SEC finds violation in appointment of 2 EPCIB independent directors

The Securities and Exchange Commission has found the appointments of Presidential Adviser Roberto Romulo and Cesar Bautista as independent directors of Equitable-PCI Bank in violation of the Securities Regulation Code (SRC).

Based on the investigation conducted by the SEC’s Compliance and Enforcement Department (SEC-CED), Romulo and Bautista are not fit to sit as independent directors in EPCI Bank subject to the requirements of Sec. 38 of the SRC.

Under Sec. 38 of the SRC, an independent director must not be an officer or employee of the corporation they serve, as well as any affiliate, subsidiary or related company thereof which would interfere with the exercise of an independent judgment in carrying out the responsibilities of a director.

In a letter sent earlier this week, SEC-CED director Huber Guevarra informed EPCIB president and CEO Rene Buenaventura about their findings and asked the bank to explain.

EPCIB’s failure to come up with a satisfactory explanation may lead to the imposition of administrative fines.

The letter pointed out that Romulo’s concurrent membership in Equitable Card Network Inc. (ECNI) as chairman of the board and as regular director even while he sat as an independent director of EPCI Bank from July 16, 2002 to July 19, 2005 was in violation of Sec.38 of the SRC.

It was also noted that Romulo’s affiliation with ECNI for seven consecutive years from 1997 to 2004 created a strong relationship as to interfere with the exercise of his independent judgement and therefore "could or could reasonably be perceived to materially interfere with his exercise of independent judgment in carrying out his responsibilities as an independent director for EPCI."

It also cited the Makati Business Club chairman Ricardo Romulo‚ Roberto’s brother, as director of Equitable Banking Corp. from 1973 to Feruary 2001 (prior to EBC’s merger with PCI Bank to create EPCI) as another violation of Sec. 38 of the SRC which provides that an independent director means a "person who apart from his fees and shareholdings, is independent of management and free from any busines or other relationships which could or could be perceived to materially interfere with his exercise of independent judgment in carrying out his responsibilities as director in any covered company..."

With respect to Bautista, the SEC-CED said his appointment as independent director for EPCI from April 20 to July 19, 2005 is in violation of the SEC‚s independent director rule because of his being a regular director since 2004 of ECNI and Equitable Savings Bank, a wholly-owned subsidiary of EPCNI.

The SEC also said the members of EPCI’s nominations committee composed of Romulo, Antonio Go, Anthony Conway and Peter Go Pailian may be held liable for failure to disclose such facts surrounding Romulo’s and Bautista’s appintment as independent directors for EPCI.

EPCIB’s former corporate secretary Nilo Divina was also cited by the SEC for failure to disclose material facts in relation to SRC Rule 20 which requires that management report be furnished to stockholders relating to an annual meeting of stockholders at which directors shall be elected.