SEC readies simplified rules to help farm projects raise capital

The Securities and Exchange Commission (SEC) is finalizing a regulation that will help farm-based companies raise up to P500 million to fund their agricultural projects by selling securities through a simplified registration process.

The memorandum circular, which the securities regulator plans to issue initially next month, is meant to support small and medium enterprises (SMEs) in raising capital for their projects.

“It’s [one of] our initiatives [because] we have seen the need to support SMEs. So, this is one of those projects that we can use and tap agriculture entrepreneurs to issue their shares,” SEC Chairman Emilio B. Aquino told BusinessWorld on the sidelines of a corporate event on Monday.

Mr. Aquino added that the new initiative targets to reach overseas Filipino workers who want to invest capital in agri-based businesses in the Philippines.

The regulator said capital-raising from the private sector for agri-based projects might involve the sale of securities to overseas Filipino investors using financial technology or fintech.

“I think that’s what we need, and to insure also our food security and develop our agricultural sector,” Mr. Aquino said.

The regulator earlier posted on its website the draft memorandum circular for Securing and Expanding Capital for Farms and Agribusiness Related Modernization Schemes or SEC FARMS for comment from agricultural companies.

The proposed circular aims to simplify the registration process for the securities of agri-based businesses through SEC FARMS instead of SEC Form 12-1, the usual format.

“Agri-based companies may use SEC FARMS for registration of its securities that are sold or offered for sale pursuant to Sections 8 and 12 of the Securities Regulation Code,” the SEC said.

According to the draft, a corporation has to be established specifically for agri-based projects and must register its securities not exceeding the amount of P500 million per project, which could be applied in a single or series of registrations.

The regulator said proceeds from the sale of the securities for registration must represent at most 50% of the agricultural project’s total project cost.

To use SEC FARMS, a company need to have secured and allocated as seed money for the project an amount representing the other 50% of the total project cost.

If the project has already started, the company needs to provide the actual percentage of accomplishment and the fund in possession should not be less than 50% of the total project cost.

“A registrant corporation may offer its registered securities in a single offer period or in a continuing offer period based on a reasonable and acceptable schedule but not to exceed one year from the date of the issuance of the Order of Registration and Permit to Sell,” the SEC said.

The registrant must also submit a monthly progress report of the amount raised from the start of the offer period.

“The Commission undertakes to declare the registration statement effective or rejected within 28 days after the date of filing of its SEC FARMS,” the regulator added.

Mr. Aquino said that the SEC hopes to launch the initiative next month, “at least the initial memorandum of understanding.”

“The use of SEC FARMS is without prejudice to the right of the Commission to require such other information or documents as it may prescribe, consistent with the interest of the general public and for the protection of investors,” the commission added.

Meanwhile, the SEC said on Tuesday that the SEC Rules and Regulations of the Financial Products and Services Consumer Protection Act of 2022, or SEC FCPA IRR has taken effect on May 14, 2023, following its publication in major broadsheets. — By Adrian H. Halili