Philippines SEC Takes Action Against eToro for Offering Unregistered Securities

The Securities and Exchange Commission (SEC) of the Philippines has issued a stern warning to investors regarding the risks associated with unregistered online investment platforms, with eToro https://www.etoro.com/crypto/ emerging as its latest target.

Boasting a user base of over 33 million globally, eToro is a renowned multinational online crypto trading platform.

However, the SEC has flagged eToro's lack of registration as a corporation in the Philippines and its failure to obtain the necessary licenses mandated by the country's Securities Regulation Code.

This legal framework outlines stringent requirements for entities engaged in the sale of securities, brokerage activities, or operating securities exchanges within the Philippines.

The absence of proper registration rings alarm bells for the Philippine regulator, as unregistered platforms operate outside the purview of regulatory oversight, exposing investors to heightened risks such as fraud, manipulation, and difficulties in fund recovery.

In a public advisory issued on 4 April, but initially circulated in March, the SEC explicitly stated that eToro is unauthorised to offer or sell securities to the Filipino public.

The advisory underscores concerns regarding Filipinos accessing eToro's platform to invest in unregistered financial products and highlights the severe legal repercussions for individuals promoting eToro's services without proper licensure.

The advisory caution the public:

"…to exercise caution before investing in these kinds of unregistered online investment platforms and their representatives."

Violators could face substantial fines up to $88,300 and imprisonment for a maximum of 21 years.

Despite the SEC's advisory, eToro's website continues to list the Philippines as a supported jurisdiction.

Regulatory Crackdown No End in Sight

This regulatory crackdown on eToro follows a broader trend in the Philippines aimed at regulating the online investment landscape.

Similar concerns led the SEC to issue an advisory against cryptocurrency exchange Binance in November 2023, ultimately resulting in the National Telecommunications Commission (NTC) blocking access to unlicensed crypto exchange websites in March 2024.

These actions reflect growing global regulatory apprehensions surrounding the risks posed by online investment platforms.

While these platforms offer enhanced accessibility and reduced barriers to entry for investors, the lack of robust oversight underscores significant risks.

The Philippine authorities' stance against eToro serves as a cautionary reminder for both investors and online investment platforms alike.

Investors are advised to conduct thorough due diligence and ensure that platforms they engage with are duly licensed and regulated within their jurisdiction.

Simultaneously, online investment platforms must remain cognizant of international regulations and diligently adhere to legal requirements across the regions in which they operate.