The third year anniversary of the trading irregularity involving the sale of unlisted shares in Abra Mining or AR will be observed in March. This incident affected hundreds of investors, including several foreign funds, who have unfortunately been victimized.
Surprisingly, despite the passage of time, the Philippine Stock Exchange (PSE) has not initiated any legal action regarding this matter.
As a result of the illegal trading of AR, investors who suffered losses have expressed their belief that the PSE is inutile in enforcing trading regulations against market participants who violate its rules. It is not surprising, therefore, that the PSE is falling behind its Asean neighbors in terms of trading volume.
The Philippines was once proud to have established the very first stock exchange in the region. However, it now pales in comparison to Thailand and Indonesia, with daily trading volumes of $3.4 billion and $1.2 billion respectively, while the Philippines only manages $500 million. The apparent indifference of the PSE towards blatant cases of trading irregularities within the exchange has contributed to this situation.
Perhaps this is the reason why many companies shun the PSE program to add luster to its roster of listed companies, given the inability of the exchange to enforce the law. In fact, the PSE has been eerily quiet on the result of its investigation on the sale of unlisted Abra Mining shares.
What is truly bewildering is that the PSE, having completed its investigation into the matter, is now passing the responsibility to the Securities and Exchange Commission (SEC) like a “hot potato.” Unfortunately, the SEC has remained silent on the issue and has not been transparent about the entire situation, which is rather disheartening.
We suspect that the failure of both the PSE and the SEC to pursue legal action against the officials of Abra Mining has contributed to the Philippines being placed on the gray list of the Financial Action Task Force. This unfavorable status acts as a significant deterrent for foreign investors that are considering entering the country.
It is important to note that the SEC is a member of the country’s Anti-Money Laundering Council. The SEC’s lack of action regarding the Abra Mining trading irregularities, which affected foreign investors, is one of the factors contributing to the Philippines’ ongoing presence on the gray list. Now, the country has a deadline until October to press charges against those involved in money-laundering activities. Failure to do so would result in the country’s blacklisting, cutting us off financial transactions with the rest of the world.
There are valid grounds to assert that the PSE is ineffective in addressing trading irregularities within the market. In this situation, we rely on the law firm, MOST, to advocate on behalf of affected investors. The law firm has written a letter to the PSE, specifically addressing it to The Hon. Ramon C. Monzon, regarding the Abra Mining trading irregularity incident. Surprisingly, the PSE has not made any public statements or press releases regarding this matter.
The letter was sent almost a year ago, yet, to our surprise, the PSE has not made any official announcements regarding it, except for the “white knight” concept mentioned by Monzon following the suspension of Abra Mining. We are left wondering what became of this promising idea put forth by the PSE’s leader and why it was not further pursued. Were there any discussions held within the PSE boardroom regarding this matter? However, we digress from the main point.
MOST Law, representing the investors affected by the Abra Mining trading irregularity, penned a letter to PSE’s Monzon on March 31, 2023. In the letter, they raised six crucial questions pertaining to the blatant trading activities surrounding the sale of unlisted shares in the suspended mining company.
The key inquiries directed to Monzon highlight significant concerns. These include questioning why the listing of certain AR shares was permitted despite not being applied for listing, as well as inquiring about the measures taken by the PSE to investigate potential involvement or liability of its own employees, officials, or systems in relation to the alleged irregularities.
Furthermore, there remains the pressing question of whether the PSE has taken proactive steps to safeguard the interests of the investing public and prevent the recurrence of similar trading irregularities. Regrettably, we have yet to hear an update from the exchange on the kind of risk management system it has implemented in this regard.
It is crucial for the bourse to address the concerns of the investing public and provide reassurance that proactive measures are being taken to prevent the reoccurrence of similar trading irregularities in the future.
What we find particularly frustrating is the fact that although the PSE acknowledged the discovery of legal violations, it simply passed the responsibility to the SEC. It is quite perplexing, to say the least.