SEC fines PSE over ‘misleading’ disclosure

By Arra B. Francia, Reporter

THE country’s corporate regulator has penalized the Philippine Stock Exchange (PSE) over an “inaccurate, incomplete, and misleading” disclosure on broker ownership in the company.

The Securities and Exchange Commission (SEC) on Friday said it has imposed a penalty of P106,000 on the PSE for violating Rules 17.1.1.2 and 17.1.1.1.3(a) of the Implementing Rules and Regulations of the Securities Regulation Code.

The commission cited a PSE disclosure on Feb. 26, entitled “PSE signs agreement ensuring reduction in Exchange broker ownership,” as well as six news articles from various publications that supposedly contained the “inaccurate and misleading information on the impact of inactive brokers and stock rights offerings on the brokers’ collective ownership of PSE.”

Following the release of the mentioned disclosure and articles, the SEC Markets and Securities Regulation Department (MSRD) wrote a letter to the PSE directing it to make a “prompt, full, fair, and accurate disclosure.”

The MSRD also directed the PSE to show cause within five business days after receipt of the letter on why it should not be penalized on the matter.

While the PSE submitted four proposed disclosures on Feb. 27 — the final version of which was posted on the same day — to comply with the SEC’s order, the MSRD said it still found all versions “inaccurate, incomplete, and misleading.” A trading halt from 11 a.m. to 1:30 p.m. on Feb. 28 was then imposed on PSE shares.

The MSRD said it found the PSE’s reply to the show-cause order insufficient, making the fines irreversible. The penalty was computed based on a P100,00 basic fine, and an additional P500 per day for 12 days from the PSE’s reply to the show-cause order until the time the SEC found its reasons insufficient.

The PSE has initiated efforts to bring down broker ownership to less than 20% last year, in a bid to secure exemptive relief from the SEC for its acquisition of the Philippine Dealing System Holdings Corp. (PDSHC).

The bourse operator claimed the conduct of a stock rights offering, alongside the revocation of licenses from inactive trading participants, would reduce their ownership to less than 20% by March.

MSRD, however, pointed out brokers’ shareholdings stood at 25.54% based on its computation. It further noted the PSE cannot include inactive brokers in the computation unless they have removed brokering as part of their activities.

The SEC department also said even after its P2.9-billion SRO, broker ownership will still be at 22.05%, beyond the single-industry limit as per the SRC.

In contrast, the PSE in a disclosure posted on Friday said that broker shareholdings after the SRO would stand at 21.71% of 84.9 million outstanding shares.

Shares in PSE lost P2 or 0.83% to P238.80 apiece on Friday.