FOR more than three hours on Wednesday, trading of shares of the Philippine Stock Exchange Inc. (PSE) was suspended by the Securities and Exchange Commission (SEC), as it accused the exchange of issuing “misleading statements” on the PSE’s move to bring down brokers’ ownership and satisfy regulatory requirements.
PSE shares were halted at 10:19 a.m. after opening at P244.40. It resumed trading at 1:30 p.m.
“The suspension was just made so that the public could accurately digest the actual changes in the SRO [stock rights offer],” Marita Limlingan, president of Regina Capital and Development Corp., told the BusinessMirror.
Limlingan was referring to the 11.5-million stock rights offering by the PSE that the exchange claims would dilute the brokers’ ownership down to 20 percent.
The latter act is what the SEC requires the PSE to undertake so that it can secure the regulator’s approval of its acquisition of PDS Holdings Inc., the parent company of the Philippine Dealing & Exchange Corp. (PDEx) and the Philippine Depository and Trust Co. (PDTC) and is considered an “Exchange Controller.”
The PDEx is the dealing exchange for fixed-income securities, while PDTC acts as depository and registry for participants for both fixed income and equity securities, the
The Securities and Regulation Code (SRC) strengthened SEC regulatory functions over all entities dealing in securities, such as the PSE, the PDEx and Capital Market Integrity Corp., as well as market professionals like brokers and dealers, among others.
During the drafting of the SRC, the legislature observed that control over the PSE by a group of small brokers with vested interest in maintaining the status quo resulted in abuses to the detriment of the public.
“To avoid this situation and to protect public interest, Congress included in the SRC a provision which limits industry ownership to 20 percent and individual ownership to 5 percent,” the SEC has said in its explanation of the PSE’s move to acquire PDS Holdings.
Hence, the SEC required the PSE to bring down brokers’ ownership to 20 percent from the current 23 percent.
The SEC, however, said the stock rights offer alone will not dilute the brokers’ ownership and that both it and the PSE still need to do more, including revoking the status of inactive brokers. The PSE, however, said it “strongly disagrees” with a SEC statement describing its disclosures as “inaccurate” and “misleading.”
“The PSE has been in constant communication with the SEC to satisfy the requirements of the Commission [SEC] by issuing a clarification, which [the] PSE believes was sufficient,” it said in a statement.
“The company [PSE] has already revoked the status of, and have declared vacant the trading rights of, inactive trading participants, who are also shareholders, constituting about 2.34 percent of the total outstanding capital stock,” the PSE said in a separate disclosure.
The SEC, on the other hand, is currently completing the process of revoking the registration of these shareholders if they will not amend their primary purposes to that of a nonbroker business, the PSE added.
With the issuance of the 11.5 million common shares under the SRO, brokers’ shareholdings will go down to 22.05 percent. This, however, still includes the shares owned by brokers whose trading rights have been revoked by the PSE and who are currently undergoing administrative procedures with the SEC.
“After the SEC completes its process, the broker shareholdings further go down to below 20 percent,” the PSE said. “The company is confident that with the offer fully underwritten and the procedures already being implemented by the company and the SEC, this will be fully achieved.”
Shares of the PSE closed at P245, or P1 higher than its previous close. About 3,730 shares valued at 930,814 were traded on Wednesday.
Image credits: Nonie Reyes