"HOUSE OF REPRESENTATIVES
RECEIVED

Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

17TH CONGRESS

REGISTRATION UNIT
BILLS AND iNUEX SERVICE

1* Regular Session

House Bill no2144

;

Introduced by Hon. Dakila Carlo E. Cua

EXPLANATORY NOTE

The Securities Regulation Code (Republic Act No. 8799) and other laws provide for the
regulation of the issuance and trade of securities in the country. ‘The purpose of the Code is to broaden
participation of ownership, encourage the growth of capital markets and protect investors. ‘The
crowdfunding movement is in line with this aim, and its expansion in the Philippine market, if properly

executed, will be beneficial to the national economy.

The existing legislation effectively regulates traditional forms of financing and raising capital.

However, with the development and proliferation of new technological and social advancements in

relation to funding options, there is a compelling need to enhance the current law in order to better

address the specific issues which arise from equity crowdfunding campaigns.

By defining crowdfunding and delineating specific rules regarding the registration and regulation
of both platforms and campaigns, the crowdfunding movement may be allowed to flourish and grow in
the Philippines, while ensuring that investors and their investments are still adequately protected by

updated regulations and reportorial requirements.

In view of the foregoing, passage of this bill is urgently sought.

HON. (LA CARLO E. CUA

7
Lone District- Province of Quirino



Republic of the Philippines
HOUSE OF REPRESENTATIVES.
Quezon City
17TH CONGRESS

1* Regular Session

House Bill No. 2144

Introduced by Hon. Dakila Carlo E. Cua

AN ACT TO REGULATE EQUITY CROWDFUNDING, AMENDIN

FOR THE PURPOSE.
REPUBLIC ACT NO. 8799, OTHERWISE KNOWN AS “THE SECURITIES REGULATION

CODE”!

Be it enacted by the Senate and the House of Representatives of the Philippines in Congress

assembled:

SECTION ONE. Section 3 of Republic Act No. 8799 is hereby amended to add the

following definitions:

“Equi

rowdfunding” ‘Transactions involving the offer or sale of securities by an issuer,
which is conducted through a funding portal that complies with

the requirements of this Code;

An offer or sale made by equity crowdfunding is not considered

as a public offer.

“Funding Portal” ‘A person acting as an intermediary in a transaction involving the
offer or sale of securities for the account of others, solely in
relation to equity crowdfunding offerings. A funding portal is

not considered as a broker or dealer.

SECTION TWO. Section 10.1 regarding exempt transactions, of Republic Act No. 8799 is

hereby amended to add the following exemption:

‘Transactions involving the offer or sale of securities by an issuer, provided that:

+ Note: These regulations are heavily modeled on the earlier cited and discussed United States Jumpstart
Our Business Startups Act


(A) The issuer complies with the requirements of this Code;

(B) The transaction is conducted through a funding portal that
complies with the requirements of this Code;

(C) The total amount of securities sold by the issuer during the
12 month period immediately preceding the date of such
transaction is not more than PhP 60 Million;

(D) The total amount of securities sold to any investor by an
issuer during the 12 month period immediately preceding the
date of such transaction is not greater than:

a. 10 percent of the annual income or net worth of such
investor, as applicable, if either value is less than
PhP 300,000; and

b. 20 percent of the annual income or net worth of such
investor, as applicable, not to exceed 50 percent of
the lesser value, if the annual income or net worth is
equal to or more than PhP 300,000; and

c. Any amount not in excess of 100 percent of the
annual income or net worth (whichever is less) of an

investor designated as a qualified buyer.

SECTION THREE. Section 10.4 of Republic Act No. 8799 is hereby amended to add the

following requirements for the qualification of a funding portal:

A funding portal must

(A) Provide such disclosures, including disclosures related to risks and other
investor education materials, as the Commission shall deem appropriate;
(B) Ensure that each investor:
a. Reviews investor education information;
b. Positively affirms that he/she understands that he/she is risking the

loss of the entire investment, and that the investor could bear such a

loss;


¢. Answers questions demonstrating
i, An understanding of the level of risk generally involved in
investments in startups and MSMEs;

ii. An understan

1g of the risk of illiquidity;

‘An understanding of other such matters as the Commission

may determine are appropriate;

(C) Take measures to reduce the risk of fraud with respect to such transactions,
including obtaining a background and securities enforcement regulatory
history check on the officers holding more than 20 percent of the outstanding
equity of every issuer whose securities are offered by the portal;

(D) Ensure that all the offerings are only provided to the issuer when the target
funding amount is reached or exceeded;

(E) Make efforts to determine the compliance of issuers and investors with the

applicable maximum amounts of i

vestments

(F) Take steps to protect the privacy of information collected from investors.

SECTION FOUR. Section 10.4 of Republic Act No. 8799 is hereby amended to add the

following requirements for the qualification of an equity crowdfunding securities issuer:
For the purposes of equity crowdfunding, an issuer who offers or sells securities must:

(A) File with the Commission and provide to all investors and the relevant funding portal,

and make available to all potential investors:

‘The name, legal status, physical address and website address of the issuer;
b. The names of the directors, officers, and other persons holding more than 20

percent of the shares of the issuer;

A description of the business of the issuer;

d. A description of the stated purpose and intended use of the funding sought;

c. The target funding amount, deadline for the campaign, and relevant regular
updates regarding progress in meeting the target amount;

f. The price to the pu

of the securities offered, or the method to determine
that price;

8. A description of the ownership and capital structure of the issuer;


h. A description of the financial condition of the issuer, including the following
financial statements:
i. For issuers whose total target funding amount in the preceding 12
month period is PhP 60 Million or less:
1. ‘The income tax retums filed by the issuer for the most
recently completed year; and
2. Financial statements of the issuer, which shall be certified by
the CEO (or equivalent) to be true and complete in all
material respects;
ji, For issuers whose total target funding amount in the preceding 12
month period is more than PhP 60 Million, but not more than PhP
100 Million:
1. Financial statements reviewed and certified by an

independent Certified Public Accountant; and

For issuers whose total target funding amount in the preceding 12

in excess of PhP 100 Million:

month period
1. Audited financial statements;
(B) Not advertise the terms of the offering, except for notices which direct potential
investors to the relevant funding portal; and

(C) At least annually file with the Comi

ion and provide investors with reports of the

operations and financial statements of the issuer.

SECTION FIVE. Section 12, in relation to Section 8.1 of Republic Act No. 8799 is hereby

amended to add the following exemption from registration:

The SEC shall, by rule, exempt a registered funding portal from the requirement to register as a
broker or dealer under the Code, provided that such funding portal remains subject to the

examination, enforcement and other rulemaking authority of the Commission.

SECTION SIX. ‘A new provision in regard to restriction on resale of equity crowdfunding

securities is hereby added to Republic Act No. 8799 as follows:

Securities issued pursuant to equity crowdfunding may not be transferred by the purchaser during

the 12 month period immediately following the date of purchase of such securities, except:


(A) To the issuer of the securities; or
(B) To a member of the family of the purchaser in connection with the death or annulment of the
purchaser, or other analogous circumstance.
SECTION SEVEN. ‘A new provision in regard to review of amounts relevant to

equity crowdfunding securities is hereby added to Republic Act No. 8799 as follows:

The stated amounts pertaining to limitations in relation to investments and offers in equity
crowdfunding are subject to re-evaluation and adjustment by the Commission:
(A)at least semi-annually for the first three years following the enactment of equity
crowdfunding legislation;

(B) at least annually for the remainder of the first decade following the enactment of equity

crowdfunding legislation; and

(C) at least bi-annually thereafter.

SECTION EIGHT. Separability Clause. If any provision of this Act or the
application thereof to any person or circumstance is held to be void, or unconstitutional, any other

provision not affected thereby shall remain in full force and effect.

SECTION NINE. Repealing Clause. All laws, decrees, executive orders,
rules and regulations or parts thereof as are inconsistent with this Act are hereby repealed, amended or
modified accordingly: Provided, that the penal provisions shall not apply to acts done prior to the

effectivity of the Securities Regulation Code on July 19, 2000.

SECTION TEN.

Act shall take effect fifteen (15)

days after its complete publication in the Official Gazeute or in at least two (2) newspapers of general

circulation.

Word Count: 1,281