PSE drafting new rules on suspension, takeover of brokerage companies

The Philippine Stock Exchange (PSE) is drafting new rules governing the suspension and take-over of erring broker firms.

The revised rules seek to update the old compliance and surveillance rules to make them conform to the provisions of the Securities Regulation Code and its implementing rules and regulations.

The rules set out the procedures for the inspection, examination and investigation of trading participants and the disposition of cases by the PSE’s Compliance and Surveillance Group (CSG).

The amended rules also cover the suitability requirements for brokers; the standards of conduct of trading participants, associated persons and salesmen; customer protection rules; financial responsibility of brokers (including the net capital rule and elimination of subordination agreements); and disciplinary guidelines and sanctions.

In order to arrest the further commission of violations of the securities law and prevent financial instability among brokers to avoid damage to the capital market, the CSG may summarily suspend or impose limitations upon the erring trading participants without need of approval from the governance committee provided, however, that the latter shall, within five trading days from implementation of such order, convene to review, confirm, modify or reverse the CSG’s action.

Before summarily suspending or imposing limitation upon the erring trading participant’s operations, the CSG may grant a period within which the erring broker shall rectify or remedy the violations of the securities law or exchange rules.

The failure by the governance committee to resolve the summary order shall be deemed an automatic confirmation of the action taken by the CSG.

The PSE has already released its proposed revised compliance and surveillance rules for public comment.

Upon expiration of the comment period, the comments will be consolidated into the draft rules. The consolidated version shall then be submitted to the governance committee and to the PSE board together with a summary of the submitted comments. Thereafter, the exchange shall file with the Securities and Exchange Commission for appropriate action the consolidated rules as adopted by the PSE board, together with the summary of written comments and CSG’s comments or responses if any.