The Securities and Exchange Commission has released the implementing rules and regulations of Republic Act No. 11765, or the Financial Products and Services Consumer Protection Act, which seeks a stronger regulation and enforcement of provisions against investment fraud and abuses.
The IRR covers financial products and services and financial service providers under the jurisdiction of the SEC, including credit, securities and investments as well as digital financial products or services accessed and delivered through digital channels.
“True to the objectives of the FCPA, the IRR advances financial consumers’ right to equitable and fair treatment, to disclosure and transparency in the marketing of financial products and services, to protection of consumer assets against fraud and misuse, to data privacy and protection, and to timely handling and redress of complaints of consumers,” SEC chairman Emilio B. Aquino said.
The IRR reinforces the power of the SEC to exercise authority over securities issuers in tokenized or digital form. This is in line with the updated definition of securities under the rules, which cover the tokenized or digital forms of securities defined by the Securities Regulation Code.
The rules also expand the enforcement action that may be conducted by the SEC, which include the restriction on the ability of financial service providers to collect excessive or unreasonable interests, fees and charges, disqualification and/or suspension of directors, trustees, officers, or employees; and disgorgement, among others.
The SEC may order an accounting and disgorgement of profits obtained or losses avoided, as a result of a violation of the FCPA and other existing laws, including reasonable interest, in addition to penalties it may impose for such violation.
The Commission may further adopt rules and regulations on the creation and operation of a disgorgement fund, payments to financial consumers, rate of interest, period of accrual, and other matters related to the disgorgement fund.
Persons who violate provisions of the FCPA will be punished by imprisonment of not less than one year, but not more than five years, or by a fine of not less than P50,000 but not more than P2 million or both, at the discretion of the court.
Should the violation be committed by a corporation or a juridical entity, the directors, officers, employees, or other officers who are directly responsible for such violation shall be held liable.
Persons found responsible for investment fraud may also be subject to administrative sanctions, from a fine of P50,000 to P10 million for each instance of investment fraud plus not more than P10,000 for each day of continuing violation, in addition to other administrative sanctions under Section 54 of the SRC.
The IRR will take effect 15 days after publication in the Official Gazette or in at least two national newspapers of general circulation.
