ICO Draft Rules Published By Philippines SECbr>
The Philippines Securities and Exchange Commission (SEC) has published its proposed rules on initial coin offerings (ICO).
The SEC said that the draft rules on ICO registration was released because the present registration process for initial public offering (IPO) may not be tailor fit for ICOs. The regulator is now seeking public feedback before rules can go into effect.
Under the draft rules, the tokens issued by the startups or companies conducting the ICO may follow the nature of a security under existing Securities Regulation Code, and therefore, these should be registered with the agency and necessary disclosures need to be made for the protection of the investing public.
“All ICOs conducted within the Philippines or by Philippine startups or corporations shall be required to undergo an initial assessment by submission of initial assessment request and attached documents (including the proposed whitepaper) wherein said startup or corporation shall have the burden to prove that the tokens are not security tokens,” the SEC said. “The SEC shall have 20 days upon receipt of complete documents for initial assessment to determine whether the tokens are security tokens or not.”
If the SEC finds that the tokens are indeed security tokens, ICO issuers will be required to register the tokens before the start of the pre-sale. Security token issuers will also be required to incorporate, and in the case of foreign companies, required to maintain a branch office in the country. If an ICO is only to be issued to a maximum of 20 people or will be limited to institutional investors, it could be exempted from the registration requirement.
“The issuer of the security tokens are required to submit, among the other documents, as exhibits to the registration statement a code audit report issued by an independent code auditor, including but not limited to testing of the source code, KYC/AMLA framework, technology risks and security protocols,” the SEC said. “Regular code audit reports shall also be required to be submitted for monitoring of the project, in addition to other continuing reports specified under the proposed rules .”
Approved ICOs will need to keep the proceeds under escrow with a reputable independent escrow agent.
“The Escrow Agreement should be submitted as part of the exhibits attached to the registration statement and should provide, among others, (1) that the said proceeds shall be withdrawn only upon the presentation of the Issuer’s work progress report, and (2) that the Escrow Agent will return the said proceeds to the investors in case the soft cap of the project is not reached or in a pro rata basis in case the project is abandoned by the issuer before completion,” the regulator said.