The Securities and Exchange Commission (SEC) of the Philippines has issued two warnings this month cautioning traders about two retail forex and contract for difference (CFD) brokers, eToro and XM.

The SEC stated that eToro and XM have launched promotional activities on various social media websites and apps to attract their target markets, including Filipinos, to engage in trading activities using their respective platforms.

The eToro platform is accessible through its main website and also offers subdomains for different countries, while investors can also opt to invest through its mobile application. XM's platform is accessible through its main website as well as its mobile application.

The operations of eToro and XM allow Filipinos to create user accounts on their platforms to invest in and trade unregistered investment products. Despite the operators of these platforms being registered brokers/dealers in different jurisdictions, in the Philippines, the SEC requires:

• Submission of an application for registration and providing detailed information about the securities, including issuance price, use of proceeds, and nature of the securities.
• Securities must be issued by companies registered in the Philippines or licensed dealers.
• The issuer must hold a secondary license to sell or offer securities to the public.

According to the Commission's database, the operators of eToro and XM platforms are not registered as companies in the Philippines and are engaging in securities sales or offering services without the necessary licenses and/or authorization, conducting securities trading activities, acting as brokers or dealers, or establishing or operating securities exchanges.

Therefore, the public is advised to exercise caution before investing in such unregistered online investment platforms and their representatives. In dealing with these unregistered platforms, the Commission reiterates its advisory titled "Warning: Do Not Deal with Unregistered Foreign Entities, Organizations, and Companies."

Furthermore, individuals such as salesmen, brokers, dealers, or agents, representatives, promoters, recruiters, influencers, endorsers, and facilitators who sell or persuade people to invest in eToro or XM platforms in the Philippines, even through online means, may incur criminal liability under Section 28 of the Securities Regulation Code (SRC) and may be subject to a maximum fine of five million pesos (approximately $88,500) or imprisonment of up to 21 years, or both, under Section 73 of the SRC.