043007: SEC says PSE must look for demutualization alternatives

By Zinnia B. Dela Peña
The Philippine Star 04/30/2007

The Securities and Exchange Commission (SEC) said that while it cannot force brokers to sell their shareholdings in the Philippine Stock Exchange (PSE), the bourse should continue to look for other alternatives to comply with the demutualization mandate.

"We can’t impose but they have to look at other alternatives," SEC Chairman Fe Barin said.

Brokers were given until July 20 to divest their stake in the PSE in order to comply with the 20 percent single industry ownership requirement under the Securities Regulation Code. Individual investors, on the other hand, are limited to a maximum of five percent stake each in the PSE.

At present, brokers own 46 percent of the PSE.

Barin said the issue would be discussed by the commission en banc and the PSE.

She refused to say whether the SEC is open to extending the deadline for brokers to sell their stake in the exchange.

PSE president Francis Lim, however, believes that the SEC cannot force brokers to sell their stake in PSE.

"The question is can the SEC or any court of law force the PSE to sell. I don’t think so. It is a private property," Lim said.

"I don’t think the SEC is that cruel to penalize us knowing that we’ve done everything we can to comply with the demutualization mandate," Lim said.

PSE chairman and retired Supreme Court Associate Justice Jose Vitug earlier said the exchange might ask for exemption from the application of the single industry ownership limit.

Other options include persuading brokers to start selling their shares or the PSE itself could buy back the shares.

The divestment of broker’s shareholdings in the PSE to the required industry ownership requirement is estimated to cost between P2.5 billion and P3 billion.

The industry limitation requirement was brought about by the need to reduce brokers’ control in the bourse and to allay fears that the exchange is an old boys’ club.

The SEC earlier threatened to impose an administrative fine against the PSE if it fails to comply with the single industry ownership limit rule.

Brokers’ representation in the PSE board is seen to whittle down when they unload their shareholdings in the bourse.

At present, the PSE board is composed of 15 directors, eight of which are non-brokers or outside directors while the remaining seven are brokers.

 

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