In 2021, a social media app called LYKA appeared in the Filipinos’ consciousness out of nowhere and promised the impossible — earning money just for being online. The fintech platform, which was first launched in 2019 in Southeast Asia, was able to attract users by awarding them with tokens that they could spend in real life.
The app offered a reward for every interaction: basic tasks like uploading a photo allowed users to earn LYKA’s in-app currency called GEMs or “gift cards in electronic mode.” Liking a photo, meanwhile, could provide even more GEMs.
Interestingly, the coins were redeemable in real life and can be used to buy anything from a luxury spa treatment to paying a MERALCO bill. This platform can only be accessed by downloading the LYKA app from GooglePlay or App Store, and it’s only available in the Philippines for now.
LYKA saw tremendous growth in the country in the past year as celebrities and influencers started going viral after flexing their earnings from the app. In one viral video, a celebrated actress tearfully gifted her mother with a Ford SUV worth $70,000 — all paid upfront, she claimed, with the Lyka currency.
Request for automatic approval of LYKA’s SEC application denied
As the saying goes, “all good things must come to an end.”
This is what the Hong Kong-based fintech company must have felt after the Anti-Red Tape Authority (ARTA) under the Office of the President rejected its request for automatic approval of its application for company registration with the Securities and Exchange Commission (SEC).
In a notice of denial dated March 6, the ARTA rejected the request filed by LYKA Philippines Solutions Inc. for automatic approval of its registration with the SEC over the company’s failure to submit the complete documentary requirements.
LYKA President Michael Bryant T. Lim filed the request before the ARTA after noting that the Securities and Exchange Commission (SEC) supposedly failed to act on its application for company registration, despite the submission of its Articles of Incorporation, by-laws, application to do business, and the corresponding fee for incorporation, among many other requirements.
He argued that under Republic Act (RA) No. 9485, as amended by RA No. 11032 or The Ease of Doing Business and Efficient Government Service Delivery Act of 2018, “if a government office or agency fails to act on an application or request for renewal of a license, clearance, permit, certification or authorization subject for renewal within the prescribed processing time, said license, clearance, permit, certification or authorization shall automatically be extended.”
The ARTA, however, affirmed the SEC’s position that the automatic approval mandated by law did not apply to LYKA Philippines, given that entities under investigation are not covered by the reglementary period provided under RA No. 11032 and that automatic approval is only applicable upon submission of complete requirements.
It can be recalled that LYKA and its proposed major stockholder, Things I Like Company, Ltd., were issued a cease and desist order for violation of Republic Act No. 11127, or the “National Payment Systems Act,” and are now suspended for possible money laundering.
Documents related to LYKA and its major stockholder were deemed indispensable to the SEC’s evaluation of the feasibility and sustainability of the company’s operation, to safeguard merchants, investors, and the shareholders of the company.
SEC says LYKA has yet to comply with its directive
In a press release, the SEC stated that LYKA failed to comply with a directive from the SEC Enforcement and Investor Protection Department (EIPD) requiring it to submit proof as to how the company finances its operation.
The SEC’s EIPD had also asked the company for a list of merchants, a list of payables, and a document disclosing the owners of GRL17 Nominee Limited, which it said appeared as the founding member of Things I Like Company, Ltd.
Clearance from the EIPD is one of the requirements for businesses engaged in the financial technology sector seeking to register with the SEC.
“However, [Lim] failed to show proof that it submitted a clearance from the [EIPD]. Accordingly, it cannot be said that there was a submission of complete documentary requirements as stated in the Citizen’s Charter of the SEC for Registration of Corporations through the eSPARC,” the ARTA said in its resolution denying the request.
“Considering the foregoing, the requirements laid down under Section 10 of RA 9485, as amended, and its Implementing Rules and Regulations for Automatic Approval have not been met. Thus, Automatic Approval is not warranted in the instant application for registration of company submitted by LYKA with the SEC,” the ARTA resolution added.