SEC Chairman Lilia R. Bautista underscored the need for the PSE to create an independent compliance and surveillance corporation after a PSE audit exposed fraud and other violations by a number of brokerage houses.
"We have earlier asked the PSE to set up a separate corporation to handle its compliance and surveillance functions but up to now they have not complied with our directive. This should be done in line with the practices of other demutualized exchanges," Bautista said.
Bautista said the Commission is also considering hiring a group to take charge of the PSE’s compliance and surveillance functions to maintain objectivity of audits.
The SEC has received reports that several brokers have been wielding their influence on investigations being conducted by the PSE’s CSD. This has impeded the CSD’s investigation and resolution of cases.
The PSE, however, has objected to the creation of an independent compliance and surveillance corporation as this would entail additional costs.
The CSD 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 and duties of members of the managing body of issuers to minority shareholders.
The SEC said the CSD shall not be subordinated or\ otherwise controlled in its activity by the board or PSE management and shall be responsible for carrying out the PSE’s disciplinary role.
It would be recalled that in 1999 the PSE Compliance Group tendered their resignation on fears that the board would whitewash the investigation conducted on stock transactions involving BW Resources Corp.
There were reports that some PSE governors during that time used their authority to prevent the CSD from inspecting the books and records of certain brokerage houses.