Request for Comments on the Proposed Rules and Regulations Governing Crowdfunding (CF)

2017 SEC MSRD SUBJECT : Request for Comments on the Proposed Rules and Regulations Governing CrowdFunding (CF) NOTICE The Commission intends to issue Rules and Regulations Governing Crowdfunding (CF) . For this purpose, the Commission is soliciting comments from market participants and interested parties on the proposed CF Rules. Parties are encouraged to indicate the specific section and provision in the CF Rules to which their comments pertain. The draft Rules and Regulations Governing the Crowdfunding is hereto attached for your reference. Kindly address your comments to the Markets and Securities Regulation Department (MSRD) , G/F Secretariat Building PICC Complex, Roxas Boulevard Pasay City, not later than 12:00nn 15 December 2017 . You may also email your comments to mrd@)sec.gov.ph . ATTACHMENT SEC MEMORANDUM CIRCULAR NO. __ Series of 2017 SUBJECT : RULES AND REGULATIONS GOVERNING CROWDFUNDING (CF) NOTICE In recognition of the recent financial innovation of raising funds for a venture or business activity performed through 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 simpler alternative funding activity for the investing public; 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. 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. 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 small or limited scale fund raising activity usually for start-ups, micro, small and medium enterprises (MSMEs) using online electronic platforms. B. Investor refers to any investor or any potential investor, as the context requires. C. Issuer refers to the originator, maker, obligor, or creator of the security. D. SRC refers to the Securities Regulation Code under the Republic Act No. 8799. E. Commission refers to the Securities and Exchange Commission. F. Start-up refers to a venture or project which is at the initial phase of business. G. MSMEs are micro, small and medium enterprises governed by the Republic Act (R.A.) 9501 or the Magna Carta for MSMEs. MSME is defined in the same Act Section 3 as "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, must 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" H. Securities. As defined under Section 3 of the Securities Regulation Code (SRC). I. Intermediary refers to a registered broker, investment house or funding portal which mediates offer and sale of crowdfunding securities. J. 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: a. Brokers refer to persons engaged in the business of buying and selling of securities for the account of others. b. 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. K. 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. L. Persons associated with a funding portal are any partner, officer, director or manager of a funding portal (or any person occupying a similar status or performing similar functions), any person directly or indirectly controlling or controlled by such funding portal, or any employee of a funding portal, except that any person associated with a funding portal whose functions are solely clerical or ministerial shall not be included in the meaning of such term. M. 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. N. 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. O. 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. P. Material Information refer to definition under SRC Rule 14 . CHAPTER TWO Exemption from Registration of Securities SECTION 3. Eligibility for Exemption from Registration . (a) 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: (1) The issuer is an entity organized under the laws of the Philippines or a Filipino natural person, and accredited and/or accepted by the intermediary to utilize its platform; (2) The aggregate amount of securities that can be offered and sold by issuer within a 12-month period shall not exceed Ten Million Pesos or Php10,000,000.00; (3) The aggregate amount of securities sold to any ordinary investor across all issuers during the 12-month period shall not exceed fifty thousand pesos (Php50,000) unless the investor signs a waiver of this investment limitation in accordance with Article Three Section 17 (ii) (c) Investor Qualification ; (4) The transaction is conducted through an intermediary that complies with the requirements for intermediaries and the related requirements in this part, and the transaction is conducted exclusively through the intermediary's platform; and (b) For purposes of calculating aggregate amount of securities offered and sold by an issuer under Section 3 (a) (2) 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. ARTICLE TWO Issuer Requirements CHAPTER ONE Disclosure Requirements SECTION 4. Disclosure Requirements . An issuer offering or selling securities under these Rules must file Form CF with the Commission and provide to investors and the relevant intermediary information enumerated below. There shall only be one intermediary per offering of issues for sale under these Rules. (a) Chosen intermediary via SEC list of registered CF 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 (f) Procedure to complete or cancel investment commitment CHAPTER TWO Disqualification Provisions SECTION 5. Disqualification Provisions . (a) Disqualification of Issuer Chapter One of Article One Exemption from Registration of Securities shall not be available for issuer if the Commission finds: (1) 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; (iv) Has made any false or misleading representation of material facts in any disclosure concerning the issuer or its securities; (v) Has failed to comply with any requirements that the Commission may impose as a condition for application of securities for crowdfunding; or (2) 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; or (3) The issuer, any officer, director or controlling person performing similar functions, or any under writer 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 Commission or other competent or administrative body for violations of securities, commodities, and other related laws; (4) 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; (5) If any issuer shall refuse to permit an examination to be made by the Commission, its refusal shall be ground for the refusal or revocation of the registration of its securities; (6) If the Commission deems its 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 Commission. Otherwise, such sale shall be void; (7) Notice of issuance of such order shall be given to the issuer and every dealer and broker who shall have notified the Commission of an intention to sell such security; (8) A disclosure statement may be withdrawn by the issuer only with the consent of the Commission. (b) Intermediaries A person that is subject to above disqualification may not act as, or be an associated person of, an intermediary in a transaction involving the offer or sale of securities unless so permitted pursuant to Commission rule or order. 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 6. Advertising . (a) 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: (1) 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; (2) The terms of the offering; and (3) 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. (b) 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 must identify their affiliation with the issuer in all communications on the intermediary's platform. CHAPTER FOUR Issuer Forms SECTION 7. 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: (a) Form CF: Application as Issuer of Crowdfunding Securities must be filed prior all other forms herein. (b) Form CF-O: Offering Statement this must 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 Commission 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 Commission. For amendment, use Form CF/A. (c) Form CF-AR: Annual Report this must be filed not later than one hundred five (105) days after the end of the fiscal year. For amendments, use Form CF-AR/A. (d) Form CF-TR: Termination of Reporting for issuers eligible to terminate its obligation to file annual reports, must 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. (e) Form CF-U: Progress Update An issuer must file with the Commission and provide to investors and the relevant intermediary 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. For detailed discussion, refer to Article Five. ARTICLE THREE Intermediary Requirements As defined in Section 2, intermediaries refer to brokers, investment houses, and funding portals mediating sale and resale of crowdfunding securities. A separate Article details funding portal eligibility and disclosure requirements, Article Four. CHAPTER ONE General Requirements for Intermediaries SECTION 8. 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 30 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. An intermediary in a crowdfunding transaction must satisfy the following criteria: i. The applicant will be able to operate an orderly, fair and transparent market in relation to the offer and sale of securities through its electronic facilities; ii. The applicant's board, chief executive, controller, and any other person who is primarily responsible for the operations of financial management of the body corporate, are fit and proper and have not a. 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, dealer or associated persons has failed to supervise, with a view to preventing such violation, another person who commits such violation; b. 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. failed to satisfy the qualifications or requirements for registration prescribed under Article Three of these Rules Intermediary Requirement , and any related provisions in the SRC and its Rules; d. 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. 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; f. 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 law administered by the Commission; g. 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; h. 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. 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. iii. 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; iv. The applicant will appoint at least one lead person as required under Section 9 Appointment of Lead Person; v. 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; vi. The operational framework of the intermediary shall make satisfactory provisions a. for the protection of investors and public interest; b. to ensure proper functioning of the market; c. to promote fairness and transparency; d. to manage any conflict of interest that may arise; e. to promote fair treatment of its users or any person who subscribe for its services; f. to promote fair treatment of any issuer, or potential issuer, on its portal; g. to ensure proper regulation and supervision of its users, or any person utilizing or accessing its portal, including suspension and expulsion of such persons; h. to provide an avenue of appeal against the decision of the crowdfunding operator; and i. the applicant has sufficient financial, human, and other resources for the operation of crowdfunding activities, at all times. vii. Before the applicant is allowed to fully operationalize the platform, the Commission may require among others: a. The intermediary to provide an IT assurance regarding the system readiness; and b. 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 C. Sufficient IT and technical support arrangements. For purposes of this rule, users mean investors, potential investors who have the authority to use or access a crowdfunding intermediary's platform. SECTION 9. Appointment of Lead Person . A crowdfunding intermediary must appoint at least one Lead Person. A person who is appointed as Lead Person of a crowdfunding intermediary must be the chief executive of the intermediary or any person who is primarily responsible for the operations and financial management, by whatever name called. For brokers or investment houses, the Lead Person may also be an Associated Person, or is under the direct supervision of an Associated Person. At all times, the Lead Person must 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 on relation to the position of a Lead Person shall be filled within three months from the date of the departure of the former Lead Person in compliance with this Chapter. SECTION 10. Management of Conflict of Interest . A crowdfunding intermediary must 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 must 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 Measures to Reduce Risk of Fraud SECTION 11. Measures to Reduce Risk of Fraud . An intermediary in a transaction involving the offer or sale of securities in reliance on Rules Governing Crowdfunding must: i. 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 fulfils Section 26 of the SRC or Prohibitions on Fraud, Manipulation and Insider Trading 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; ii. 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. An intermediary will be deemed to have satisfied this requirement if the issuer has engaged the services of a transfer agent that is registered under the 2015 SRC IRR Section 36.4.1 ; iii. Deny access to its platform to an issuer if the intermediary: a. 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 Section 5 Disqualification Provisions . In satisfying this requirement, an intermediary must, 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. b. 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 must 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 must 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 THREE Account Opening SECTION 12. 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 must 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 must 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 13. Educational Materials . An intermediary must 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: i. 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; ii. 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; iii. Any restriction on the resale of a security offered and sold in reliance on these Rules; iv. The types of information that an issuer is required to provide under Section 4 Disclosure Requirements , the period and frequency of the delivery of that information; v. The limitations on the amounts an investor may invest pursuant to Section 3 Eligibility for Exemption from Registration ; vi. 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; vii. 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; viii. 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 ix. That under Section 46 End of Compliance , an issuer shall cease to publish annual reports. An intermediary must 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 must 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 14. Promoters . In connection with establishing an account for an investor, an intermediary must 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, must 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 15. Compensation Disclosure . When establishing an account for an investor, an intermediary must clearly disclose the manner in which the intermediary is compensated in connection with offerings and sales of securities in reliance on these Rules. CHAPTER FOUR Requirements with Respect to Transactions SECTION 16. Issuer Information . An intermediary in a transaction involving the offer or sale of securities in reliance to these Rules must make available to the Commission and to investors any information required to be provided by the issuer of the securities under Section 4 Disclosure Requirements. i. This information must 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; ii. This information must be made publicly available on the intermediary's platform for a minimum of 30 days before any securities are sold in the offering, during which time the intermediary may accept investment commitments; iii. This information, including any additional information provided by the issuer, must 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 iv. An intermediary must require any person to establish an account with the intermediary to access this information. SECTION 17. Investor Qualification . Each time before accepting any investment commitment (including any additional commitment from the same person), an intermediary must: i. 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; ii. Obtain from the investor the following: a. A representation that the investor has reviewed the intermediary's educational materials delivered pursuant to Section 13 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 b. 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. c. A waiver to the investment limit requirement from an ordinary investor if the ordinary investor intends to exceed the Php50,000 investment limit requirement. SECTION 18. Communication Channels. An intermediary must 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: i. 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; ii. The intermediary permits public access to view the discussions made in the communication channels; iii. 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 iv. 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. SECTION 19. Resale of Securities . An intermediary intending to provide a secondary market for the offer and sale of securities in reliance to these Rules, must 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 20. Notice of Investment Commitment . An intermediary must promptly, upon receipt of an investment commitment from an investor, give or send to the investor a notification disclosing: i. The peso amount of the investment commitment; ii. The price of the securities; iii. The name of the issuer; and iv. The date and time by which the investor may cancel the investment commitment. SECTION 21. Maintenance and Transmission of Funds. An intermediary must 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: i. 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 Five Completion of Offerings, Cancellations, and Reconfirmations has lapsed, provided that in no event may the intermediary direct this transmission of funds earlier than 30 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 4 Disclosure Requirements ; ii. Return funds to an investor when an investment commitment has been cancelled in accordance with Chapter Five Completion of Offerings, Cancellations, and Reconfirmations (including for failure to obtain effective reconfirmation as required under Section 25 Cancellations and Reconfirmations Based in Material Changes) ; and iii. Return funds to investors when an issuer does not complete the offering. SECTION 22. Confirmation of Transaction . An intermediary must, 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: i. The date of the transaction; ii. The type of security that the investor is purchasing; iii. 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; iv. If a debt security, the interest rate and the yield to maturity calculated from the price paid and the maturity date; v. If callable security, the first date that the security can be called by the issuer; and vi. The source, form and amount of any remuneration received or to be received by the intermediary from persons other than the issuer. CHAPTER FIVE Completion of Offerings, Cancellations, and Reconfirmations SECTION 23. 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 25 Cancellations and Reconfirmations Based in Material Changes . SECTION 24. Early Completion of Offering . If an issuer reached the target offering amount prior to the deadline identified in its offering materials pursuant to Section 4 Disclosure Requirements , the issuer may close the offering on a date earlier than the deadline identified in its offering materials, provided that: i. The offering remains open for a minimum of 30 days pursuant to Chapter 4 Requirements with Respect to Transactions ; ii. The intermediary provides notice to any potential investors, and gives or sends notice to investors that have made investment commitments in the offering, of: a. The new anticipated deadline of the offering; b. The right of investors to cancel investment commitments for any reason until 48 hours prior to the new offering deadline; and c. Whether the issuer will continue to accept investment commitments during the 48-hour period prior to the new offering deadline. iii. The new offering deadline is scheduled for and occurs at least five business days after the notice required in paragraph (2) (ii) of this section is provided; and iv. At the time of the new offering deadline, the issuer continues to meet or exceed the target offering amount. SECTION 25. 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 must 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 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 must: i. 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 ii. Direct the refund of investor funds. 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 must be extended to allow for a period of five business days for the investor to reconfirm his or her investment. SECTION 26. Return of Funds If Offering is Not Completed . If an issuer does not complete an offering, an intermediary must within five business days: i. 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; ii. Direct the refund of investor funds; and iii. Prevent investors from making investment commitments with respect to that offering on its platform. CHAPTER SIX Payments to Third Parties SECTION 27. 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 SEVEN Permitted Activities for Intermediaries SECTION 28. Permitted Activities . The following are permitted activities intermediaries for crowdfunding, consistent with the prohibitions under Section 2.J Definition of Funding Portal : i. 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; ii. Apply objective criteria to highlight offerings on the funding portal's platform where: a. The criteria are reasonably designed to highlight a broad selection of issuers offering securities through the funding portal's platform; are applied consistently to all issuers and offerings; and are clearly displayed on the funding portal's platform; b. 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 c. The funding portal does not receive special or additional compensations for highlighting one or more issuers or offerings on its platform. iii. 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: a. 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 b. 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. iv. 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: a. Does not participate in these communications, other than to establish guidelines for communication and remove abusive or potentially fraudulent communications; b. Permits public access to view the discussions made in the communication channels; c. Restricts posting of comments in the communication channels to those persons who have opened an account on its platform; and d. 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. v. Advise an issuer about the structure or content of the issuer's offering, including assisting the issuer in preparing offering documentation; vi. 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 or dealer, 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; vii. Pay or offer to pay any compensation to a registered broker or dealer for services, including referrals pursuant to paragraph (vi) of this section, in connection with the offer or sale of securities by the funding portal in reliance on these Rules, provided that: a. Such services are provided pursuant to a written agreement between the funding portal and the registered broker or dealer; and b. Such services and compensation are permitted under this part. viii. Receive any compensation from a registered broker or dealer 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: a. Such services are provided pursuant to a written agreement between the funding portal and the registered broker or dealer; and b. Such compensation is permitted under this part. ix. 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: a. 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; b. 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 c. The funding portal does not receive special or additional compensation for identifying the issuer or offering in this manner. x. Deny access to its platform to, or cancel an offering of an issuer, pursuant to Section 11 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; xi. 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; xii. 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 xiii. Direct the assigned bank, as required by Section 21 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 29. 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 Crowdfunding Intermediary is approved for membership 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 must register as a Funding portal. Schedule B: Amendment to Application for Registration A Crowdfunding Intermediary must 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) 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. ARTICLE FOUR Funding Portal Regulation CHAPTER ONE Registration of Funding Portals SECTION 30. Registration . No entity shall act as a funding portal unless it is registered as such. An applicant shall comply with the following requirements: i. Must be organized as a corporation and registered with the Commission; ii. Must have equity of at least Php50,000; iii. Registration Statement (Form CF-I Schedule A) which would include information concerning: a. Funding portal's principal place of business; b. Funding portal's legal status and disciplinary history, if any; c. Business activities, including types of compensation the funding portal would receive; d. Control affiliates of the funding portal and disclosure of their disciplinary history, if any; and e. Funding portal's website address(es) or other means of access. iv. Account Opening and Disclosure Rules; v. Business Conduct Rules. SECTION 31. Amendments of Registration . A funding portal must 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 32. Withdrawal. A funding portal must 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 33. 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 34. 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. CHAPTER THREE Conditional Safe Harbor SECTION 35. Conditional Safe Harbor . Under Section 2.J 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: i. Offer investment advice or recommendations; ii. Solicit purchases, sales, or offers to buy the securities offered or displayed on its platform or portal; iii. Compensate employees, agents, or other persons for such solicitation or based on the sale of securities displayed or referenced on its platform or portal; iv. 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.J Definition of Funding Portal . No presumption shall arise that a funding portal has violated the prohibitions under Section 2.J 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. CHAPTER FOUR Compliance SECTION 36. Policies and Procedures . A funding portal must 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 37. Confidentiality . A funding portal must comply with the requirements of 2015 SRC IRR Rule 30.2.1.2.4.2 as they apply to brokers. SECTION 38. 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 FIVE Reports, Recordkeeping and Other Post Registration/Operational Requirements CHAPTER ONE General Reporting Requirements SECTION 39. 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 must provide such records as requested at the place in the Philippines within seventy-two (72) hours after receipt of the request. SECTION 40. Submission of Yearly Reports . ISSUER and INTERMEDIARY must file with the Commission and post on the issuer's or intermediary'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 as described in Article Two Issuer Requirements . Issuer and intermediary shall, at the end of each year, submit a report on all CF transactions it entered into with clients during the subject year. SECTION 41. Review of records . All records of a funding portal are subject at any time, or from time to time, to reasonable periodic, special, or other examination by the representatives of the Commission. Every funding portal shall furnish promptly to the Commission true, correct, complete and current copies of such records of the funding portal that are requested by the representatives of the Commission. CHAPTER TWO Ongoing Reporting Requirements for Issuers SECTION 42. Annual Report of Issuers . An issuer that has offered and sold securities must file with the Commission 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 must be provided and the certification by the principal executive officer will not be required. The annual report also must include the Disclosure Requirements of these Rules. The report must be filed using Form CF-AR and submitted to the Commission 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 must 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 43. 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 Commission as provided in this Chapter: (i) An issuer must file with the Commission and provide to investors and the relevant intermediary Form CF-U: 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. (ii) If the issuer will accept proceeds in excess of the target offering amount, the issuer must file with the Commission and provide to investors and the relevant intermediary, 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. (iii) The requirements of paragraphs (A) (i) and (ii) 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 must 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 44. Records to be Made and Kept by Intermediary . (a) Generally An intermediary shall make and preserve the following records for five years, the first two years in an easily accessible place: (1) All records related to an investor who purchases or attempts to purchase crowdfunding securities; (2) All records related to issuers who offer and sell or attempt to offer and sell crowdfunding securities; (3) Records of all communications that occur on or through its platform; (4) 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; (5) All records required of intermediary to demonstrate compliance with, in accordance with these Rules; (6) 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 funding portal operations (if any), funding portal malfunctions, changes to funding portal procedures, maintenance of hardware and software, instructions pertaining to access to the funding portal and denials of, or limitations on, access to the funding portal; (7) All written agreements (or copies thereof) entered into by such funding portal relating to its business as such; (8) 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: (A) Number of transactions; (B) Number of securities involved in a transaction; (C) Total amounts raised by, and distributed to, issuers; and (D) Total dollar amounts raised across all issuers, expressed in U.S. dollars; and (9) A log reflecting the progress of each issuer who offers or sells securities through the funding portal toward meeting the target offering amount; (10) Intermediaries shall use Form 17 for annual report. (b) Record 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: i. Reliable timing data for the initiation of the trade that would permit complete and accurate crowdfunding transactions; ii. 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; iii. All terms of each CF, including all terms and information regarding payment or settlement instructions; iv. 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; v. The name of the investor with which each CF was executed; vi. The price at which the CF was executed, in end of day Peso rate; vii. Fees or commissions and other expenses, identified by transaction; and viii. 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; ix. All terms of each related cash or clearing transaction; x. The price at which the related sale or resale transaction was executed; xi. 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; xii. Records of each transaction executed on a funding portal or market cleared by bank/s maintained in compliance with SEC regulations; xiii. A record of the any other relevant financial information relating to transactions in crowdfunding; and xiv. Any other relevant information. (c) Format The records required to be maintained and preserved pursuant to paragraph (a) of this section must be produced, reproduced, and maintained in the original, nor-alterable format in which they were created. (d) Third parties The records required to be made and preserved pursuant to this section may be prepared or maintained by a third party on behalf of a funding portal. An agreement with a third party shall not relieve a funding portal from the responsibility to prepare and maintain records as specified in this rule. A funding portal must file with the registered national securities association of which it is a member, a written undertaking in a form acceptable to the registered national securities association, signed by a duly authorized person of the third party, stating in effect that such records are the property of the funding portal and will be surrendered promptly on request of the funding portal. The undertaking shall include the following provision: With respect to any books and records maintained or preserved on behalf of [name of CF portal] , the undersigned hereby acknowledges that the books and records are the property of [name of CF portal] , 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 45. 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: 1. Matters pertaining to its governance a. Minutes of meeting of the governing body and relevant committee minutes, including handouts and presentation materials. b. Organizational charts for its governing body and relevant committees, business trading unit, clearing unit, risk management unit and all other relevant units or divisions. c. Resumes of managers, senior supervisors, officers and directors and their corresponding job descriptions, including job responsibilities and extent of authority. d. Internal and external audit, risk management, compliance and consultant reports including management responses. e. Business and strategic plans for the business trading unit. f. All organizational documents relating to the crowdfunding, including but not limited to, partnership agreements, articles of incorporation or charter, minute books and stock certificate books (or other similar type documents). 2. Financial records a. The financial records reflecting all assets and liabilities, income and expenses, and capital accounts of the intermediary. b. All other financial records to be kept under current or subsequent SEC regulations. 3. Complaints a. The record of each complaint received by the intermediary shall include the complainant's name, address and account number, the date the complaint was received, the name of all persons identified in the complaint, description of the nature of the complaint, the disposition of the complaint, and the date the complaint was resolved. b. There shall also be a record indicating that each investor and/or potential investor has been provided with a notice containing the physical address, email or other widely available electronic address, and telephone number of the unit/department of intermediary and/or issuer to which any complaint may be directed. 4. Marketing and sales materials All marketing and sales presentations, advertisements, literature and communications, and a record documenting that the intermediary has complied with, or adopted policies and procedures reasonably designed to establish compliance with all applicable sections of these Rules. SECTION 46. End of Compliance . An issuer must continue to comply with the ongoing reporting requirements until one of the following occurs: (1) 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 (2) The issuer liquidates or dissolves its business in accordance with state law. SECTION 47. Sanction . If the Commission finds that there is a violation of any provision of this Rule 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 make the statements therein not misleading or refuses 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. SECTION 48. Effectivity . These rules shall take effect fifteen (15) days after the date of last publication in two (2) newspapers of general circulation in the Philippines.