The Securities and Exchange Commission (SEC) is giving the Philippine Stock Exchange (PSE) a few more months to comply with the 20 percent ownership limit of the brokers in the Exchange or face monetary penalties.
In a letter to PSE chairman Jose C. Vitug and president Francis Lim, Market Regulation Department head Jose P. Aquino said the PSE should comply with the ownership requirement not later than the record date for the annual stockholders meeting and election of directors of PSE for 2006 or March 31, 2006 whichever is earlier.
The SEC is also requiring the PSE to submit an action plan detailing how they will comply with the ownership limit. The action plan which is to be submitted in 30 days from December 6, 2005, should also indicate the definite date of PSE’s compliance which should not be later than the period required by the Commission.
"Failure to comply with the ownership limit prescribed under Section 33 (C) of the Securities Regulation Code within the period fixed herein shall subject PSE to a fine of
P100,000 plus P100 per day of delay pursuant to SEC Memorandum Circular No. 6 Series of 2005," Aquino said.
According to the SEC, brokers still own 7.34 million shares or 48.06 percent of the total outstanding shares of the PSE. This computation include certificated PSE shares of brokers, PSE shares owned by individuals who are related to brokers and those shares lodged with the Philippine Depository and Trust Corp. (PDTC) which are under the principal accounts of brokers.
Based on the data submitted to the Commission by the PDTC, brokers with certificated shares collectively hold 32.62 percent of the total outstanding shares of the Exchange. PSE shares lodged with the PDTC under the principal accounts of brokers meanwhile account for 12.5 percent or 1.98 million shares of the PSE. PSE shares under the name of individuals who are related to brokers, on the other hand, hold 2.95 percent or 449,998 shares.
In view of this, the SEC reminded the PSE that its Rules Governing the Trading of PSE shares prohibits the purchase of PSE for the accounts of related persons of a broker dealer which include its subsidiaries and affiliates and its directors, officers, principal stockholders and the nominees to the PSE and the spouses and relatives up to the first degree or by affinity or consanguinity.
The rest of the shares of the PSE are owned by institutions (33.58 percent), individuals (7.09 percent), and foreign and local clients of brokers (14.22 percent).
The PSE was once wholly-owned by brokers but the ownership of the latter had been reduced as part of the Exchange’s demutualization process. The dilution of the brokers’ ownership in the Exchange is also in compliance with Section 33 (c) of the Securities Regulation Code (SRC).
Under Section 33 ( c ) of the SRC provides that no industry or business group may beneficially own or control, directly or indirectly, more than 20 percent of the voting rights of the PSE. The SEC Rules Governing the Trading of PSE Shares classify broker dealers as a business industry.
Meantime Lim said the Exchange is doing its best to comply with the ownership limit of brokers as required by the law. He said they are looking at the best options on how they can dispose of the brokers’ shares in the Exchange.
"The Exchange is speeding up the process on limiting the ownership. We are doing away with the selection of a financial adviser. The board has instead approved a resolution appointing our independent director Roberto Atendido to take the lead in coming up with the best option to implement the process," Lim said.
