No more voluntary suspension, SEC warns brokers

The Securities and Exchange Commission (SEC) has finalized the order disallowing stock brokers to go under voluntary suspension and instead requiring them to re-apply under stricter capitalization requirements.

In an en banc resolution, the SEC said registered brokers/dealers shall no longer be allowed to go under voluntary suspension, closing the door for other brokerage houses to go on leave at the PSE floor.

The last broker to apply for voluntary suspension was HSBC Securities, the local stock brokerage unit of the Hong Kong-based financial giant.

Prior to that, a record number of stockbrokerage firms — most of them foreign units — temporarily halted their operations through voluntary suspensions this year.

The foreign firms said the present poor market condition has not enabled them to generate the critical volume level that is necessary to raise the revenue to cover the fixed and overhead costs that they have to shell out to sustain full operations.

Among the brokerage firms which sought voluntary suspension this year include All AsiaSecurities Management Corp., BNP Paribas Peregrine Securities, Citicorp Securities International, E*Trade Securities, FEB Stock Brokers, Keppel Securities, Nomura Securities, Orion-Squire Capital, PJB Pacific Securities, Topwin Securities, UOB Securities, UPCC Securities, WorldSec Securities, Merrill Lynch, OCBC Securities, G.K. Goh Securities, Guoco Securities, Magnum Securities and Rashid Hussain Securities.

With the order, the SEC said it would no longer allow brokers to go on voluntary suspension, which means either they continue to operate — even at a loss — or cease their operations entirely and apply for re-registration if the need arises later.

The SEC’s decision was prompted by inquiries from brokers who previously suspended their operations voluntarily but continue to seek the renewal of their licenses or register anew as brokers and/or dealers.

"Thus, broker dealers whose registrations have been terminated and/or have voluntarily suspended their operations may apply for registration at a later date but shall be treated as new applicants and shall have to comply with all the requirements for registration under the Securities Regulation Code, the SEC said.

It added that all brokers and dealers who intend to operate next year will be allowed to pay their renewal fee up to Dec. 14, 2001 only.

Hence, for brokers who have ceased operations and would re-apply for registration, they would be subject to the revised capitalization rules which impose a minimum paid-up capital of P100 million for new registrants.

At present, active brokers need only to post a minimum net capital of P10 million, inclusive of a P5 million surety bond for brokers. In addition, a P1 million surety bond for dealers is required, as the SEC has permitted the dual roles of broker-dealer.

On the other hand, brokers who have suspensed their operations are only required a P2 million minimum net capital base.

Out of the 184 member-brokers that made it to the stockholders list of the demutualized PSE, only P136 are still actively trading amid poor market conditions.