TWO global financial service companies are competing to design a plan which will resolve the brokers’ ownership issue in the Philippine Stock Exchange (PSE).

                In an interview over the weekend, PSE president and chief executive Francis Lim said the board will meet with UBS and JP Morgan in its regular meeting before the end of the month and ask each to present its respective proposals.

                “The rationale for this is that I want to address the issue before our next annual stockholders’ meeting this April,” he said, referring to the voting rights of brokers who collectively own 46 percent of the exchange.

                Under the corporation code, the extent of the ownership is equal with the voting rights.

                However, the Securities Regulation Code (SRC) limits the ownership or control of the voting rights in the exchange of any industry or business group, whether directly or indirectly. The 20-percent limit became a requirement when the bourse demutualized or converted from a member-owned company into shareholder-owned firm in August 2001.

                “I would like to avoid any problem between the regulator and the brokers so we are finding ways to resolve the issue,” Lim said.

                To comply with regulations, the brokers could sell more shares via private placement or a public offering.

                But with the current volatility in the market, the last option may not be viable. The shares of the exchange are listed at the bourse by way of introduction. At the end of trading last Friday, PSE shares were valued P860 each.

                Last July, the PSE asked the Securities and Exchange Commission (SEC) for another extension to comply with the directive that calls for further reduction in the collective ownership of the brokers.

                But the SEC denied the request and instead ordered that the voting rights of the brokers be reduced to 20-percent from 46 percent.

                The PSE should have complied with the said rule in 2006 but the SEC gave the bourse a one-year extension. The extension lapsed on July 27, 2007.

                Since then, the commission has been penalizing the PSE even if the exchange has requested the corporate regulator for reconsideration.

                The brokers, in various transactions, had sold shares to institutional investors but still fail to meet the prescribed 20-percent limit.

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TWO global financial service companies are competing to design a plan which will resolve the brokers’ ownership issue in the Philippine Stock Exchange (PSE).

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Did you know 1: He’s now being called a rat in some circles of Philippine Communications Satellite Corp. It turns out this senior executive works for one group but has been telling everything that’s discussed to the other group out of, well, vested interest.