Joint examinations of stockbroker firms planned

The Securities and Exchange Commission plans to jointly conduct with the Philippine Stock Exchange examinations of stockbroker firms to avoid potential gaps in separate on-site inspections.

An SEC official said the Commission is currently reviewing its inspection procedures to allow for a joint SEC-PSE on-site examination of stockbrokers and dealers.

According to the SEC official, the move is in line with the corporate watchdog agency’s efforts to provide adequate protection to the public and ensure that broker firms comply with the securities law.

The SEC official said the Commission may, on its own initiative, conduct periodic or parallel examinations of PSE member-brokers to validate the exchange’s findings.

The official said the move was also prompted by reports that some broker-firms owned by PSE directors have refused to open their books and records to the exchange’s Compliance and Surveillance Group (CSG).

The CSG is a critical unit of the PSE that monitors market conditions and trading activities to detect violations of the securities law and exchange rules, including sales practices and financial and operational requirements.

It also monitors compliance by listed companies with continuing listing obligations.

"We have received reports that some influential governors of the PSE have been using their positions to prevent the CSG from looking into the books of their stockbrokerage houses. Because of this, the CSG cannot do their jobs effectively," the same SEC official said.

This was the same reason why the SEC ordered last year the creation of a separate Compliance and Surveillance Department to look into possible violations of securities regulations by stockbrokers.

The exchange, however, seems to be dragging its feet on this as it has yet to spin off its CSG into a corporation.

The SEC said the new CSG, when spun off, must not be controlled in its activity by the PSE board or management and must be responsible for carrying out the exchange’s disciplinary role.

The need to create an independent CSG was due to criticisms that some PSE governors tamper with the findings of the bourse’s surveillance unit to cover up the misdeeds of their peers.

It will be recalled in 1999 the entire CSG under the management of lawyer Ruben Almadro resigned on fears that the PSE board would whitewash the investigation conducted on stock transactions involving the BW Resources Corp. of Businessman Dante Tan.

The investigation into BW was due to the phenomenal rise in the share prices of the company from only P1.98 per share to a peak of P108 per share in just a short period of time. the shares have since fallen to below their par value of P1.

During an audit conducted by the Sec on brokerage houses that have heavily traded shares of BW, 75 brokers were found to have violated securities rules and regulations. The SEC generated P12 million in revenues from the collection of administrative fines from these erring brokers.