The Philippines financial regulator Securities and Exchange Commission (SEC) has issued two advisories this month, warning traders against two Retail FX and CFDs brokers, eToro and XM.

The SEC stated that each of eToro and XM have launched promotional campaigns on various social media websites and applications to entice its target market, including Filipinos, to engage in trading activities using their respective platforms.

The eToro platform may be accessed through its main etoro.com, which also provides subdomains that cater to different countries which investors could choose to invest in as well as through its mobile applications. XM’s platform may be accessed through its main website xm.com as well as through its mobile applications.

Each of eToro’s and XM’s operations allow Filipinos to create user accounts on their platform for the purpose of investing and trading unregistered investment products. While it appears that the operators of these platforms are a registered broker/dealer in different jurisdictions, in the Philippines, before securities and investment products can be sold or offered to the public, the Securities Regulation Code requires:

1. That the securities being offered are registered with the Philippine Securities and Exchange Commission (SEC). This involves filing an application for registration and providing detailed information about the securities, including the issuance price, the use of the proceeds, and the nature of the securities;
2. That the securities must be issued by a corporation or a licensed dealer, both of which should be registered in the Philippines; and
3. That the issuer possesses a secondary license to sell or offer securities to the public.

Based on the Commission’s database, both of the operators of the platforms eToro and XM are not registered as a corporation in the Philippines and operate without the necessary license and/or authority to sell or offer any form of securities, to engage in the business of buying or selling securities or as a broker or dealer, or to create or operate an exchange for the buying and selling of securities.

In view thereof, the public is hereby advised to exercise caution before investing in these kinds of unregistered online investment platforms and their representatives. In dealing with these unregistered platforms, the Commission reiterates its Advisory entitled: “Advisory against Dealing with Non-Registered Foreign Entities, Organizations, and Corporations.”

In addition, those who act as salesmen, brokers, dealers or agents, representatives, promoters, recruiters, influencers, endorsers, and enablers of either the eToro or XM platform in selling or convincing people to invest in either platform within the Philippines, even through online means, may be held criminally liable under Section 28 of the SRC and be penalized with a maximum fine of Five Million Pesos (about USD $88,500) or imprisonment of 21 years or both pursuant to Section 73 of the SRC.