Factoran not qualified to sit as independent director of Equitable PCI Bank, says SEC

The Securities and Exchange Commission (SEC) has ruled that former Environment and Natural Resources Secretary Fulgencio S. Factoran is not qualified to sit as independent director of Equitable PCI Bank.

In a letter to EPCI Bank, the SEC’s Corporation Finance Department said Factoran is not qualified to become an independent director due to a provision in the Securities Regulation Code (SRC) that states that the independent director must not be an officer or employee of the corporation they serve, as well as any affiliate, subsidiary or related company thereof.

Factoran is presently a director of PCI Leasing Finance Inc., a subsidiary of EPCI Bank.

To ensure that the directors of EPCI Bank are qualified to sit in the board, the SEC has required the bank to submit the final list of nominees for its independent directors and ensure that these nominees have been pre-screened by the nominations committee.

An SEC official said the nominees submitted by EPCI Bank have yet to be evaluated by the bank’s nominations committee as required under the SRC.

Under Section 38 of the SRC, the nominations commitee must pre-screen the qualifications and prepare a final list of all candidates which shall contain all information on the nominees for independent directors.

The nominations committee is mandated to put in place screening policies and parameters to enable it to effectively review the qualifications of the nominees for independent directors.

EPCI Bank was also directed to include discussions on how the company shall disseminate the prescribed information to its stockholders prior to the bank’s annual meeting on July 19.

Aside from Factoran, others nominated for the independent director positions are Antonio Basilio, Cesar Bautista, Roberto Romulo, retired Justice Teodoro Regino, Anthony Te, Ricardo Murillo, Peter Garrucho Jr., Isidro Alcantara, Gregory Domingo, Edward Go, and Jesus Tirona.

An independent director is defined under the SRC as someone independent of management and free from any business or other relationship which could reasonably be perceived to materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director.

The independent director should not be related to any director, officer or substantial shareholder of the covered company, any of its related companies or any of its substantial shareholders. He must not also be employed in any executive capacity by the covered company, any of its related companies and/or by any of its substantial shareholders within the last five years.

A related company means another company which is its holding company, its subsidiary or a subsidiary of its holding company.

Under the rules, issuers of registered securities and public companies are required to have at least two independent directors or at least 20 percent of its board size, whichever is the lesser.

The SEC said any controversy arising from the selection, nomination or election of independent directors shall be resolved by the SEC by appointing independent directors from the list of nominees submitted by the stockholders.

The Government Service Insurance System (GSIS) which holds a 12-percent stake in EPCI Bank, lodged a complaint earlier against the appointment of Romulo as independent director, alleging such move was done to allow the Go family to retain control of the country’s third largest bank.

GSIS said Romulo is not qualified to sit on the EPCI Bank board for being a board member of Equicom Systems Management Inc., a joint venture between Equitable Group and Telius International.

EPCI Bank has been a takeover target of Banco de Oro, the country’s seventh largest, since 2003 when the latter offered to buy the 25 percent block owned by the Social Security System. The sale is being blocked by the controlling Go family.

BDO is controlled by the group of retail tycoon Henry Sy whose nominees to the EPCI Bank board were barred from taking their seats in the bank last year. However, the Makati Regional Trial Court upheld last week the disenfranchisement of the BDO representatives in the EPCI Bank board, saying it would make them privy to sensitive information about the bank’s plans and strategy.