In an order released yesterday, the commission en banc said it is of the opinion that Section 33.2 of the Securities Regulation Code could not be form the basis for disqualifying the incumbent corporate treasurer and secretary from performing their respective official functions with the exchange because they are not tasked with the day-to-day concerns, management and operations of the exchange.
Villaroman is concurrently the president of broker firm Securitist Specialist Inc. while Cruz heads HK Securities. Both brokerage houses are registered brokers and trading participants of the exchange.
The ruling was in response to the letter-complaint of the group of PSE director Robert Coyiuto, questioning the appointment of Villaroman and Cruz on the ground that the src expressly prohibits any active member-broker of the PSE from sitting on the exchange’s management unless detached for at least two years prior to such appointment.
Justifying its order, the Commission said neither the src nor its implementing rules and regulations give a clear definition of officers occupying management positions.
The commission said Villaroman and Cruz do not participate in the day-to-day operations of the exchange nor receive any salary in the discharge of their duties. It noted that the exchange has other officers to discharge management functions, namely the general counsel and the chief financial officer.
"We are interpreting the src provision liberally, in view of the fact that the exchange is still owned and controlled by the brokers because they have not complied with the requirements of Sec. 33 to reduce their equity ownership to the specified limits. To rule otherwise at this time would mean that no broker can ever become a chairperson, an officer or be assigned from time to time to certain functions to assist the board," the commission said.
The commission said while Villaroman and Cruz are presently affiliated with their respective broker firms, "their association as such will not in any way prejudice their functions in the exchange," considering their unquestionable integrity.
Moreover, the commission said it believes that the retention of the two officers is the better option to maintain the stability of the exchange. "The two officers must be allowed to continue their term of office in the exchange for as long as their services contribute to the development of the capital market and the efficient operations of the exchange," the commission en banc said.
The SEC likewise is set to issue another order, appointing Jose P. Aquino, director of the SEC’s Markets Regulation Department, to head the nominations and elections committee of the PSE. The move is to ensure transparency and fairness in the selection of independent directors for the PSE.
The move is in response to a complaint lodged by the same group, questioning the constitution of the bourse’s nomelec.
The group of Coyiuto cited, as a basis for its complaint, a memorandum circular recently issued by the SEC, which requires the inclusion of an independent director in the composition of the nomelec.
None of the incumbent independent directors of the PSE wanted to be part of the nomelec due to professional commitments.
Under the SEC circular, all companies and exchanges are required to set up a committee which shall review the qualifications of the nominees for independent directors and prepare the final list of all candidates, which shall be submitted to the SEC.
Under the Securities Regulation Code, an independent director is defined as a "person other than an officer or employee of the corporation, its parent or subsidiaries, or any other individual having a relationship with the corporation, which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director."