SEC cracks down on sham investment, lending firms
The Securities and Exchange Commission (SEC) is intensifying its crackdown on sham investment and lending activities, with more companies having their corporate papers canceled to protect investors from fraud.
In a May 16 order, the SEC Enforcement and Investor Protection Department said it had canceled the corporate registration of Cyfle OPC for allegedly soliciting investments from the public without the proper license.
“The investment scheme of [Cyfle] also operates to defraud investors as it deceives the investing public by making it appear that they have the authority to deal in securities,” the SEC said in its order.
According to the corporate watchdog, Cyfle had supposedly been requiring a P50,000 minimum investment under a one-year term, with a promise of a 30-percent return.
The SEC pointed out that this had violated the Revised Corporation Code, which states that a company cannot exercise corporate powers beyond what is stipulated in its articles of incorporation.
In Cyfle’s case, it was incorporated in 2022 to engage in and provide management consultancy services to the general public, the regulator said.
Cyfle did not respond to the SEC’s show cause order in September 2024.
The SEC imposed a fine of P1 million against Cyfle for offering securities to the public without a registration and license from the commission.
Lending
The regulator also recently canceled the lending license of Hi-Fin Lending Inc. for supposedly failing to disclose one of its third-party service providers, WeWill Tech Corp. The latter was allegedly harassing customers of online lending platforms (OLPs).
Financing and lending firms are required to submit a list of their third-party service providers under Republic Act No. 11765, or the Financial Products and Services Consumer Protection Act. The SEC pointed out that Hi-Fin did not include WeWill in its July 11, 2024 list of suppliers.
Hi-Fin argued, however, that WeWill had not begun operations until July 31, noting that it “did not provide any false, inaccurate or misleading information in previous disclosures.”
But the SEC countered that Hi-Fin should have updated its list, making it noncompliant with the law.
Hi-Fin’s certificate of authority to operate as a lending company and its primary registration were likewise revoked.
At the same time, the regulator issued a cease and desist order against Hupan Lending Technology Inc. for operating Magic Peso, an unrecorded OLP.
In its May 13 order, the SEC said the continuous operation of Magic Peso violated the ongoing moratorium on new OLPs, as prescribed under the commission’s Memorandum Circular No. 10, Series of 2021.
Under the circular, only OLPs registered as of Nov. 2, 2021 were allowed to continue operating after the SEC received “numerous complaints” about the alleged violations of companies in this industry.
Magic Peso was not listed among the OLPs allowed to operate. The SEC noted that the issuance of a cease and desist order against Hupan was “necessary to prevent fraud, injury or harm to the public and financial consumers who are using Magic Peso.”
