SEC wants more independent directors on exchanges board

THE Securities and Exchange Commission (SEC) is proposing that independent directors comprise the majority of the board of exchanges and other organized markets, following international best practices.

The regulator is seeking public comments for the proposed memorandum circular requiring more independent directors in exchanges.

In a statement, the SEC said the circular will be issued in line with Section 22 of Republic Act 11232 or the Revised Corporation Code, which prescribes that independent directors constitute at least 20% of the board of directors of corporations vested with public interest.

“The draft memorandum circular providing for the SEC Rules on the Number of Independent Directors of Exchanges and Other Organized Markets aligns with the best practices of major and comparable markets in many economies, where independent directors comprise the majority of the board of securities exchanges,” it said.

The SEC cited Bursa Malaysia, the Singapore Exchange, the Australian Securities Exchange and the Stock Exchange of Thailand as exchanges where the majority of its board directors are non-executive and/or independent.

Previous regulations, as set in the implementing rules of the Securities Regulation Code, require exchanges to have only at least three independent directors.

The Philippine Stock Exchange, Inc. currently has three independent directors on its 15-seat board.

The SEC also noted that exchanges and other organized markets implement ownership restrictions or disclosure requirements for substantial shareholdings of an exchange or other organized markets.

CORPORATE RECORDS
At the same time, the regulator is also drafting guidelines on the procedure for conducting investigations of the right to inspect and/or reproduce corporate records.

The SEC said the proposed rules are aimed at operationalizing Section 73 of the code, which would allow any director, trustee, stockholder or member of a corporation to inspect corporate records, regardless of the form in which they are stored.

The draft memorandum, posted on the SEC website, said any corporation that will deny this right may be reported to its Company Registration and Monitoring Department or any SEC Extension Office.

Denial may come in the form of an outright refusal to peruse the records or failure to take necessary steps to check the records within a reasonable amount of time.

The SEC must summon the concerned corporation within five calendar days from receiving the report and filing payment. The corporation will have 10 days to respond upon receipt of the summons.

Within 30 days from holding a clarificatory conference with the corporation, the SEC will decide on the appropriate action.

Also, the regulator is proposing rules on designating an e-mail address and contact number for transactions with the SEC.

Under the draft circular, every corporation, association, partnership and person under the jurisdiction of the SEC should submit an official and an alternate e-mail address and cellular number where it can be contacted for all transactions.

For domestic corporations, the contact information must be under the control of the corporate secretary or a duly authorized representative. For foreign corporations, the contact information must be controlled by the resident agent or a duly authorized representative.

Failure to submit the information may result in a P10,000 basic penalty and an additional P1,000 for each day of non-submission.

Comments on all the proposed memorandum circulars will be accepted by the SEC until July 3. — Denise A. Valdez