How to verify if a lending company is SEC registered

The Securities and Exchange Commission (SEC) serves as the primary regulator of corporate entities in the Philippines, including lending companies. Verifying whether a lending company holds valid SEC registration is essential for borrowers, investors, and counterparties to mitigate risks associated with fraudulent or unauthorized operations. Unregistered or improperly licensed entities frequently engage in predatory lending practices, charge usurious rates, or disappear after collecting payments, leaving victims with limited recourse. This article outlines the complete legal and practical framework for verification under Philippine law.

Legal Framework Governing Lending Companies

Lending companies in the Philippines are principally governed by Republic Act No. 9474, the Lending Company Regulation Act of 2007. Under this statute, a “lending company” is defined as a corporation engaged primarily in the business of granting loans or extending credit facilities. Key requirements include:

• Organization as a stock corporation under the Revised Corporation Code (Republic Act No. 11232).
• Minimum paid-up capital of ₱1,000,000 for lending companies operating in a single region, with higher thresholds for nationwide operations.
• Submission of Articles of Incorporation and By-Laws containing the specific purpose of engaging in lending activities.
• Procurement of a license to operate from the SEC after satisfying capitalization, director qualifications, and operational standards.

Related statutes include:

• Republic Act No. 8556 (Financing Company Act of 1998, as amended), which covers financing companies that may also engage in lending but often involve lease-purchase arrangements or longer-term financing.
• The Revised Corporation Code, which mandates registration of all domestic and foreign corporations.
• Republic Act No. 3765 (Truth in Lending Act), requiring full disclosure of interest rates, fees, and charges.
• SEC regulations on corporate governance, financial reporting, and anti-money laundering compliance.

Lending companies must maintain annual audited financial statements, file General Information Sheets (GIS), and submit updates on changes in ownership, directors, or principal office. Failure to obtain or maintain the SEC license constitutes illegal operation and exposes the entity to administrative, civil, and criminal sanctions.

Distinction Between SEC Registration and Lending License

SEC registration of the corporation itself (issuance of a Certificate of Incorporation) is only the first step. A company may be duly registered as a corporation yet lack authority to engage in the lending business. The critical document is the Certificate of Authority or License to Operate as a Lending Company issued by the SEC’s Company Registration and Monitoring Department or the appropriate supervision unit. Only entities holding this specific license may lawfully solicit, grant, and collect loans from the public.

Online or digital lending platforms fall under the same regime. The SEC has issued memoranda requiring fintech lending companies to register and obtain licenses, with additional scrutiny on data privacy, electronic contracts, and consumer protection.

Comprehensive Steps to Verify SEC Registration and Licensing

1. Collect Preliminary Information
   Obtain the exact company name (including “Inc.,” “Corp.,” or “Lending Corp.”), any claimed SEC Registration Number (typically a 7- to 10-digit code), Tax Identification Number (TIN), principal office address, and names of directors or authorized officers. Request copies of any loan agreement or promissory note, which should reference the SEC number and license details.

2. Access the Official SEC Company Registry
   Visit the SEC’s official website (www.sec.gov.ph). Navigate to the Company Registration or eSPARC/CRMS portal. Use the public search function to query by:

   • Company name (exact or keyword)
   • SEC Registration Number
   • Stockholder or officer name (for cross-verification)

   A legitimate record will display:

   • Date of incorporation and registration status (active, suspended, revoked, or dissolved)
   • Principal office address (must match the one provided)
   • Authorized capital stock and paid-up capital
   • List of current directors, officers, and stockholders (via latest GIS)
   • Filings history, including audited financial statements

3. Verify the Specific Lending License
   After confirming corporate registration, inquire whether the company holds a valid lending license. This may require:

   • Direct request to the company for a copy of the Certificate of Authority.
   • Contacting the SEC’s Corporate Governance and Finance Department or the Supervision and Monitoring Department.
   • Checking published SEC advisories or lists of registered lending companies, which the Commission periodically releases through its website and official gazette.

4. Review Public Corporate Documents
   Request or download the following from the SEC (some are available online, others upon payment of fees):

   • Articles of Incorporation and By-Laws (must explicitly include lending as a primary or secondary purpose).
   • Latest General Information Sheet (GIS).
   • Audited Financial Statements for the past two to three years.
   • Any amendments to the corporate purpose or capitalization.

5. Cross-Verification with Other Agencies

   • Bangko Sentral ng Pilipinas (BSP): Lending companies are generally non-deposit-taking and fall outside BSP supervision. However, if the entity claims quasi-banking functions or accepts deposits, verify with the BSP’s Supervisory Policy and Research Department. Pure lending companies should not appear on BSP’s list of authorized banks or quasi-banks.
   • Department of Trade and Industry (DTI): Sole proprietorships or partnerships cannot legally operate as lending companies under RA 9474; they must incorporate with the SEC.
   • National Privacy Commission (NPC): For online lenders, confirm registration if they process personal data.

6. Physical and Operational Due Diligence
   Visit the declared principal office address. Legitimate companies maintain a verifiable physical presence. Conduct site inspection and confirm that the office appears operational and displays required corporate signage.

7. Request Official Confirmation
   Submit a formal written request to the SEC for certification of registration and licensing status. Provide the company’s details and pay the prescribed fee. The SEC will issue an official letter confirming or denying the entity’s authority.

Red Flags Indicating Possible Non-Registration or Illegal Operation

• Absence of an SEC Registration Number or refusal to provide it.
• Mismatched addresses between claimed office and SEC records.
• Use of generic or frequently changing company names without clear corporate identity.
• Promises of instant approval without credit checks or collateral requirements that violate standard lending practices.
• Collection methods involving harassment, public shaming, or threats (prohibited under the law).
• Operation solely through unregulated social media accounts or messaging apps without a disclosed corporate entity.
• Interest rates or fees exceeding legal limits without proper disclosure (effective rates are capped under usury laws and Truth in Lending Act).
• Demands for upfront processing fees, insurance premiums, or “service charges” before loan release.

Legal Consequences of Dealing with Unregistered Lending Companies

Entities operating without SEC registration or license face:

• Fines ranging from ₱10,000 to ₱100,000 or more per violation.
• Imprisonment of officers for up to 10 years under RA 9474 and the Revised Corporation Code.
• Issuance of Cease and Desist Orders, asset freeze, and business closure.
• Invalidation of loan contracts, allowing borrowers to challenge collection efforts in court.

Borrowers who transact with unregistered lenders may still be obligated to repay principal under principles of unjust enrichment, but they gain stronger defenses against excessive interest, penalties, and abusive collection. Courts have consistently ruled that contracts violating mandatory registration requirements are voidable or subject to reformation.

Ongoing Compliance and Monitoring

Registered lending companies must:

• File annual reports and GIS within prescribed periods.
• Maintain minimum capital and liquidity ratios.
• Adhere to corporate governance standards, including independent directors where required.
• Submit to SEC examination and inspection.

The SEC maintains continuous monitoring and publishes warnings against fly-by-night operators, particularly in the online lending space. Borrowers should periodically re-verify status, as licenses can be suspended or revoked for regulatory violations.

Verifying SEC registration and licensing of a lending company constitutes fundamental due diligence under Philippine law. By systematically following the procedures outlined—beginning with the official SEC registry search and extending to license confirmation and document review—stakeholders protect themselves from fraudulent schemes and ensure transactions occur within a regulated, transparent framework. This process upholds the integrity of the Philippine financial system and enforces accountability on entities extending credit to the public.