The Securities and Exchange Commission (SEC) has defended the term limits it imposed on broker directors of the Philippine Stock Exchange Inc. (PSE).
SEC Memorandum Circular (MC) No. 17 restricts broker-directors to a maximum cumulative term of 10 years at any exchange.
‘The commission reiterates that MC 17 was promulgated pursuant to the regulatory powers vested upon it under Republic Act [RA] No. 8799, or the Securities Regulation Code [SRC], as well as Republic Act No. 11232, or the Revised Corporation Code of the Philippines,’ the SEC said in a statement.
‘Accordingly, the memorandum circular directly advances the commission’s mandate to uphold corporate governance standards, enhance market transparency, and strengthen integrity and accountability in the corporate sector. These are essential toward building a robust, dynamic and world-class Philippine capital market-capable of attracting global investment and driving sustainable economic growth.’
Former PSE Chair Ma. Vivian Yuchengco and Eddie Gobing, a director petitioned the Court of Appeals to declare the rule unconstitutional.
Yuchengco and Gobing sat on the board for 28 years and 25 years, respectively.
The SEC said it is ‘disappointed’ that after providing a reasonable two-year transition period for the implementation of the reform-following extensive consultations-‘we now find ourselves having to defend it in court.’
‘We see no deprivation of shareholders’ rights. Shareholders remain free to elect the directors of their choice from among those who are qualified under the law and SEC regulations. The law does not recognize an unfettered right to elect any specific individual regardless of applicable regulatory qualifications.’
In their petition which they filed last week, Yuchengco and Gobing said ‘the SEC ironically seeks to exclude those with the most experience and insight in managing and directing the affairs of the Exchange, just so other ‘qualified brokers’ may be given an opportunity to serve on the board’.
‘Reading between the lines, these other ‘qualified brokers’ are those who are unable to get the required number of votes to be elected as members of the board of the Exchange.
‘The only way they can sit on the board is if the SEC disqualifies long-serving Broker Directors who, because of their experience and qualifications, have consistently received the greatest number of votes from the shareholders during the annual elections,’ the petition read.
SEC Chairman Francis E. Lim said the agency is fully prepared to defend this reform.
‘The SEC remains steadfast in strengthening investor confidence, enhancing market integrity, and building a more dynamic, competitive, and trusted Philippine capital market,’ he said.
‘Serving as a director of an exchange is a privilege, not a vested right. It is subject to the qualifications and regulatory standards prescribed by law and the SEC. Good governance requires board renewal, fresh perspectives and a commitment to advancing the long-term interests of our capital market above individual or institutional interests.’