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WHAT is
in store for the Philippine Stock Exchange (PSE) after
deferring a capital restructuring plan intended to
dilute the ownership of stockbrokers to the legal limit
of 20 percent from “approximately 42 percent” as
required under the Securities Regulation Code? The
Securities and Exchange Commission (SEC) as corporate
regulator, which still exercises regulatory jurisdiction
over the exchange, won’t stop sending PSE president
Francis Ed Lim memos after memos and holding meetings
with exchange officials until it has gotten what it had
long wanted the exchange to do: Follow the law.
The
20-percent limit on ownership, which did not cover the
issuance of 6.0776 million shares (equivalent to 39.781
percent) to five investors, including the Government
Service Insurance System, San Miguel Corp. Retirement
Fund and Philippine Long Distance Telephone Corp.
Beneficial Trust Fund. The SEC has either failed to
compute or simply ignored a similar violation which it
has accused the brokers of doing.
****
Restricting the ownership by an industry in the PSE may
look very simple to implement. However, reducing the
stockbrokers’ holdings in the PSE won’t be easy. Who
among them would give up their holdings—a private
property, as a matter of fact—without a fight? Not one
would be brave enough to come out into the open and
fight to protect his/her vested right. After all, they
believe they should have owned 100 percent of the PSE’s
outstanding common shares and not only 20 percent as
mandated by law.
On the
other hand, the law should be followed. There is no way
the SEC would compromise their being regulators. SEC
chairman Fe Barin and the four commissioners are tasked
to implement the rules, no matter who gets hurt. One
should only go over the postings on the SEC web site how
it has been heavily penalizing violators of the
commission’s rules. Just look at Union Bank of the
Philippines, which was assessed a penalty of P1.217
million. The bank, which is controlled by the Aboitiz
family, luckily got to pay only P232,500. Don’t ask
anyone how this happened. Just hire the best lawyers.
****
The
change in the corporate status of the PSE into a stock
corporation from nonstock corporation was only the
beginning of the predicaments of the stockbrokers. Then
the new securities law came and the PSE’s former owners
were told to give way to a new ownership format by going
public, that is by listing their company’s shares for
public trading. Then they were told they—the brokers—as
a group were allowed only to own 20 percent of the PSE’s
outstanding shares.
The
question is: Aren’t Barin and company getting too strict
with the stockbrokers, but lenient to others? Are they
consistent in their actions as regulators? Why, in the
first place, should the law limiting the brokers’ stake
to 20 percent “of the voting rights of the exchange” be
selective? Why should the law be worded that it would
not allow the issuance of preferred shares to dilute the
brokers’ ownership to 20 percent? The SEC presently
allows the inclusion of preferred shares in determining
the percentage of ownership of foreigners in companies
where they can legally own only up to 40 percent of
outstanding capital stock? If Barin and company can
sometimes be lenient in the interpretation of the law to
attract foreign investors, why can’t they extend the
same treatment to PSE broker-stockholders?
****
PSE
president Francis Ed Lim, having been in the practice of
law for many years, may very well know how difficult it
is to fight the SEC. He may be arguing without
necessarily antagonizing the regulators. In short, he
engages in a more diplomatic approach in confronting the
issue. If the PSE top man has been of weaker caliber and
no patience at all in dealing with the SEC, he would be
meeting Barin and company head-on as long as he could
effectively argue the case for the brokers.
In a war
of arguments, the regulator always wins. Who says you
can’t fight city hall? You can, but you always lose as
the PSE had realized the futility of arguing when it
received an order from Vicente Graciano P. Felizmenio,
officer in charge of the SEC market-regulation
department. In his letter dated August 13, 2007, he said
the commission decided to impose on the PSE a fine of
“P100,000 plus P100 for very day of delay” in reducing
the brokers’ ownership to 20-percent limit. Then
Felizmenio told the PSE that it should initially pay
P101,000 as basic fine plus P100 per day for the period
July 21 to 31, 2007. At the same time, he warned they
will conduct periodic assessment to determine “the
additional fine until PSE shall have fully complied with
the industry-ownership limit.”
Incidentally, Felizmenio did not state in his letter to
the PSE the exact number of shares the stockbrokers
owned. When he signed the order penalizing the PSE, he
placed the number at “approximately 6,457,548 shares of
the 15,277,511 outstanding PSE shares” as of July 20,
2007. (The percentage is 42.857 percent and not 42.27
percent as computed by the SEC.) It seems he does not
know the number as when this writer inquired from his
officer, he was told to ask instead Aissa V. Encarnacion,
PSE corporate secretary, who was not available for a
two-minute telephone interview. |
