AIBC News spoke with Commissioner Kelvin Lester K. Lee of the Philippine Securities and Exchange about the impact of Fintech on corporate governance and regulation in the Philippines.
LH: How is the SEC protecting people from crypto frauds and ultra-high interest loans?
Attorney Kelvin Lester K. Lee: The SEC protects the people from crypto fraud by formulating its own Digital Asset Offering (DAO) and Digital Asset Exchange Rules (DAX) Rules which are designed to regulate cryptocurrency trading and exchanges in the Philippines. Meanwhile, the SEC protects people from ultra-high interest by implementing a cap on interest rates and other fees imposed by lending and financing companies, and their online lending platforms.
The Commission, as the regulator of financing and lending companies, in consideration of the plight of borrowers, has issued SEC Memorandum Circular No. 3 series of 2022 which, in turn, implements Bangko Sentral ng Pilipinas Circular No. 1133 series of 2021 re: Ceiling/s on Interest Rates and Other Fees Charged by Lending Companies (LCs), Financing Companies (FCs), and their Online Lending Platform.
LH: What did the Commission do to set changes into motion?
Attorney Kelvin Lester K. Lee: As early as October 2019, the Commission wanted to bring to an end predatory and other abusive lending practices in solidarity with the predicament of our hapless kababayan borrower. We asked the Monetary Board to consider the SEC’s proposal for limits on interest rates, fees and other charges that lending and financing companies may impose on consumer and payday loans. This led to the issuance of said BSP Circular and SEC. Memorandum Circular No. 3 which now imposed a ceiling of 6 percent nominal interest rate and 15 percent effective interest rate on general-purpose loans which are unsecured not exceeding Php 10,000 and with a loan term of up to 4 months.
LH: What happens to companies that fail to comply?
Attorney Kelvin Lester K. Lee: Lending companies, which fail to comply with the rate limits, will be subject to penalties worth P25,000 and P50,000 for the first and second offense, respectively, while financing companies will be penalized with P50,000 for the first offense and P100,000 for the second offense. The penalty for the third offense for both lending and financing companies will amount to twice the amount imposed for the second offense up to P1 million; the suspension of their financing and lending activities for 60 days; or the revocation of their Certificates of Authority to Operate as a Financing/Lending Company.
LH: The Philippines sits midway in the ease of doing business. What is the goal of the
SEC in improving the ranking?
Attorney Kelvin Lester K. Lee: SEC’s goal is to further improve its ranking by pushing more digital innovations.
Last June 22, 2023, President Ferdinand R. Marcos, Jr., launched SEC’s new digital services that will make the registration and monitoring of corporations even easier across the country, along with a capital market initiative that will allow for more investments in the agriculture sector. The President officially launched the Electronic SEC Universal Registration Environment (eSECURE), Electronic SEC Education, Analysis, and Research Computing Hub (eSEARCH), SEC API Marketplace, Electronic Registry Application for Market Participants (eRAMP), and SEC Check App 2.0.
LH: What measures are in place to deliver a secure business environment?
Attorney Kelvin Lester K. Lee: More than improving the ease of doing business through easier company registration, the new digital services seek to achieve a secure business environment through strict compliance with laws and regulations and a more informed investor base equipped with tools to make smart financial decisions The SEC developed eSECURE, eSEARCH, SEC API Marketplace, eRAMP, and SEC CheckApp 2.0 in line with the President’s push for e-governance and thrust to attract investments and business in the Philippines. eSECURE serves as a company’s gateway to SEC online services, including the newly launched applications. Users can log in to eSECURE and access their accounts without the need to individually log in to each service.
Through risk-based credentialing, eSECURE electronically authenticates the identity of SEC clients, thereby preventing unauthorized access to confidential company information. It works against the perpetration of investment scams and money laundering activities, as well as improves financial integrity and readily exacts accountability.
Attorney Kelvin Lester K. Lee is Commissioner of the Philippine Securities and Exchange Commission He is also a columnist for the Manila Times and serves as Corporate Law Lecturer and Professor for a number of mandatory continuing legal education programmes. His area of expertise in corporate governance. In his capacity as the Supervising Commissioner of the Markets and Securities Regulation Department and the Information & Communications Technology Department, he spearheads the creation and supervision of the International Affairs and Protocol Division and the PhiliFintech Innovation Office within the Commission. In recognition of his expertise, Attorney Lee was honoured as a Lee Kuan Yew Senior Fellow in Public Service by the National University of Singapore in 2022 and celebrated as a Blockchain Champion by the Blockchain Council of the Philippines. He received the prestigious Outstanding Fintech Innovation Leader in the Philippines award at the Asian Digital Finance Forum and Awards in 2023.