SEC: Brokers still own more than 20% of PSE


By James A. Loyola

The Securities and Exchange Commission (SEC) has reiterated that the Philippine Stock Exchange (PSE) is still not compliant with its ownership cap of 20 percent for stock brokers even after its recent stock rights offering (SRO).

In a statement, the SEC noted that “even after completion of the Stock Rights Offer, the PSE still falls short of the 20 percent industry limit by 1.71 percent.”

According to the SEC, total broker shareholders as of February 28, 2018 stood at 18.43 million shares or 21.71 percent of the PSE’s total outstanding capital of 84.93 million shares after the SRO.

The SRO was intended by the PSE to dilute the ownership of stock brokers to 20 percent or below.

However, the PSE noted that stock broker ownership would actually fall below 20 percent if the SEC completes the revocation process for stock brokers who have been inactive for at least five years.

PSE President Ramon Monzon noted that inactive stock brokers have a total 2.2 percent stake in the PSE and these shareholders will cease to be classified as brokers once the SEC revokes their licenses.

He explained that the SEC initiates proceedings for the revocation of brokers’ licenses if these firms have been inactive for at least five years. However, the PSE has no idea how long these proceedings will take.

Thus, the PSE is asking the SEC to consider it to have already complied with the ownership cap if inactive brokers shares are excluded.

Complying with the 20 percent ownership cap is among the requirements imposed by the SEC on the PSE for the bourse’s request for exemptive relief from the SEC to acquire and merge with the PDS Holdings Corporation which is the owner of the fixed income bourse with its own ownership cap.

The PSE does not have much time since its share purchase agreements with PDS shareholders with a total stake of 72 percent will expire on March 31, 2018. These agreements have already been extended three times.

The Department of Finance, which supervises the SEC, wants the government to control the fixed income bourse through the Land Bank of the Philippines which is also seeking to acquire PDS Holdings.