Additional thoughts on insider trading
Earlier this week, I talked about my disappointment with the PSE’s non-response to the repeated allegations of insider trading that have come up as a result of the Metro Pacific [MPI 4.19 4.6%] capex shenanigans, the Figaro [FCG 1.05 1.0%] stake sale, and the 2GO Logistics [2GO 14.22 0.3%] tender offer.
I had a number of readers reach out to express their intense anger toward the PSE for its perceived failures in this regard, and I had several reach out to provide additional context on the actual state of enforcement in a way that made me think I needed to do a better job of actually laying out what each group in the “insider trading soup” does.
Well, here we go:
The PSE: No role at all, except to email the Capital Markets Integrity Corporation (CMIC) whenever it spots something “very suspicious”.
The CMIC: This group used to be a subsidiary of the PSE, but was spun-off into an independent, self-regulating organization to combat the perception of the stock market as an “old boys club” that rewards rampant insider trading with lax oversight and non-existent enforcement of rules. The CMIC conducts investigations into potential cases of insider trading, but as the PSE’s President explained, the CMIC is not allowed to publicize these investigations or even act on their findings to punish or sanction the potential wrong-doers.
The SEC: This is the governmental agency tasked with “registration and supervision of corporations and securities, as well as capital market institutions and participants”. The SEC is the only group that has the authority to actually punish or sanction insider trading. If the CMIC investigates a case of insider trading, it must give over all of its work to the SEC, which will then conduct its own investigation. The PSE has no role in this, the CMIC can’t actually take any actions or say anything about what it is doing, and the SEC is the only one that can really do anything.
So what is the SEC doing? Good question. From what we've been allowed to see: Not a lot. Remember that case against Roberto V. Ongpin that I raised in the original article, where the SEC investigated Mr. Ongpin and found him liable for 174 counts of insider trading and ?174 million in fines? Yeah, the Court of Appeals dismissed that with finality for “lack of substantial evidence”. So the only case of insider trading that I could find where the SEC actually meted out a punishment was actually nothing. They were overruled. Nobody has been convicted (to my knowledge) of insider trading in the Philippines.
MB BOTTOM-LINE
The PSE is obviously not responsible for the embarrassing state of the oversight framework that it operates within.
Mr. Monzon, as PSE President, doesn’t personally run cover for the insider trading or “look the other way” to allow the insider trading to happen.
The PSE owes its existence to the SEC and it is regulated by the SEC, and the SEC has decided that the PSE will have no role in this process.
My frustration comes from his implication that we, the investing public, are simply being “impatient” by voicing our displeasure with the MPI, FCG, and 2GO transactions, which is an odd reaction to have when (1) Mr. Monzon himself said that the PSE saw the same transactions and found them to be “very suspicious”, enough so to contact the CMIC about, and (2) insider trading goes completely unpunished, or if it is punished, those punishments are doled out behind closed doors.
The SEC is to blame for this situation.
Could the CMIC and PSE do more to address the problem with the tools that they have at their disposal? I think that’s a deeper discussion that is long overdue.
--
Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
- Latest
