The Philippine Stock Exchange has assured the public that its decision to suspend trading in shares of Manila Electric Co. (Meralco) was “nothing political” and merely intended to protect the integrity of stock market transactions.
In a statement, PSE president and chief executive officer Francis Lim said the suspension, which took effect on Dec. 17, 2008, was consistent with the bourse’s mandate to maintain an efficient and orderly market.
“We fully recognize that the issue surrounding the MER shares and the consequent suspension of its trading therewith has inconvenienced Meralco shareholders. But we would like to assure everyone that there was nothing political or sinister behind the board decision. Our board, acting as a collegial body, adopted in utmost good faith this painful decision solely to protect the investing public and maintain the integrity of our stock market,” Lim said.
The issue involved Meralco’s cancellation of stock certificates of Land Bank of the Philippines aggregating 42 million Meralco shares which were then issued to a certain Josefina Lubrica based on an order from the Department of Agrarian Reform Office of the Regional Adjudicator Region IV.
In arriving at its decision, Lim said the PSE exercised utmost caution and decided on the merits of the case “to prevent the exchange from being used as unwitting tool to take control of a listed company.”
“The men and women of the PSE board are particularly cognizant of their role as guardians of the stock market in the situation at hand because one of the PSE directors has been perceived – rightly or wrongly – to have prominently figured in the battle for control of Meralco,” Lim said.
Lim explained that the trading suspension came as a result of a warning by the Philippine Depository & Trust Corp. (PDTC) on Dec. 16 on its failure to download information such as brokers’ balances, involving Meralco to the Securities Clearing Corp. of the Philippines (SCCP).
Landbank alleged that the cancellation of the shares and issuance of new stock certificates in favor of Lubrica are null and void, citing a Supreme Court decision.
“The practical effect of PDTC’s action is to prevent the SCCP from settling any trades of MER shares, whether Lubrica or non-Lubrica shares. It would have been reckless and suicidal for the PSE not to suspend trading of MER shares, knowing fully well in advance that no shares will be downloaded on settlement date,” Lim said.
“A settlement fail is a no-no in the stock market world. It shatters investor confidence. MER shares are one of the highly traded issues in the stock market. Investors all over the world buy them. You can just imagine how investors located in different countries buying MER shares would react if, on settlement date, they don’t get delivery of the shares they bought,” Lim further said.
Lim said the exchange had undertaken measures to isolate and segregate the shares of Lubrica to ensure that they are not traded.
He said the exchange is “eagerly awaiting confirmation from the PDTC that they would download Meralco shares” to allow resumption of trade.