The Securities and Exchange Commission (SEC) has tightened rules on financial products and services in the country to better protect consumer assets against fraud.

Under the recently released Implementing Rules and Regulations (IRR) of Republic Act 11765 or the Financial Products and Services Consumer Protection Act (FCPA), the SEC advances financial consumers rights, SEC chairperson Emilio Aquino said.

'True to the objectives of the FCPA, the IRR advances financial consumers' right to equitable and fair treatment, to disclosure and transparency in the marketing of financial products and services, to protection of consumer assets against fraud and misuse,' Aquino said.

The new rules likewise provide a layer of data privacy protection and timely handling and redress of complaints of consumers, he said.

The IRR covers all financial products and services, and financial service providers under the jurisdiction of the SEC.

These include credit, securities, and investments, including digital financial products or services that pertain to the broad range of financial services accessed and delivered through digital channels.

The rules, likewise, allow the SEC to prevent credit entities from collecting excessive or unreasonable interests, fees or charges, among others.

'The SEC may enter an order requiring accounting and disgorgement of profits obtained or losses avoided, as a result of a violation of the FCPA and other existing laws, including reasonable interest, in addition to penalties it may impose for such violation,' the SEC said.

Persons who violate FCPA or its rules face imprisonment of no less than one year, but no more than five years or by a fine of no less than P50,000, but not more than P2 million or both, at the discretion of the court.

Should the violation be committed by a corporation or a juridical entity, the directors, officers, employees or other officers who are directly responsible for such violation shall be held liable, the SEC said.

In addition, persons found responsible for investment fraud may also be subject to administrative sanctions of up to P10 million for each instance of investment fraud.

To protect the interests of financial consumers, the IRR requires financial service providers to integrate a Consumer Protection Risk Management System (CPRMS) into its enterprise-wide risk management processes and risk governance framework.

The CPRMS includes the governance structure, policies, processes, measurement, and control procedures to ensure that consumer protection risks are identified, measured, monitored, and mitigated.

The board of directors of each company shall be primarily responsible for approving and overseeing the implementation of the CPRMS, according to the new rules.

Financial service providers are also directed to establish a Financial Consumer Protection Assistance Mechanism (FCPAM), for free assistance to financial consumers on financial transaction concerns, including complaints, inquiries, and requests.

The SEC now requires financial service providers to have a cooling-off period of no less than three days.

This is to give consumers time to consider the costs and risks of a financial product or service, free from the pressure of the sales team of the financial service provider, the SEC said.

With the IRR, the SEC also reiterates the prohibition on the use of abusive collection or debt recovery practices.

 

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