SEC imposes 10-year term limit for broker directors serving on exchange boards
THE SECURITIES and Exchange Commission (SEC) is imposing a cumulative 10-year term limit on broker directors serving on exchange boards, a rule that is being opposed by some market participants.
Under SEC Memorandum Circular No. 17, a broker director may serve a maximum cumulative period of 10 years in the same exchange, whether cumulative or intermittent.
The circular was signed by SEC Chairperson Francisco Ed. Lim on May 21.
“Strong institutions require regular renewal, independent oversight, and broader representation,” Mr. Lim said in a statement on Thursday.
“By setting reasonable term limits for broker directors, the SEC seeks to strengthen market governance, mitigate potential conflicts of interest, level the playing field among the different categories of directors in exchanges, and align our regulatory framework with internationally recognized standards, while ensuring a fair and orderly transition,” he added.
The SEC said the measure is aligned with principles of the International Organization of Securities Commissions, which promote fair representation in the governance of self-regulatory organizations such as exchanges.
Under the circular, a broker director that has served for five cumulative years will be required to undergo a one-year cooling-off period before becoming eligible for re-election.
The five-year term and 10-year term maximum period is reckoned up to the date of the next annual stockholders’ meeting, following the fifth or 10th cumulative annual election.
A broker director’s service of more than six months in a year will be counted as one full year for purposes of computing the five-year term and 10-year maximum cumulative service under the circular.
Following the cooling-off period, the re-elected broker director can serve a fresh term of up to five cumulative years.
The SEC circular also provides for a two-year transition period for incumbent broker directors, allowing them to complete their current terms and remain eligible for the next two annual elections.
Covered exchanges that exceed the maximum cumulative term limit for broker directors will be subject to penalties, including a P1-million fine per broker director per year and a P30,000 monthly penalty for each month that the violation continues.
Third or succeeding offense for the same violation will be subject to suspension or revocation of the exchange’s secondary or primary license.
The new directive would affect several long-serving broker directors at the Philippine Stock Exchange, including Ma. Vivian Yuchengco (28 years), Eddie T. Gobing (25 years), and Wilson L. Sy (12 years).
The SEC’s term limit proposal had previously drawn opposition from individuals, including Ms. Yuchengco, who argued that it would be “wrong,” noting that brokers are also shareholders of the PSE.
Certain business groups expressed support for the changes, saying these would promote board renewal and investor confidence, and committed to working with regulators and stakeholders to help develop a fair capital market.
The SEC circular will take effect 15 days after its full publication in the Official Gazette or in at least two newspapers of general circulation. — Alexandria Grace C. Magno
