The Philippines’ financial regulator Securities and Exchange Commission (SEC) issued two notices this month, warning traders against two retail FX and CFDs brokers, eToro and XM.
The SEC said eToro and XM have launched promotional campaigns on various websites and social media apps to entice its target market, including Filipinos, to engage in trading activities using their respective platforms.
The eToro platform can be accessed through the main etoro.com, which also provides subdomains targeting different countries that investors could choose to invest in, as well as through its mobile apps. XM’s platform can be accessed through the main website xm.com as well as through its mobile applications.
Each of eToro and XM’s features allow Filipinos to create user accounts on their platform for the purpose of investing and trading non-registered investment products. Although it appears that the operators of these platforms are registered broker/dealers in different jurisdictions, in the Philippines, before securities and investment products can be sold or offered to the public, the Securities Regulation Code requires:
- That the securities offered are registered with the Securities and Exchange Commission of the Philippines (SEC). This includes applying for registration and providing detailed information about the securities, including the issue price, the use of the proceeds and the nature of the securities.
- That the securities must be issued by a company or an authorized agent, both of which must be registered in the Philippines; and
- That the issuer has a secondary license to sell or offer securities to the public.
Based on the Commission’s database, both eToro and XM platform operators are not registered as a company in the Philippines and operate without the necessary license and/or authorization to sell or offer any form of securities, to engage in the business of trading or sale of securities or as a broker or dealer, or to establish or operate an exchange for the purchase and sale of securities.
In view of this, the public is advised to exercise caution before investing in such unregistered online investment platforms and their representatives. In dealing with these unregistered platforms, the Commission reiterates its Advisory entitled: “Advisory against dealing with unregistered foreign entities, organizations and companies”.
In addition, those who act as sellers, brokers, traders or agents, representatives, promoters, recruiters, influencers, promoters and helpers of either the eToro or XM platform to sell or persuade people to invest in any platform within the Philippines, even and through online media, may be held criminally liable under Section 28 of the SRC and punished with a maximum fine of five million pesos (approximately US$88,500) or imprisonment of 21 years or both under Section 73 of the SRC.