Published 22 September 2023, The Daily Tribune

Digital technology has transformed financial transactions and commerce worldwide. Assuring users of convenience, agility, and speed, digital technology serves as a new platform for the finance industry.

Through digital channels, consumers can now easily access financial products and services like bank accounts, insurance policies, pre-need and health maintenance organization products, and securities investments.

With the evolving digital finance industry, legislators recognized the need to protect consumers from digital scams, fraud, and iniquitous terms of financial products and services. Republic Act 11765, the Financial Products and Services Consumer Protection Act or FCPA, was enacted to strengthen the powers and authority of the financial regulators.

Financial regulators, like the Bangko Sentral ng Pilipinas, Securities and Exchange Commission or SEC, Insurance Commission, and the Cooperatives Development Authority, were granted rulemaking, market monitoring, enforcement, and adjudication powers.

As such, financial regulators can now impose penalties on non-complying financial service providers.

Penalties may include restrictions on financial service providers from collecting excessive or unreasonable interest, fees, or charges, disqualification and/or suspension of directors, trustees, officers, or employees; imposition of fines, suspension, or penalties, issuance of cease-and-desist orders, suspension of operations, and disgorgement.

As mandated in the FCPA, the financial regulators issued their respective implementing rules and regulations, laying down their guidelines for enforcing the FCPA.

The SEC issued Memorandum Circular No. 5 (SEC IRR) on 29 April 2023. It required financial service providers within its jurisdiction (such as investment companies, public companies, financing and lending companies, and issuers of securities) to, among other things, ensure their consumers have an effective recourse to complaints and problems. As such, they are required to establish a single consumer assistance mechanism or a financial consumer protection assistance mechanism and provide free assistance to consumers on financial transaction concerns. The FCPAM shall include the handling of complaints, inquiries, and requests.

Financial consumers may also elevate their concerns to the SEC through its authorized operating departments, i.e., the Company Registration and Monitoring Department, Corporate Governance and Finance Department, Market and Securities Regulation Department, Enforcement and Investor Protection Department, and the SEC Extension Offices. Complaints may be elevated to the authorized operating departments (1) after the complaint or inquiry has not been resolved after 30 days from initial submission, and (2) within 15 days from when the financial consumer found the action taken by the financial service provider to be unsatisfactory.

For the additional protection of consumers, financial service providers shall be responsible and shall be solidarily liable for all acts or omissions of its agents in marketing financial products or services and transacting with consumers. Financial service providers are likewise required to submit a list of their authorized third-party service providers engaged to perform debt collection, marketing, and/or transactions with financial consumers.

Notably, the SEC now requires the registration of investment advisers. An investment adviser refers to a person who, for compensation, engages in the business of advising others on the value of investment products or the advisability of investing in, purchasing, or selling investment products, or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning investment products.

(To be continued)

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