Veteran stockbrokers Ma. Vivian Yuchengco and Eddie T. Gobing have asked the Court of Appeals to bar the Securities and Exchange Commission (SEC) from implementing its new rule imposing term limits on broker-directors of the Philippine Stock Exchange (PSE) board.

In their petition, they asked the appellate court to declare unconstitutional SEC Memorandum Circular No. 17 for violating their rights to due process and equal protection, and to declare it void for being contrary to the Securities Regulation Code and Revised Corporation Code.

Despite opposition from stockbrokers, the SEC has stood firm by finalizing its rules imposing a 10-year term limit for broker-directors of the PSE, though it provided a graceful exit for those affected through a two-year transition period.

SEC Memorandum Circular No. 17, Series of 2026, also provides penalties for any exchange that breaches the maximum cumulative term limit of 10 years.

Under the circular, a broker may sit on an exchange’s board of directors for a maximum cumulative period of 10 years. However, they must observe a one-year cooling-off period (reduced from an originally proposed two years) after serving an initial cumulative term of five years before becoming eligible for reelection to serve up to five years more.

The SEC gave affected exchanges—in this case, the PSE—a two-year transition period during which affected incumbent broker-directors will be allowed to complete their current terms and remain eligible for nomination and election in the two succeeding annual elections.

This term limit applies to former PSE chairwoman Yuchengco, who has been a PSE director for 28 years, as well as Gobing (25 years) and Wilson Sy (12 years, who did not seek reelection). Meanwhile, Diosdado Arroyo, son of former President Gloria Macapagal Arroyo and a director for six years, would need to take a break before sitting on the board for four more years.

“In its claimed desire to promote good corporate governance… 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,” Yuchengco and Gobing said.

In the transitory provision of MC 17, the SEC stated that other "qualified brokers" could include two foreign independent directors with international market expertise, broker-directors representing foreign brokerage firms, and directors with investment banking or capital markets experience.

“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,” Yuchengco and Gobing said.

They noted: “Not only is the policy antithetical to good corporate governance practices that the SEC professes to promote, it is also arbitrary, unreasonable, and discriminatory, in violation of the constitutional guarantees of due process and equal protection. It disenfranchises stockholders from meaningfully participating in the control and management of the Exchange through the exercise of their right to vote and to be voted for as members of the governing board.”

They accused the SEC of taking it upon itself to decide for the stockholders of the Exchange who should represent them on the board, “even demonstrating an unwarranted preference for foreigners, and has weaponized term limits to prevent a certain group of individuals from ever again serving as directors.”

Thus, they claimed that the SEC acted with grave abuse of discretion amounting to lack or excess of jurisdiction when it issued MC 17, which should be struck down for being unconstitutional.

They also noted that the CA has the expanded power of judicial review under the 1987 Constitution "to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government," including the SEC.