IT’S been almost two decades since the Securities Regulation Code (SRC) of the Philippines was enacted into law, primarily to enhance the democratization of wealth and promote capital market development.
SRC Section 33.2 (c) states that “no single industry or business group shall beneficially own or control, directly or indirectly, more than 20% of the voting rights of the Exchange.” Yet the Philippine Stock Exchange (PSE) is dominated by the same personalities who lorded over the local bourse at the turn of the millennium.
In September 2016, Finance Secretary Sonny Dominguez told the stock exchange leadership to follow the law on the allocation of PSE shares to non-brokers so that it could comply with the SRC’s 20% ownership limit rule.
Recently he expressed exasperation at this seeming defiance of SRC rules by the so-called Old Boys and Girls Club running the PSE.
“The development of the capital market is being slowed down by the PSE’s protracted compliance with the law. The Duterte administration will no longer tolerate private institutions thwarting the goal of achieving a robust and inclusive financial system,” he warned the foot-dragging stockbrokers.
Otherwise, their plan to acquire 100% of the Philippine Dealing System Holdings Inc. (PDS) would not muster regulatory approval. PDS owns the PDEX fixed-income securities exchange, which PSE has been coveting since 2013.
Waiting in the wings is state-run Land Bank of the Philippines (LandBank). At the start of the year, it surprised everyone by announcing its intent to purchase at least 67% of PDS.
LandBank’s ex-officio board chairman is no less than Sec. Dominguez, who supports the bid for a controlling stake in PDS by the country’s fourth largest bank in terms of assets.
The days of the Old Boys and Girls Club are clearly numbered. Quo vadis, PSE?