PHILIPPINE Stock Exchange, Inc. (PSE) Director Ma. Vivian Yuchengco said her legal challenge to a Securities and Exchange Commission (SEC) rule limiting the tenure of broker-directors is intended to protect shareholders’ rights.
“My lawsuit is for everybody, not for me alone,” she told reporters on the sidelines of an event on Tuesday.
“My lawsuit is nothing personal,” she added.
Ms. Yuchengco said she had informed SEC Chairperson Francisco Ed. Lim of her intention to challenge the rule in court if the Commission proceeded with its issuance.
“You cannot deprive a shareholder of sitting in his own board,” she said, citing her status as a founding member of the PSE and a holder of original shares in the Exchange.
The SEC issued Memorandum Circular No. 17 in May, imposing a cumulative 10-year term limit on broker-directors serving on the same exchange, whether consecutively or intermittently.
The circular also requires broker-directors who have served a cumulative five years to observe a one-year cooling-off period before becoming eligible for reelection.
The SEC provided transitional arrangements for incumbent broker-directors, including a two-year period to comply with the new requirements.
The Commission said the measure is intended to strengthen corporate governance and promote fair representation on exchange boards, in line with principles of the International Organization of Securities Commissions concerning self-regulatory organizations.
The rule would affect long-serving PSE broker-directors, including Ms. Yuchengco, who has served for 28 years; Eddie T. Gobing, for 25 years; and Wilson L. Sy, for 12 years.
Ms. Yuchengco had previously opposed the term limit, arguing that brokers are also shareholders of the Exchange and questioning the restrictions on their eligibility to serve on its board.
BROKER CAPITAL REQUIREMENTS
Ms. Yuchengco also expressed concern over the SEC’s separate proposal to increase the minimum capital requirement for broker-dealers, saying smaller Filipino-owned brokerage firms could face difficulties complying with the higher threshold.
“We need them for this business. They’re the ones who support us when the business is bad,” she said, referring to smaller brokers.
The SEC is proposing to raise the minimum unimpaired paid-up capital requirement for broker-dealers to P120 million from P100 million as part of amendments to its existing capitalization rules.
Under the draft rules, the proposed P120-million requirement would generally apply to broker-dealers, including exchange trading participants, non-exchange broker-dealers, first-time registrants, and companies acquiring existing broker-dealer businesses.
Broker-dealers dealing exclusively in proprietary shares and not holding securities for clients would be subject to a separate minimum capital requirement of P2.5 million.
The proposed increase forms part of the SEC’s review of capitalization requirements that have been in place for more than two decades.
Mr. Lim previously said the proposed adjustment was partly prompted by past incidents involving brokerage firms with relatively small capital bases, while clarifying that lower capitalization did not necessarily indicate misconduct.
Ms. Yuchengco disagreed with linking misconduct to a brokerage firm’s capital level.
The proposed amendments remain subject to the SEC’s rulemaking process. — Alexandria Grace C. Magno