Legal Recap: Is it OK to Promote Non-SEC Registered Projects?

• For Atty. Marian Vanslembrouck, to be safe from promoting unregistered projects, it is always best to take a more conservative position.
• But there are obvious ways to spot fraudulent projects, one of which is through promising fixed profit in a certain amount of time, even though the crypto market is volatile.
• While people tend to be careless in promoting a project because they are just excited about it, promoting tokens that function as security is really a serious offense under Philippine law, the attorney said.

While this industry is relatively new but global, promoting tokens that behave as securities could put promoters, holders, and supporters at risk. And what if the token that is supported and promoted by the community has been tagged as a security? What could happen? 

For Atty. Marian Vanslembrouck, who was recognized as one of the top in-house legal counsel in the country by The Legal 500 through the GC Powerlist: Philippines 2023 and served as an associate general counsel at Enjin, to be safe from promoting unregistered projects, “it is always best to take a more conservative position.”

This discussion is part of the 23rd episode of the BitPinas Webcast on September 26, 2023, “Crypto Hype and Influencer Ethics with Atty. Marian Vanslembrouck.”

Promoting Unregistered Projects: Is It Illegal? 

According to Vanslembrouck, knowing when a token can be considered a security is on a case-to-case basis, and “in the Philippines, it is a set of ‘do your own research’ steps that I would recommend for you to do.” 

But there are obvious ways to spot projects that just disguise as “crypto,” when in fact are fraudulent, as per the lawyer. One of which is through promising fixed profit in a certain amount of time, even though the crypto market is volatile: 

“I’m not saying that all tokens are securities, but there’s a possibility that the token that you are promoting can be considered a security, especially if you see that the token promotes guaranteed returns, saying that ‘give us your money for x days, and in 20 days, you will receive 50%.’ Iyong mga ganoong products, those are obviously security.” 

In the same webcast, Vanslembrouck mentioned that investors may visit the Securities and Exchange Commission (SEC) website to check the list of companies and individuals that are registered with the Commission. 

But in this discussion, she added that it could be not enough to check a company’s legitimacy, investors should also check if the entity is allowed to offer securities to the public by examining if the security being offered is registered and is allowed to be promoted to the public. 

“In the Philippines, if something’s directed to the Filipinos and is not SEC-registered and the company is also not authorized to offer securities, it is most probably not allowed,” the former Enjin Legal Counsel explained. 

Promoting Unregistered Projects: A Blunder? 

Vanslembrouck also expressed that while she understands that people tend to be careless in promoting a project because they are just excited about it, promoting tokens that function as security is really a serious offense under Philippine law: 

“If you promote or solicit people to invest in such product, you can actually be held liable under the Securities Regulation Code (SRC) and the Financial Products and Services Consumer Protection Act (FCPA).”

The SRC is the one that regulates the issuance, sale, and trading of securities in the country and defines securities as shares, participation, or interests in a corporation or in a commercial enterprise or profit-making venture and is evidenced by a certificate, contract, or instrument, whether written or electronic in character.

While the FCPA gives monetary regulators in the country, such as the SEC and the Bangko Sentral ng Pilipinas (BSP), powers to enforce the provisions of the law to registered financial service providers. 

In a Public Advisory of the SEC, the Commission emphasized that all individuals involved, including influencers, endorsers, promoters, and enables, in convincing others to invest in an unregistered project can be criminally prosecuted and penalized accordingly. 

The fine is said to be ₱5,000,000.00 or a penalty of 21 years of imprisonment or both pursuant to Sections 28 and 73 of the SRC.

This article is published on BitPinas: Legal Recap: Is it OK to Promote Non-SEC Registered Projects?

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