How to Check SEC Registration and Lending License of a Philippine Lending Company

Introduction

In the Philippines, the lending industry plays a crucial role in providing financial access to individuals and businesses. However, with the proliferation of lending entities, it is essential for borrowers, investors, and stakeholders to verify the legitimacy of these companies to avoid scams, unfair practices, and legal pitfalls. The Securities and Exchange Commission (SEC) is the primary regulatory body overseeing the registration and licensing of lending companies under Republic Act No. 9474, also known as the Lending Company Regulation Act of 2007 (LCRA). This act mandates that all lending companies must be registered as corporations with the SEC and obtain a Certificate of Authority (CA) to operate legally as lenders.

Checking the SEC registration and lending license ensures compliance with Philippine laws, protects consumer rights, and promotes transparency in financial transactions. Failure to verify these credentials can lead to dealings with unauthorized entities, which may result in void contracts, financial losses, or even criminal liabilities. This article provides a comprehensive guide on the processes, legal frameworks, requirements, and best practices for verifying the registration and licensing status of lending companies in the Philippine context.

Legal Framework Governing Lending Companies

Republic Act No. 9474: Lending Company Regulation Act of 2007

The LCRA is the cornerstone legislation for regulating lending companies in the Philippines. It defines a lending company as a corporation engaged in granting loans from its own capital funds or from funds sourced from not more than 19 persons. Key provisions include:

Mandatory Registration: All lending companies must first register as stock corporations with the SEC under the Revised Corporation Code of the Philippines (Republic Act No. 11232).
Certificate of Authority (CA): Beyond corporate registration, a CA from the SEC is required to legally engage in lending activities. This serves as the "lending license" and confirms that the company meets capital, governance, and operational standards.
Exemptions: Certain entities are exempt from the LCRA, such as banks, quasi-banks, pawnshops, and non-stock savings and loan associations regulated by the Bangko Sentral ng Pilipinas (BSP) or other bodies. However, if an entity claims to be a lending company outside these exemptions, SEC oversight applies.
Prohibitions and Penalties: Operating without SEC registration or CA is punishable by fines ranging from PHP 10,000 to PHP 2,000,000, imprisonment up to 10 years, or both. The SEC can also issue cease-and-desist orders and revoke licenses for violations.

Revised Corporation Code of the Philippines (Republic Act No. 11232)

This law governs the incorporation and registration of all corporations, including lending companies. It requires minimum capitalization (at least PHP 1,000,000 for lending companies under SEC rules), submission of articles of incorporation, bylaws, and other documents. The code emphasizes corporate governance, anti-money laundering compliance, and data privacy under Republic Act No. 10173 (Data Privacy Act of 2012).

SEC Memorandum Circulars and Rules

The SEC issues supplementary rules to implement the LCRA:

SEC Memorandum Circular No. 19, Series of 2019: Updates minimum capitalization requirements and outlines the application process for CA.
SEC Memorandum Circular No. 18, Series of 2019: Provides guidelines on anti-money laundering and counter-terrorism financing for covered institutions, including lending companies.
Online Lending Platforms: For fintech lenders, SEC Memorandum Circular No. 19, Series of 2017, regulates online lending platforms, requiring them to register and obtain CA if they facilitate loans.

Interplay with Other Laws

Anti-Money Laundering Act (Republic Act No. 9160, as amended): Lending companies must comply with know-your-customer (KYC) rules.
Consumer Protection Laws: The Consumer Act of the Philippines (Republic Act No. 7394) and Truth in Lending Act (Republic Act No. 3765) mandate fair disclosure of loan terms.
BSP Oversight: If a lending company evolves into a banking institution or handles deposits, it falls under BSP jurisdiction via the Manual of Regulations for Non-Bank Financial Institutions.

Requirements for SEC Registration and Lending License

Before delving into verification steps, understanding the prerequisites for a lending company to obtain these credentials is vital:

SEC Corporate Registration

Incorporation Documents: Articles of Incorporation, Bylaws, Treasurer's Affidavit, and proof of payment for shares.
Minimum Capital: PHP 1,000,000 fully paid-up for standard lending companies; higher for those with foreign ownership or specific operations.
Directors and Officers: At least five incorporators, with a majority being Filipino citizens if foreign equity exceeds 40% (under the Foreign Investments Act).
SEC Approval: Upon submission, the SEC issues a Certificate of Incorporation, confirming the company's legal existence.

Certificate of Authority (Lending License)

Application Process: Post-registration, the company applies for CA via the SEC's Company Registration and Monitoring Department (CRMD).
Requirements:
- Proof of compliance with capitalization.
- Business plan, including lending policies and risk management.
- Clearances from the Bureau of Internal Revenue (BIR), Social Security System (SSS), PhilHealth, and Pag-IBIG.
- Anti-money laundering manual.
- Lease contract or proof of office address.
Fees: Registration fees vary but typically include PHP 1/10 of 1% of authorized capital stock plus documentary stamp taxes.
Validity: The CA is perpetual unless revoked, but companies must file annual reports (General Information Sheet and Audited Financial Statements) to maintain good standing.

Step-by-Step Guide to Checking SEC Registration

Verifying SEC registration confirms the company's legal incorporation. Here's how:

Access the SEC Website: Visit the official SEC portal at www.sec.gov.ph. Navigate to the "Online Services" or "Company Registration" section.
Use SEC i-View System: This is the SEC's online database for public inquiries.
- Register for a free account if required.
- Search by company name, SEC registration number, or incorporators' names.
- The system will display the Certificate of Incorporation, date of registration, authorized capital, and status (active, suspended, or revoked).
Check the General Information Sheet (GIS): Request or view the latest GIS, which lists current officers, stockholders, and amendments. This ensures the company is up-to-date with filings.
Verify Through SEC Express: For physical verification, visit an SEC office or use the SEC Express System for certified true copies of documents (fees apply: PHP 100–500 per document).
Cross-Check with Other Databases:
- BIR: Confirm Tax Identification Number (TIN) validity.
- DTI: If the company has a business name registration (for sole proprietorships, but lending companies must be corporations).

If the company is not found or shows as revoked, it is not legally registered.

Step-by-Step Guide to Checking Lending License (Certificate of Authority)

The CA is distinct from general registration and specifically authorizes lending operations.

SEC Website Search: On www.sec.gov.ph, go to the "Enforcement and Investor Protection" or "Registered Lending Companies" section. The SEC maintains a list of registered lending companies with CA.
Download the Masterlist: The SEC periodically publishes an updated masterlist of licensed lending companies in PDF format on its website. Search for the company's name and check the issuance date of the CA.
Online Verification Portal: Use the SEC's eSPARC (Electronic Simplified Processing of Application for Registration of Companies) or contact the CRMD via email (crmd@sec.gov.ph) for confirmation.
Public Notices and Advisories: Review SEC advisories for warnings against unlicensed entities. The SEC issues public warnings about fake or revoked lenders.
Physical Inquiry: Visit the SEC Head Office in Pasay City or satellite offices. Request a certification of CA status (fee: approximately PHP 200).
Fintech-Specific Checks: For online lenders, verify registration under the SEC's fintech rules. The list of registered online lending platforms is available on the website.

If no CA is found, the company is operating illegally as a lender.

Common Red Flags and Consequences

Red Flags

Promises of unrealistically low interest rates or guaranteed approvals.
Lack of physical office or verifiable contact details.
Pressure to pay upfront fees.
Absence from SEC lists or discrepancies in provided registration numbers.
Use of foreign-based apps without local SEC approval.

Consequences of Dealing with Unregistered/Unlicensed Companies

For Borrowers: Loans may be unenforceable, leading to disputes. Victims can file complaints with the SEC for restitution.
For Companies: Administrative sanctions, including fines, license revocation, and referral to the Department of Justice for criminal prosecution.
Broader Implications: Unregulated lending contributes to debt traps, usury (interest rates exceeding 6% per month under the Usury Law, though liberalized), and economic instability.

Best Practices and Tips

Always request copies of the Certificate of Incorporation and CA before transacting.
Consult a lawyer or financial advisor for complex verifications.
Report suspicious entities to the SEC via its hotline (02-8818-0921) or online complaint form.
For foreign-owned lenders, check compliance with the Foreign Investments Act.
Stay updated via SEC social media and newsletters for new regulations.
Use third-party verification services cautiously, ensuring they reference official SEC data.

By diligently checking SEC registration and lending licenses, stakeholders can foster a safer financial ecosystem in the Philippines, aligned with national goals of inclusive growth and consumer protection.