The year ends with a bang when the Philippine Stock Exchange (PSE) warned the investing public to undertake extreme caution and due diligence with respect to any solicitation of funds by companies that intend to be trading participants. PSE stated that there is no guarantee that such companies will be considered as trading participants as they will be required to undergo a comprehensive assessment based on qualifications under the law. Solicitation of funds by companies that intend to be trading participants may be considered a sale or distribution of securities in the Philippines that require registration with the Securities and Exchange Commission (SEC) under the Securities Regulation Code (SRC). Failure to obtain such registration subjects the seller of securities to civil and criminal penalties. Those who act as agents, dealers, brokers and salesmen in the solicitation of funds by companies that intend to be trading participants can be prosecuted and held liable under Section 28 of the SRC while penalties can be a maximum fine of P5 million or 21 years imprisonment or both under Section 73 of the SRC. Per the PSE Rules Governing Trading Rights and Trading Participants, the minimum qualifications for a company applying to be a trading participant is that it must be a duly registered domestic corporation authorized to transact as a broker or dealer in securities; must be composed of shareholders not exceeding such number under the law; and must have a minimum unimpaired paid-up capital of P100 million. PSE holds the right to assess the character of a company that intends to be a trading participant such as the reputation and qualification of its shareholders, management, nominee and other personnel. We do not know the reason why the PSE took time before warning the investing public about the solicitation of funds by companies that intend to be trading participants but what we do know is that this company is the financial technology startup known as Investagrams. In a gathering with the investing public on August 26, Investagrams announced its plan to launch an online stock trading platform known as InvestaTrade. Investagrams started a crowdfunding activity known as Investagrams Brokerage Pledge Campaign that provides benefits to donors depending on the amount donated. We must commend Investagrams for providing the investing public with free online stock trading products and services but the manner of funding an online stock trading platform does not justify the means.
