunding platform facilitates the investor's investment; D. General risk warning in participating in CF; E. Information on rights of investor relating to participation in CF; F. Information about complaints handling or dispute resolution and its procedures; G. Commission approved fees, charges and other expenses that it may charge to, impose on an issuer or investor; and H. Information on processes and contingency arrangement in the event the crowdfunding intermediary is unable to carry out its operations or cessation of business. CHAPTER THREE Prudential Requirements SECTION 12. Expenditure- and Risk-Based Minimum Capital Requirement. An intermediary in a transaction involving the offer or sale of securities in reliance on Rules Governing Crowdfunding shall, at all times, maintain a capital amount which exceeds its annual operational expenditure which constitutes all expenses and losses that arise in the crowdfunding intermediary's normal course of business facilitating the offer or sale of securities in reliance to these Rules in a twelve-month accounting period. For the purposes of this section, a crowdfunding intermediary shall calculate its relevant annual operational expenditure with reference to its most recent audited financial statements. If the crowdfunding intermediary's most recent audited financial statements do not represent a twelve-month accounting period, it shall calculate its annual operational expenditure on a pro rate basis so as to produce an equivalent annual amount. If a crowdfunding intermediary has not completed its first twelve months of business operations, it shall calculate its annual operational expenditure based on forecast expenditure as reflected in the budget for the first twelve months of business operations, as submitted with its application. HESIcT If a crowdfunding intermediary has (i) a material change in its expenditure; or (ii) varied its crowdfunding activities, it shall recalculate its expenditure-based minimum capital accordingly. Where a crowdfunding intermediary has recalculated its annual operational expenditure and its expenditure-based minimum capital, it shall submit this recalculation to the Commission within 10 days of its completion and seek approval from the Commission. The Commission may within 30 days upon receipt of the recalculation object to the recalculation and require the crowdfunding intermediary to revise its expenditure-based minimum capital. The Commission may require additional capital in the form of cash or insurance to cover any risky activities arising from the proposed or actual operations of the Crowdfunding Intermediary. CHAPTER FOUR Measures to Reduce Risk of Fraud SECTION 13. Measures to Reduce Risk of Fraud. An intermediary in a transaction involving the offer or sale of securities in reliance on Rules Governing Crowdfunding shall: A. Have a reasonable basis for believing that an issuer seeking to offer and sell securities in reliance to these Rules through the intermediary's platform shall not commit any form of fraud including Section 26 of the SRC on Fraudulent Transactions and the related requirements of this part. In satisfying this requirement, an intermediary may rely in the representations of the issuer concerning compliance with these requirements unless the intermediary has reason to question the reliability of those representations; B. Have a reasonable basis for believing that the issuer has established means to keep accurate records of the holders of the securities it would offer and sell through the intermediary's platform, provided that an intermediary has reason to question the reliability of those representations; C. Deny access to its platform to an issuer if the intermediary: i. Has reasonable basis for believing that the issuer or any of its officers, directors (or any person occupying a similar status or performing a similar function) or beneficial owners of 20 percent or more of the issuer's outstanding voting equity securities, calculated on the basis of voting power, is subject to disqualification under Article Four Chapter Two Disqualification Provisions . In satisfying this requirement, an intermediary shall, at a minimum, conduct a background and securities enforcement regulatory history check on each issuer whose securities are offered by the intermediary and on each officer, director or beneficial owner of 20 percent or more of the issuer's outstanding voting equity securities, calculated on the basis of voting power. caITAC ii. Has a reasonable basis for believing that the issuer of the offering presents the potential for fraud or otherwise raises concerns about investor protection. In satisfying this requirement, an intermediary shall deny access if it reasonably believes that it is unable to adequately or effectively assess the risk of fraud of the issuer or its potential offering. In addition, if an intermediary becomes aware of information after it has granted access that causes it to reasonably believe that the issuer or the offering presents the potential for fraud or otherwise raises concerns about investor protection, the intermediary shall promptly remove the offering from its platform, cancel the offering, and return (or for funding portals, direct the return of) any funds that have been committed by inventors in the offering. CHAPTER FIVE Account Opening SECTION 14. Accounts and Electronic Delivery. No intermediary may accept an investment commitment in a transaction involving the offer or sale of securities in reliance on these Rules until the investor has opened an account with the intermediary and the intermediary has obtained from the investor consent to electronic delivery of materials. An intermediary shall provide all information that is required under these Rules , including, but not limited to, educational materials on investing in crowdfunding, notices and confirmations, through electronic means. Unless otherwise indicated in the relevant rule under this Article, in satisfying this requirement, an intermediary shall provide the information through an electronic message that contains the information, through an electronic message that includes a specific link to the information as posted on the intermediary's platform, or through an electronic message that provides notice of what the information is and that it is located on the intermediary's platform or on the issuer's website. Electronic messages include, but are not limited to, e-mail, social media messages, instant messages or other electronic media messages. SECTION 15. Educational Materials. An intermediary shall deliver educational materials to investors establishing an account on their platform that explain in plain language and are otherwise designated to communicate effectively and accurately: A. The process for the offer, purchase and issuance of securities through the intermediary and the risks associated with purchasing securities offered and sold in reliance to these Rules ; B. The types of securities offered and sold in reliance on these Rules available for purchase on the intermediary's platform and the risks associated with each type of security, including the risk of having limited voting power as a result of dilution; ICHDca C. Any restriction on the resale of a security offered and sold in reliance on these Rules ; D. The types of information that an issuer is required to provide under Section 43 Disclosure Requirements , the period and frequency of the delivery of that information; E. The limitations on the amounts an investor may invest pursuant to Section 3 Eligibility for Exemption from Registration ; F. The limitations on an investor's right to cancel an investment commitment and the circumstances in which an investment may be cancelled by the issuer; G. The need for the investor to consider whether investing in a security offered and sold in reliance to these Rules is appropriate for that investor; H. That following completion of an offering conducted through the intermediary, there may or may not be any ongoing relationship between the issuer and intermediary; and I. That under Section 58 End of Compliance , an issuer shall cease to publish annual reports. An intermediary shall make the most current version of its educational material available on its platform at all times and, if at any time, the intermediary makes a material revision to its education materials, it shall make the revised educational materials available to all investors before accepting any additional investment commitments or effecting any further transactions in securities offered and sold in reliance to these Rules . SECTION 16. Promoters . In connection with establishing an account for an investor, an intermediary shall inform the investor that any person who promotes an issuer's offering for compensation, whether past or prospective, or who is a founder or an employee of an issuer that engages in promotional activities on behalf of the issuer on the intermediary's platform, shall clearly disclose in all communications on the intermediary's platform, respectively, the receipt of the compensation and that he or she is engaging in promotional activities on behalf of the issuer. SECTION 17. Compensation Disclosure . When establishing an account for an investor, an intermediary shall clearly disclose the manner in which the intermediary is compensated in connection with offerings and sales of securities in reliance on these Rules . CHAPTER SIX Requirements with Respect to Transactions SECTION 18. Issuer Information. An intermediary in a transaction involving the offer or sale of securities in reliance to these Rules shall make available to the Commission and to investors any information required to be provided by the issuer of the securities under Section 43 Disclosure Requirements . A. This information shall be made publicly available on the intermediary's platform, in a manner that reasonably permits a person accessing the platform to save, download, or otherwise store the information; B. This information shall be made publicly available on the intermediary's platform for a minimum of 15 days before any securities are sold in the offering, during which time the intermediary may accept investment commitments; C. This information, including any additional information provided by the issuer, shall remain publicly available on the intermediary's platform until the offer and sale of securities in reliance to these Rules is completed or cancelled; and TCAScE D. An intermediary shall require any person to establish an account with the intermediary to access this information. SECTION 19. Investor Qualification. Each time before accepting any investment commitment (including any additional commitment from the same person), an intermediary shall: A. Have a reasonable basis for believing that the investor satisfies the investment limitations established by these Rules . An intermediary may rely on an investor's representations concerning compliance with the investment limitation requirements, and the amount of the investor's other investments made pursuant to these Rules unless the intermediary has reason to question the reliability of the representation; B. Obtain from the investor the following: i. A representation that the investor has reviewed the intermediary's educational materials delivered pursuant to Section 15 Educational Materials , understands that the entire amount of his or her investment may be lost, and is in a financial condition to bear the loss of the investment; and ii. A questionnaire completed by the investor demonstrating the investor's understanding that: a. There are restrictions on the investor's ability to cancel an investment commitment and obtain a return of his or her investment; b. It may be difficult for the investor to resell securities acquired in reliance on these Rules ; and c. Investing in securities offered and sold in reliance on these Rules involves risk, and the investor should not invest any funds in an offering made in reliance on these Rules unless he or she can afford to lose the entire amount of his or her investment. iii. A signed declaration that the investor has not exceeded his/her investment limit pursuant to Section 3 (C) of these Rules . iv. A proof of income from Retail Investors, or a certificate issued by a Registrar of Qualified Buyers from Qualified Investors. SECTION 20. Communication Channels. An intermediary shall provide on its platform communication channels by which investors and potential investors can communicate with one another and with representatives of the issuer about offerings made available on the intermediary's platform, provided : A. If the intermediary is a funding portal, it does not participate in these communications other than to establish guidelines for communication and remove abusive or potentially fraudulent communications; B. The intermediary permits public access to view the discussions made in the communication channels; C. The intermediary restricts posting of comments in the communications channels to those persons who have opened an account with the intermediary on its platform; and D. The intermediary requires that any person posting a comment in the communication channels clearly and predominantly disclose with each posting whether he or she is a founder or an employee of an issuer engaging in promotional activities on behalf of the issuer, or is otherwise compensated, whether in the past or prospectively, to promote the issuer's offering. cTDaEH SECTION 21. Resale of Securities. An intermediary intending to provide a secondary market for the offer and sale of securities in reliance to these Rules , shall include in its operational framework the rules and procedures by which the resale of securities in reliance to these Rules will be conducted, and provide in its platform the necessary arrangements in conducting the resale of such securities. SECTION 22. Notice of Investment Commitment. An intermediary shall promptly, upon receipt of an investment commitment from an investor, give or send to the investor a notification disclosing: A. The peso amount of the investment commitment; B. The price of the securities; C. The name of the issuer; and D. The date and time by which the investor may cancel the investment commitment. SECTION 23. Maintenance and Transmission of Funds. The proceeds resulting from the offer and sale of Crowdfunding securities, or an amount equal to these proceeds, shall be credited into a sub-account, moved to a sub-portfolio, or otherwise tracked by the Crowdfunding Intermediary in an appropriate manner and attested to by a formal internal process. ITAaHc In compliance with this section, an intermediary shall direct investors to transmit the money or other consideration directly to a bank that has agreed in writing to hold the funds for the benefit of, and to promptly transmit or return the funds to the persons entitled thereto. An intermediary in a transaction involving the offer or sale of securities in reliance on these shall promptly direct the bank to: A. Transmit funds from the bank to the issuer when the aggregate amount of investment commitments from all investors is equal to or greater than the target amount of the offering, and the cancellation period as set forth in Chapter Seven of this Article Completion of Offerings, Cancellations, and Reconfirmations has lapsed, provided that in no event may the intermediary direct this transmission of funds earlier than 15 days after the date on which the intermediary makes publicly available on its platform the information required to be provided by the issuer under Section 43 Disclosure Requirements ; B. Return funds to an investor when an investment commitment has been cancelled in accordance with Chapter Seven of this Article Completion of Offerings, Cancellations, and Reconfirmations (including for failure to obtain effective reconfirmation as required under Section 27 Cancellations and Reconfirmations Based in Material Changes ); and C. Return funds to investors when an issuer does not complete the offering. cSaATC SECTION 24. Confirmation of Transaction. An intermediary shall, at or before the completion of a transaction in a security in reliance on these Rules give or send to each investor a notification disclosing: A. The date of the transaction; B. The type of security that the investor is purchasing; C. The identity, price, and number of securities purchased by the investor, as well as the number of securities sold by the issuer in the transaction and the price(s) at which the securities were sold; D. If a debt security, the interest rate and the yield to maturity calculated from the price paid and the maturity date; E. If callable security, the first date that the security can be called by the issuer; and F. The source, form and amount of any remuneration received or to be received by the intermediary from persons other than the issuer. CHAPTER SEVEN Completion of Offerings, Cancellations, and Reconfirmations SECTION 25. Cancellation. An investor may cancel an investment commitment for any reason until 48 hours prior to the deadline identified in the issuer's offering materials. During the 48 hours prior to such deadline, and investment commitment may not be cancelled except as provided in Section 27 Cancellations and Reconfirmations Based in Material Changes . SECTION 26. Early Completion of Offering . If an issuer reached the target offering amount prior to the deadline identified in its offering materials pursuant to Section 43 Disclosure Requirements , the issuer may close the offering on a date earlier than the deadline identified in its offering materials, provided that: A. The offering remains open for a minimum of 15 days pursuant to Chapter Six of this Article Requirements with Respect to Transactions ; B. The intermediary provides notice to any potential investors, and gives or sends notice to investors that have made investment commitments in the offering, of: i. The new anticipated deadline of the offering; ii. The right of investors to cancel investment commitments for any reason until 48 hours prior to the new offering deadline; and iii. Whether the issuer will continue to accept investment commitments during the 48-hour period prior to the new offering deadline. cHDAIS C. The new offering deadline is scheduled for and occurs at least five business days after the notice required in paragraph (ii) of this section is provided; and D. At the time of the new offering deadline, the issuer continues to meet or exceed the target offering amount. SECTION 27. Cancellations and Reconfirmations Based in Material Changes. If there are changes to material information, as set forth in the 2015 SRC IRR Rule 14.1 , to the terms of an offering or to the information provided by the issuer, the intermediary shall give or send to any investor who has made an investment commitment notice of the material change and that the investor's investment commitment will be cancelled unless the investor reconfirms his or her investment commitment within five (5) business days from receipt of the notice. If the investor fails to reconfirm his or her investment within those five business days, the intermediary within five business days thereafter shall: A. Give or send the investor a notification disclosing that the commitment was cancelled, the reason for the cancellation and the refund amount that the investor is expected to receive; and B. Direct the refund of investor funds. EATCcI If material changes to the offering or to the information provided by the issuer regarding the offering occur within five business days of the maximum number of days that an offering is to remain open, the offering shall be extended to allow for a period of five business days for the investor to reconfirm his or her investment. SECTION 28. Return of Funds if Offering is Not Completed . If an issuer does not complete an offering, an intermediary shall within five business days: A. Give or send each investor a notification of the cancellation, disclosing the reason for the cancellation, and the refund amount that the investor is expected to receive; B. Direct the refund of investor funds; and C. Prevent investors from making investment commitments with respect to that offering on its platform. CHAPTER EIGHT Payments to Third Parties SECTION 29. Prohibition on Payments for Sensitive Personal Information . An intermediary may not compensate any person for providing the intermediary with the sensitive personal information of any investor or potential investor in securities offered and sold in reliance on these Rules . For purposes of this rule, sensitive personal information means information that can be used to distinguish or trace an individual's identity, either alone or when combined with other personal or identifying information that is linked or linkable to a specific individual. CHAPTER NINE Permitted Activities for Intermediaries SECTION 30. Permitted Activities. The following are permitted activities for crowdfunding intermediaries, consistent with the prohibitions under Section 2 (M) Definition of Funding Portal : A. Determine whether and under what terms to allow an issuer to offer and sell securities in reliance on these Rules through its platform; provided that a funding portal otherwise complies with this section; B. Apply objective criteria to highlight offerings on the funding portal's platform where: i. The criteria are (i) reasonably designed to highlight a broad selection of issuers offering securities through the funding portal's platform; (ii) applied consistently to all issuers and offerings; and (iii) clearly displayed on the funding portal's platform; ii. The criteria may include, among other things, the type of securities being offered (for example, common stock, preferred stock or debt securities); the geographic location of the issuer; the industry or business segment of the issuer; the number or amount of investment commitments made, progress in meeting the issuer's target offering amount or, if applicable, the maximum offering amount; and the minimum or maximum investment amount; provided that the funding portal may not highlight an issuer or offering based on the advisability of investing in the issuer or its offering; and iii. The funding portal does not receive special or additional compensations for highlighting one or more issuers or offerings on its platform. C. Provide search functions or other tools that investors can use to search, sort, or categorize the offerings available through the funding portal's platform according to objective criteria where: DHITCc i. The criteria may include, among other things, the type of securities being offered (for example, common stock, preferred stock or debt securities); the geographic location of the issuer; the industry or business segment of the issuer; the number or amount of investment commitments made, progress in meeting the issuer's target offering amount or, if applicable, the maximum offering amount; and the minimum or maximum investment amount; and ii. The criteria may not include, among other things, the advisability of investing in the issuer or its offering, or an assessment of any characteristic of the issuer, its business plan, its key management or risks associated with an investment. D. Provide communication channels by which investors can communicate with one another and with representatives of the issuer through the funding portal's platform about offerings through the platform, so long as the funding portal: i. Does not participate in these communications, other than to establish guidelines for communication and remove abusive or potentially fraudulent communications; ii. Permits public access to view the discussions made in the communication channels; iii. Restricts posting of comments in the communication channels to those persons who have opened an account on its platform; and iv. Requires that any person posting a comment in the communication channels clearly disclose with each posting whether he or she is a founder or an employee of an issuer engaging in promotional activities on behalf of the issuer, or is otherwise compensated, whether in the past or prospectively, to promote an issuer's offering. E. Advise an issuer about the structure or content of the issuer's offering, including assisting the issuer in preparing offering documentation; F. Compensate a third party for referring a person to the funding portal, so long as the third party does not provide the funding portal with sensitive personal information of any potential investor, and the compensation, other than that paid to a registered broker, is not based, directly or indirectly, on the purchase or sale of a security in reliance on these Rules offered on or through the funding portal's platform; G. Pay or offer to pay any compensation to a registered broker for services, including referrals pursuant to paragraph (F) of this section, in connection with the offer or sale of securities by the funding portal in reliance on these Rules , provided that: cEaSHC i. Such services are provided pursuant to a written agreement between the funding portal and the registered broker; and ii. Such services and compensation are permitted under this part. H. Receive any compensation from a registered broker for services provided by the funding portal in connection with the offer or sale of securities by the funding portal in reliance on these Rules , provided that: i. Such services are provided pursuant to a written agreement between the funding portal and the registered broker; and ii. Such compensation is permitted under this part. I. Advertise the existence of the funding portal and identify one or more issuers or offerings available on the portal on the basis of objective criteria, as long as: i. The criteria are reasonably designed to identify a broad selection of issuers offering securities through the funding portal's platform, and are applied consistently to all potential issuers and offerings; ii. The criteria may include, among other things, the type of securities being offered (for example, common stock, preferred stock or debt securities); the geographic location of the issuer; the industry or business segment of the issuer; the expressed interest by investors, as measured by number or amount of investment commitments made, progress in meeting the issuer's target offering amount or, if applicable, the maximum offering amount; and the minimum or maximum investment amount; and iii. The funding portal does not receive special or additional compensation for identifying the issuer or offering in this manner. J. Deny access to its platform to, or cancel an offering of an issuer, pursuant to Section 13 Measures to Reduce Risk of Fraud , if the funding portal has a reasonable basis for believing that the issuer or the offering presents the potential for fraud or otherwise raises concerns about investor protection; K. Accept, on behalf of an issuer, an investment commitment for securities offered in reliance on these Rules by that issuer on the funding portal's platform; L. Direct investors where to transmit funds or remit payment in connection with the purchase of securities offered and sold in reliance on these Rules ; and M. Direct the assigned bank, as required by Section 23 Maintenance and Transmission of Funds , to release proceeds to an issuer upon completion of a crowdfunding offering or to return proceeds to investors in the event an investment commitment or an offering is cancelled. SECTION 31. Disqualification of Intermediaries . Operation with respect to crowdfunding of investment houses, brokers and funding portal may be refused, or any registration granted may be revoked, suspended, or limitations placed thereon, by the Commission if, after due notice and hearing the Commission determines the application or registrant: A. Has willfully violated any provision of these Rules , the SRC and its rules , any rule, regulation or order made hereunder, or any other law administered by the Commission, or in the case of a registered broker has failed to supervise, with a view to preventing such violation, another person who commits such violation; CTIEac B. Has willfully made or caused to be made a materially false or misleading statement in any application for registration or report filed with the Commission or a self-regulatory organization, or has willfully omitted to state any material fact that is required to be stated therein; C. Has failed to satisfy the qualifications or requirements for registration prescribed under Article Two of these Rules Crowdfunding Intermediary Requirements , and any related provisions in the SRC and its rules ; D. Has been convicted, by a competent judicial or administrative body of an offense involving moral turpitude, fraud, embezzlement, counterfeiting, theft, estafa, misappropriation, forgery, bribery, false oath, or perjury, or of a violation of securities, commodities, banking, real estate or insurance laws; E. Is enjoined or restrained by a competent judicial or administrative body from engaging in securities, commodities, banking, real estate or insurance activities or from willfully violating laws governing such activities; F. Is subject to an order of a competent judicial or administrative body refusing, revoking or suspending any registration, licensed or other permit under these Rules , the SRC and its rules , and any other law administered by the Commission; DcHSEa G. Is subject to an order of a self-regulatory organization suspending or expelling him from membership or participating therein or from association with a member or participant thereof; H. Has been found by a competent judicial or administrative body to have willfully violated any provisions of securities, commodities, banking, real estate or insurance laws, or has willfully aided, abetted, counseled, commanded, induced or procured such violation; or I. Has been judicially declared insolvent. SECTION 32. Forms for Intermediaries. Intermediaries shall use the following forms for application for registration, withdrawal of registration, annual report, and amendments: A. FORM CF-I Schedule A: Application for Registration The registration will be effective the later of: (1) Thirty (30) calendar days after the date that the registration is received by the Commission; or (2) The date the application of the crowdfunding intermediary is approved by the Securities and Exchange Commission. Annex A1: Application for Registration as Funding Portal If crowdfunding intermediary is not a licensed broker or investment house, the crowdfunding intermediary shall register as a Funding portal. Schedule B: Amendment to Application for Registration A crowdfunding intermediary shall file an amendment to Form CF-I within 30 days of any of the information previously submitted on Form CF-I becoming inaccurate for any reason. Schedule C: Withdrawal from Registration as crowdfunding intermediary If a crowdfunding intermediary succeeds to and continues the business of a registered crowdfunding intermediary, the registration of the predecessor will remain effective as the registration of the successor if the successor, within 30 days after such succession, files a registration on Form CF-I and the predecessor files a withdrawal on Form CF-I; provided, however, that the registration of the predecessor funding portal will be deemed withdrawn 45 days after registration on Form CF-I is filed by the successor. B. SEC FORM 17-A An annual report on SEC Form 17-A for the fiscal year in which the registration statement was rendered effective by the Commission, and for each fiscal year thereafter, within one hundred five (105) calendar days after the end of the fiscal year. SaCIDT SECTION 33. Registration Fee for Intermediaries. Upon the submission of application of registration as a Crowdfunding Intermediary, including the application of registration as a Funding Portal, the applicant shall pay an amount of Php50,000.00 plus a Legal Research Fee (LRF) of Php500.00 within such period as the Commission may fix. ARTICLE THREE Funding Portal Regulation CHAPTER ONE Registration of Funding Portals SECTION 34. Registration. No entity shall act as a funding portal unless it is registered as such. An applicant shall comply with the following requirements: A. Shall be organized as a corporation and registered with the Commission; B. Shall have paid-in capital of at least Php5,000,000, in addition to the requirements of Section 12 Expenditure- and Risk-Based Minimum Capital Requirement ; C. Registration Statement (Form CF-I Schedule A) which would include information concerning: i. Funding portal's principal place of business; ii. Funding portal's legal status and disciplinary history, if any; iii. Business activities, including types of compensation the funding portal would receive; iv. Control affiliates of the funding portal and disclosure of their disciplinary history, if any; and v. Funding portal's website address(es) or other means of access. D. Account Opening and Disclosure Rules; E. Business Conduct Rules. SECTION 35. Amendments of Registration. A funding portal shall file an amendment to Form CF-I Schedule B within 30 days of any of the information previously submitted on Form CF-I Schedule A becoming inaccurate for any reason. SECTION 36. Withdrawal. A funding portal shall promptly file a withdrawal of previously approved funding portal registration on Form CF-I Schedule C in accordance with the instructions on the form upon ceasing to operate as a funding portal. Withdrawal will be effective on the later of 30 days after receipt by the Commission (after the funding portal is no longer operational), or within such longer period of time as to which the funding portal consents or which the Commission by order may determine as necessary or appropriate in the public interest or for the protection of investors. SECTION 37. Nonresident Funding Portals . Registration pursuant to this section by a nonresident funding portal shall be conditioned upon there being an information sharing arrangement in place between the Commission and the competent regulator in the jurisdiction under the laws of which the nonresident funding portal is organized or where it has its principal place of business, that is applicable to the nonresident funding portal, and is subject to reciprocity . CHAPTER TWO Exemption SECTION 38. Exemption from Broker Registration Requirements . A funding portal that is registered as such with the Commission pursuant to these Rules is exempt from the broker registration requirements of Section 28 of the SRC and its rules connection with its activities as a funding portal. cHECAS CHAPTER THREE Conditional Safe Harbor SECTION 39. Conditional Safe Harbor. Under Section 2 (M) Definition of Funding Portal , a funding portal acting as an intermediary in a transaction involving the offer or sale of securities in reliance on these Rules may not: A. Offer investment advice or recommendations; B. Solicit purchases, sales, or offers to buy the securities offered or displayed on its platform or portal; C. Compensate employees, agents, or other persons for such solicitation or based on the sale of securities displayed or referenced on its platform or portal; D. Hold, manage, possess, or otherwise handle investor funds or securities. This Chapter is intended to provide clarity with respect to the ability of a funding portal to engage in certain activities, consistent with the prohibitions under Section 2 (M) Definition of Funding Portal . No presumption shall arise that a funding portal has violated the prohibitions under Section 2 (M) Definition of Funding Portal or this part by reason of the funding portal engaging in activities in connection with the offer or sale of securities in reliance on these Rules that do not meet the conditions specified under this section. aTHCSE CHAPTER FOUR Compliance SECTION 40. Policies and Procedures. A funding portal shall implement written policies and procedures reasonably designed to achieve compliance with the requirements under these Rules relating to its business as a funding portal. SECTION 41. Anti-Money Laundering . A funding portal shall comply with the requirements of the Anti-Money Laundering Act of 2001 , as amended and its Implementing Rules and Regulations . SECTION 42. Corporate Governance . A funding portal shall comply with the requirements of the Revised Code of Corporate Governance of 2009 and itsImplementingRulesand Regulations . SECTION 43. Confidentiality. A funding portal shall comply with the requirements of 2015 SRC IRR Rule 30.2.1.2.4.2 as they apply to brokers, as well as the Data Privacy Act of 2012. SECTION 44. Inspections and Examinations . A funding portal shall permit the examination and inspection of all of its business and business operations that relate to its activities as a funding portal, such as its premises, systems, platforms, and records by representatives of the Commission. ARTICLE FOUR Issuer Requirements CHAPTER ONE Disclosure Requirements SECTION 45. Disclosure Requirements. An issuer offering or selling securities under these Rules shall register with an intermediary and provide information enumerated below: A. Name and other details of the intermediary; B. Nature of its business, financial condition, historical reports of operation; C. Business plan with respect to CF offering; D. Risk factors of investing in its project; E. Procedure on how to return funds if target offering is not met; and F. Procedure to complete or cancel investment commitment. There shall only be one intermediary per offering of securities under these Rules . CHAPTER TWO Disqualification Provisions SECTION 46. Disqualification of Issuer. Article One Chapter Two Exemption from Registration of Securities shall not be available for issuer if the Commission finds: A. The issuer: i. Has been judicially declared insolvent; ii. Has violated any of the provision of these Rules , and the SRC and its rules , or any order of the Commission of which the issuer has notice in connection with the offered securities; iii. Has been or is engaged or is about to engage in fraudulent transactions; cAaDHT iv. Has made any false or misleading representation of material facts in any disclosure concerning the issuer or its securities; or v. Has failed to comply with any requirements that the Intermediary may impose as a condition for application of securities for crowdfunding. B. The disclosure statement is on its face incomplete or inaccurate in any material respect or includes any untrue statements of a material fact required to be stated therein or necessary to make the statement therein not misleading. C. The issuer, any officer, director or controlling person performing similar functions, or any underwriter has been convicted, by a competent judicial or administrative body, upon plea of guilty, or otherwise, of an offense involving moral turpitude and/or fraud or is enjoined or restrained by the Intermediary, the Commission or other competent or administrative body for violations of securities, commodities, and other related laws. D. The Intermediary and the Commission may compel the production of all the books and papers of such issuer, and may administer oaths to, and examine the officers of such the issuer or any other person connected therewith as to its business and affairs. E. If any issuer shall refuse to permit an examination to be made by the Intermediary and/or the Commission, its refusal shall be ground for the refusal or revocation of the registration of its securities. F. If the Intermediary and/or Commission deems it necessary, it may issue an order suspending the offer and sale of the securities pending any investigation. The order shall state the grounds for taking such action, but such order of suspension although binding upon the persons notified thereof, shall be deemed confidential, and shall not be published. Upon the issuance of the suspension order, no further offer or sale of such security shall be made until the same is lifted or set aside by the Intermediary and/or Commission. Otherwise, such sale shall be void. IDSEAH G. Notice of issuance of such order shall be given to the issuer and every broker who shall have notified the Intermediary and/or Commission of an intention to sell such security. H. A disclosure statement may be withdrawn by the issuer only with the consent of the Intermediary and/or the Commission. For purposes of this subsection, the term "competent judicial or administrative body" shall include a foreign court of competent jurisdiction and a foreign financial regulator. CHAPTER THREE Prohibition on Advertising Terms of Offering SECTION 47. Advertising. A notice may advertise any of the terms of an issuer's offering made if it directs investors to the intermediary's platform and includes no more than the following information: A. A statement that the issuer is conducting an offering, the name of the intermediary through which the offering is being conducted and a link directing the potential investor to the intermediary's platform; B. The terms of the offering; and C. Factual information about the legal identity and business location of the issuer, limited to the name of the issuer of the security, the address, phone number and website of the issuer, the e-mail address of a representative of the issuer and a brief description of the business of the issuer. Notwithstanding the prohibition on advertising any of the terms of the offering, an issuer, and persons acting on behalf of the issuer, may communicate with investors and potential investors about the terms of the offering through communication channels provided by the intermediary on the intermediary's platform, provided that an issuer identifies itself as the issuer in all communications. Persons acting on behalf of the issuer shall identify their affiliation with the issuer in all communications on the intermediary's platform. CHAPTER FOUR Issuer Forms SECTION 48. Issuer Form. Issuer shall use Form CF for offering, progress updates, termination of reporting, amendments, and annual report. Form CF may be used to file or to report any of the following. The Commission shall be furnished with a copy of the disclosures duly received by an Intermediary. The Intermediary shall also make available the disclosures provided by the Issuer on its Crowdfunding Platform. A. FORM CF Application as Issuer of crowdfunding securities shall be filed prior all other forms herein: aCIHcD Form CF-O: Offering Statement This shall be filed before the commencement of the offering. An amendment filed prior to the effective date of the registration statement shall recommence the forty-five (45)-day period within which the Intermediary shall act on a registration statement. An amendment filed after the effective date of the registration statement shall become effective only upon such date as determined by the Intermediary. For amendment, use Form CF/A. Form CF-AR: Annual Report This shall be filed not later than one hundred five (105) days after the end of the fiscal year. For amendments, use Form CF-AR/A. Form CF-TR: Termination of Reporting For issuers eligible to terminate its obligation to file annual reports, shall file within five business days from the date on which the issuer becomes eligible to terminate its reporting obligation, to advise investors that the issuer will cease reporting. Form CF-U: Progress Update An issuer shall file with the Intermediary and provide to investors Progress Update to disclose its progress in meeting the target offering amount no later than five (5) business days after each of the dates when the issuer reaches 50 percent and 100 percent of the target offering amount, and in case of changes to material information, as set forth in the 2015 SRC IRR Rule 14.1 . For detailed discussion, refer to Article Five of these Rules . ARTICLE FIVE Reports, Recordkeeping and Other Post Registration/Operational Requirements CHAPTER ONE General Reporting Requirements SECTION 49. Recordkeeping. Every Crowdfunding Intermediary and/or Issuer shall make, keep and preserve for such periods, records, furnish copies thereof, and make such reports, as the Commission by its rules and regulations may prescribe. SECTION 50. Location of Records. All records required shall be kept at the principal place of business of the Intermediary and/or Issuer or such other principal office as shall be designated by the Intermediary or Issuer. If the principal place of business is outside the Philippines, then upon the request of the SEC, the Intermediary and/or Issuer shall provide such records as requested at the place in the Philippines within seventy-two (72) hours after receipt of the request. SECTION 51. Submission of Yearly Reports. An Intermediary and/or Issuer shall file with the Commission and post on the intermediary's website an annual report along with Issuer disclosures and other Issuer submissions certified by the principal executive officer of the Issuer to be true and complete in all material respects and a description of the financial condition of the Issuer as described in Article Four Issuer Requirements . A crowdfunding intermediary shall, at the end of each year, submit a report on all CF transactions in its crowdfunding platform. SECTION 52. Examination of Records. All records held by an Intermediary and/or Issuer are subject at any time, or from time to time, to reasonable periodic, special, or other examination by the representatives of the Commission as the Commission may deem necessary or appropriate in the public interest or for the protection of investors. Every Intermediary and/or Issuer shall furnish promptly to the Commission true, correct, complete and current copies of such records of the Intermediary and/or Issuer that are requested by the representatives of the Commission. CHAPTER TWO Ongoing Reporting Requirements for Issuers SECTION 53. Annual Report of Issuers. An issuer that has offered and sold securities under these Rules shall file with its intermediary and post on the issuer's website an annual report along with the financial statements of the issuer certified by the principal executive officer of the issuer to be true and complete in all material respects and a description of the financial condition of the issuer. If, however, an issuer has available financial statements that have either been reviewed or audited by a public accountant that is independent of the issuer, those financial statements shall be provided and the certification by the principal executive officer will not be required. cHaCAS The annual report also shall include the Disclosure Requirements of these Rules . The report shall be filed using Form CF-AR and submitted to the Intermediary no later than 105 days after the end of the fiscal year covered by the report. An issuer providing financial statements that are not audited or reviewed shall have its principal executive officer provide the following certification: I, [identify the certifying individual], certify that the financial statements of [identify the issuer] included in this Form are true and complete in all material respects. [Signature and Article]. SECTION 54. Progress Updates. The issuer shall make, keep and maintain the following reports and records which shall be submitted to or be open for inspection by the Intermediary and/or the Commission, as provided in this Chapter: A. An issuer shall file with the Intermediary and provide to investors progress report using Form CF-U: Progress Update to disclose its development in achieving the target offering amount no later than five (5) business days after each of the dates when the issuer reaches 50 percent and 100 percent of the target offering amount, and in case of changes to material information, as set forth in the 2015 SRC IRR Rule 14.1 . B. If the issuer will accept proceeds in excess of the target offering amount, the issuer shall file with the Intermediary and provide to investors, no later than five business days after the offering deadline, a final Form CF-O/A: Amendment to Statement of Offering to disclose the total amount of securities sold in the offering. C. The requirements of paragraphs (A) and (B) of this section shall not apply to an issuer if the relevant intermediary makes publicly available on the intermediary's platform frequent updates regarding the progress of the issuer in meeting the target offering amount; however, the issuer shall still file a Form CF-O/A: Amendment to Statement of Offering to disclose the total amount of securities sold in the offering no later than five business days after the offering deadline. CHAPTER THREE Ongoing Reporting Requirements for Intermediaries SECTION 55. Records to be Made and Kept by Intermediary. An intermediary shall make and preserve the following records for five years, the first two years in an easily accessible place: A. All records related to an investor who purchases or attempts to purchase crowdfunding securities; B. All issuer forms and disclosures submitted by issuers; C. All other records related to issuers who offer and sell or attempt to offer and sell crowdfunding securities; DACcIH D. Records of all communications that occur on or through its platform; E. All records related to persons that use communication channels provided by a funding portal to promote an issuer's securities or communicate with potential investors; F. All records required of intermediary to demonstrate compliance with, in accordance with these Rules ; G. All notices provided by such intermediary to issuers and investors generally through the crowdfunding platform or otherwise, including, but not limited to, notices addressing hours of crowdfunding platform operations (if any), crowdfunding platform malfunctions, changes to crowdfunding platform procedures, maintenance of hardware and software, instructions pertaining to access to the crowdfunding platform and denials of, or limitations on, access to the crowdfunding platform; H. All written agreements (or copies thereof) entered into by such funding portal relating to its business as such; I. All daily, monthly and quarterly summaries of transactions effected through the funding portal, including: i. Issuers for which the target offering amount has been reached and funds distributed; and ii. Transaction volume, expressed in: J. Number of transactions; K. Number of securities involved in a transaction; L. Total amounts raised by, and distributed to, issuers; and M. Total dollar amounts raised across all issuers, expressed in U.S. dollars; and N. A log reflecting the progress of each issuer who offers or sells securities through the funding portal toward meeting the target offering amount. SECTION 56. Records of Crowdfunding Transactions . The intermediary shall make and keep all pertinent information on crowdfunding transactions including records of all oral and written communications provided or received concerning sales, resales, offers, cancellation, instructions, and prices, whether communicated by telephone, voicemail, facsimile, instant messaging, chat rooms, electronic mail, mobile device or other digital or electronic media. The record shall specifically include the following: A. Reliable timing data for the initiation of the trade that would permit complete and accurate crowdfunding transactions; B. A record of the date and time, to the nearest minute, using Philippine Standard Time, by timestamp or other timing device, for each crowdfunding transaction; C. All terms of each CF, including all terms and information regarding payment or settlement instructions; D. CF portal and/or broker and other CF participants shall make and keep record of each CF that it centrally clears, categorized by transaction and counterparty; E. The name of the investor with which each CF was executed; HSCATc F. The price at which the CF was executed, in end of day Peso rate; G. Fees or commissions and other expenses, identified by transaction; H. A record of all oral and written communications provided or received concerning sale, resale, offers, prices, cancellation and other material changes whether communicated by electronic mail, portal's messaging, or other digital or electronic media; I. All terms of each related cash or clearing transaction; J. The price at which the related sale or resale transaction was executed; K. Records of each transaction, including all documents on which CF transaction information is originally recorded. Such records shall be kept in a form and manner identifiable and searchable by transaction, and shall include all documents customarily generated in accordance with market practice that demonstrate the existence and nature of the CF transaction, including, but not limited to, records of all orders (filled, unfilled or cancelled), correspondence, journals, memoranda, ledgers, confirmation, risk disclosure documents, statement of purchase and sale, documents of Article, if applicable; L. Records of each transaction executed on a funding portal or market cleared by bank/s maintained in compliance with SEC regulations; M. A record of the any other relevant financial information relating to transactions in crowdfunding; and N. Any other relevant information. The records required to be maintained and preserved pursuant this Chapter shall be produced, reproduced, and maintained in the original, non-alterable format in which they were created. EHaASD The records required to be made and preserved pursuant to this Chapter may be prepared or maintained by a third party on behalf of an intermediary. An agreement with a third party shall not relieve an intermediary from the responsibility to prepare and maintain records as specified in this rule. A crowdfunding intermediary shall file with the Commission, a written undertaking, signed by a duly authorized person of the third party, stating in effect that such records are the property of the crowdfunding intermediary and will be surrendered promptly on request of the crowdfunding intermediary. The undertaking shall include the following provision: With respect to any books and records maintained or preserved on behalf of [name of CF intermediary] , the undersigned hereby acknowledges that the books and records are the property of [name of CF intermediary] , and hereby undertakes to permit examination of such books and records at any time, or from time to time, during business hours by representatives of the Securities and Exchange Commission, and to promptly furnish to the Commission, a true, correct, complete and current hard copy of any, all, or any part of, such books and records. SECTION 57. Business Records. An intermediary shall keep full, complete and systematic records of all activities related to its business as an intermediary of crowdfunding, including, but not limited to, the following: A. Matters pertaining to its governance; B. Financial records; C. Complaints; and D. Marketing and sales materials. IDTSEH SECTION 58. End of Compliance. An issuer shall continue to comply with the ongoing reporting requirements until one of the following occurs: A. The issuer or another party repurchases all of the securities issued in reliance with these Rules , including any payment in full of debt securities or any complete redemption of redeemable securities; or B. The issuer liquidates or dissolves its business in accordance with applicable rules and regulations. SECTION 59. Sanction and Penalties. If the Commission finds that there is a violation of any provision of these Rules or any applicable rules under the SRC , or that any person, in a registration statement or its supporting papers and the prospectus, as well as in the periodic reports required to be filed with the Commission has made any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to have made the statements therein not misleading or refused to permit any lawful examination into its corporate affairs, the Commission shall, in its discretion impose additional sanctions in addition to the existing sanctions and/or penalty fees approved and published by the Commission through its official publications such as the SRC Section 54 , memorandum circulars, resolutions, website and other issuances. The imposition of foregoing administrative sanctions shall be without prejudice to the filing of criminal charges against the individuals responsible for the violation in accordance with Section 73 of the SRC . ARTICLE SIX Miscellaneous Provisions SECTION 60. Transitory Provision. Any person or corporation engaged in equity-based and/or lending-based crowdfunding prior to the effectivity of these Rules shall comply with the requirements under Article Two Crowdfunding Intermediary Requirements within three (3) months upon the effectivity of these Rules . Those who submit an application for registration in accordance with Article Two Crowdfunding Intermediary Requirements of these Rules within three (3) months from effectivity of these Rules may continue its operations until the application has been approved, and in doing so, will not be regarded as carrying on crowdfunding activities in contravention with these Rules . SECTION 61. Repealing Clause. All rules and regulations, circulars, orders, memoranda, or any part thereof and the rules and regulations previously promulgated by the Commission, in conflict with or contrary to these Rules are hereby repealed or modified accordingly. SECTION 62. Separability Clause. If any portion or provision of these Rules is declared unconstitutional or invalid, the other portions of provisions thereof, which are not affected shall thereby continue in full force and effect. SECTION 63. Effectivity. These rules shall take effect fifteen (15) days after its publication in two (2) newspapers of general circulation in the Philippines. July 8, 2019, Pasay City Philippines. SICDAa (SGD.) EMILIO B. AQUINO Chairperson ATTACHMENTS SEC Form CF/CF Issuers SEC Form CF-I Revised June 2019