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SEC’s warning against online trading apps

The Manila Times logo The Manila Times 10/8/2019 KELVIN LESTER LEE

a close up of a mans face © Provided by The Manila Times Publishing Corp. KELVIN LESTER LEE

(Editor’s note: The opinions in this article are the author’s, as published by our content partner, and do not necessarily represent the views of MSN or Microsoft.)

As you are all aware, various technological innovations have given birth to online trading, or the act of buying and selling financial products through an online trading platform, as generally defined. Such platforms are normally provided by internet-based brokers and made available to anyone looking to make money from the market.

Online trading makes business transactions relatively faster, effective and cheaper. Historically, the usual practice of trading stocks involves a customer calling his or her broker for orders. Now, a customer can simply connect to the internet and easily click the stocks that he or she wants to trade.

In the Philippines, some brokers in the Philippine Stock Exchange have already launched their own online trading apps, while others are in the process of developing one.

It is worth noting, however, that there are online trading apps where one can trade stocks, even foreign currencies and cryptocurrencies, from other countries. Being so, these companies are not regulated by the Securities and Exchange Commission (SEC).

In a series of advisories issued by the SEC, one of which was issued on October 30, 2018, the SEC reiterated that foreign exchange trading is considered illegal in the Philippines. The public was accordingly advised to stop engaging in foreign exchange trading and investing in foreign-registered investment platforms of commodity futures, contracts for difference, indices, binary options and the like.

In addition, the SEC also advised the public that persons and entities acting as brokers, salesmen or agents of these securities have no license to engage or deal in any manner with these securities, and should be avoided or ignored. Hence, the public should practice caution when dealing with these kinds of apps as the companies that own these online trading apps are usually not located in the Philippines.

Prior to that, an SEC advisory dated July 27, 2018 was issued with respect to the proliferation of free training seminars promoting foreign-registered electronic platforms supposedly conducted by both local and foreign experts, and promoted on various media. The SEC emphasized that some of these seminars serve as a front for the illegal offering and selling of unregistered securities by unlicensed brokers.

In the Philippines, before a company can act as a broker-dealer, they need to register with the SEC and secure a secondary license. Meanwhile, these foreign online brokerages are not registered with the SEC as they are located in other countries.

It can also be noted that the rules governing commodity futures contract, including foreign exchange trading in the Philippines, remain suspended pursuant to Rule 11.2 of the 2015 Implementing Rules and Regulations of the Securities Regulation Code.

In this light, allow me to reiterate the SEC’s advice for the public to take caution when it comes to dealing with foreign online trading apps because they are not sanctioned or cleared to operate here in the Philippines.

Kelvin Lester K. Lee is a Commissioner of the Securities and Exchange Commission (SEC). He is the co-chairperson of the SEC Committee on Memorandum Circulars To Operationalize Revised Corporation Code Provisions. The views and opinions stated herein are his own. You may email your comments and questions to oclee@sec.gov.ph.

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