SEC Unfolds Strict Regulations to Prevent Financial Crimes in Stock Market

SEC (Securities Exchange Commission) is to implement tough regulations to prevent money laundering in the stock market. The new rules require transparency regarding the identity of the beneficial owners of shares. 

These new regulations to prevent money laundering are included in SEC Memorandum Circular No. 1, Series of 2021, Guidelines in Preventing the Misuse of Corporations for Illicit Activities through Measures Designed to Promote Transparency of Beneficial Ownership.

The measures include the compulsory revelation of the identity of the beneficial owners or the people who control the corporations. 

SEC Chairman Emilio B. Aquino said, “Arrangements that allow shareholders or members to hide their identity expose corporations to the risk of being misused for illicit activities such as money laundering and terrorist financing. The newly issued guidelines will provide the commission with adequate, accurate, and timely information to combat such unlawful activities while cementing our commitment to international standards and best practices against money laundering and terrorist financing.”

The regulations also state that no organization or firm is to issue, sell, or offer sale or distribution and warrants of the bearer shares as the identity of the owner is not recorded. The framework further obligates the organizations to reveal and record the alienation, transfer, and sale of the stock shares in their stock books within 30 days by date, by whom, and to whom.

Dividends will not be paid to anyone if the name of the owner of the stock doesn’t appear in the records of the corporation. The only exceptions are the dividends that are paid by the public listed organizations or similar organizations that are authorized to act as custodian of shares with the intention of trading in the market and operating under the same rules. 

FATF- Financial Action Task Force issued the Mutual Evaluation Report that contains the recommendations that these new regulations adopted.