Yasay faces suspension, economic sabotage raps

Trading at the Philippine Stock Exchange (PSE) was not suspended yesterday, but Securities and Exchange Commission (SEC) Chairman Perfecto Yasay Jr. might end up suspended and facing charges of economic sabotage.

Apparently anticipating Yasay's suspension, President Estrada formally appointed Trade Undersecretary Lilia Bautista yesterday as the new SEC chief.

Meanwhile, a senator said lawyer Ruben Almadro, vice president of the Philippine Stock Exchange's Compliance and Surveillance Group, could also be charged with economic sabotage.

Sen. Renato Cayetano, chairman of the Senate committee on justice and human rights, said Almadro created nasty ripples when he and his 21-member staff resigned to protest a decision clearing some brokers implicated in the Best World (BW) Resources scandal.

Cayetano said that at the very least, Almadro can be sued for damages.

As this developed, Sen. Raul Roco, chairman of the Senate committee on banks and financial institutions, subpoenad Yasay and three other SEC officials to a hearing on Tuesday.

"Yasay has a lot of explaining to do," Roco said.

Mr. Estrada said he has already instructed Chief Presidential Legal Counsel Magdangal Elma to prepare the cases against Yasay, who had ordered the suspension of trading at the PSE last Tuesday following Almadro's resignation.

"What Yasay did was an act of economic sabotage," the President said.

Acting on the orders of the Chief Executive, Elma recommended a 15-day suspension for Yasay as well as instructions for Finance Secretary Jose Pardo to conduct a probe on Yasay's acts.

Elma said Yasay could be charged with "usurpation and misrepresentation of authority" when he suspended stock market trading "without the authority of the commission en banc."

Elma said Yasay particularly violated Section 38 of the Revised Securities Act, which states that the power to stop the trading requires the approval of the entire five-member commission.

"Said act of Chairman Yasay in suspending the trading in the PSE is undeniably prejudicial to the national economy and undermines the confidence in the stock exchange by local and foreign investors with far-reaching consequences," Elma said in a memorandum for the President.

As stock trading lost steam yesterday, the President immediately convened the Economic Coordinating Council (ECC) to draft measures that aim to contain anxiety in the bourse.

Trade Secretary Manuel Roxas III, who attended the ECC meeting, admitted that Yasay's action eroded the investors' confidence on the stock market.

"It was not a prudent action... it simply exacerbated the economic situation," he told reporters after the meeting. "Foreign investors are now thinking twice."

In naming Bautista as SEC chief, Mr. Estrada expressed hopes that her appointment could revitalize the stock market.

Bautista was a former ambassador and the country's permanent representative to the United Nations as well as its attached agencies.

A lawyer by profession, she was also an ex officio chairwoman of the Board of Investments, the National Development Co., the Philippine International Trading Corp., the Export Processing Zone Authority, and served as an ex officio member of the Monetary Board.

She had been offered the SEC chairmanship four times since the term of President Corazon Aquino, but declined each time saying she could not leave the Department of Trade and Industry.

Bautista told reporters that she will conduct the probe on the BW case as "a professional."

"I would not do anything that would compromise the principles of integrity and professionalism," she said.

She declined to reveal what her plans are for the SEC.

While Palace officials accused Yasay of almost ruining the economy, opposition Rep. Oscar Moreno (Lakas, Misamis Oriental) blamed presidential friend Dante Tan for the mess taking place in the stock market.

Moreno, a former banker, told reporters that Tan, BW majority owner, his associates and several brokers "seem to have violated every rule against fair-dealing."

"All the possible illegal acts that destroy investor confidence seem to have been committed by Tan and his associates. This group was the one that brought down the stock market," he said.

He said the President is not exactly blameless.

Recalling a Senate testimony of Yasay that the President had called him by telephone to ask him to clear Tan in the BW scandal, Moreno said it was a "clear case of presidential interference."

"The President may have enriched his friends, but he has impoverished many more Filipinos," he stressed.

He added that the BW fiasco will hound the administration in next year's elections and possibly until the end of Mr. Estrada's term in June 2004.

Moreno also said the stock market situation has become more confused and messy with the wake of recent developments.

"But these adversities provide us a good opportunity for reform if we really want to change ourselves. Do we want to grow, or do we want to remain as the economic laggard in Asia?" he asked.

He said he hoped the House of Representatives could see through the mess in the stock market and install the necessary safeguards in the Revised Securities Act (RSA) to prevent a repetition of the BW scandal and protect investors.

The larger chamber is now considering proposed amendments to the RSA.

For his part, Rep. Jose Ma. Salceda (LAMP, Albay) proposed that Congress create an independent commission to look into the BW mess.

Salceda, a former stock market analyst, said given the recent developments, both the SEC and the PSE are no longer credible in the BW case.

"In a sense, their hands have already been tainted," he said.

Vice President Gloria Macapagal-Arroyo agreed with the congressman's assessment. She said she wants non-brokers like PSE board members Vicente Jaime and Margarito Teves to take the lead in the investigations.

"They are members of the PSE board but they are not brokers. So, they are not insiders and they are not members of the so-called Old Boys Club," she said.

In other developments yesterday, Finance Secretary Jose Pardo said the resignations at the PSE are actually a wake-up call for its leaders to look beyond reforms and to consider looking at the ownership structure of the PSE.

He said Almadro and his staff's resignation is actually an opportunity for the PSE to strengthen its self-regulatory functions by introducing changes that will make it globally competitive.

Pardo said the PSE should consider models of stock exchanges of the world that have already broadened ownership, allowing not only stock brokers but other stakeholders to participate as owners of the exchanges.

In the Philippines, the PSE remains a membership club controlled by stockbrokers. "This is why we are having all these problems now. We are seeing the weakness of the system," he said.

Pardo said stock exchanges such as those in Hong Kong, Singapore and Australia are now owned by market players and, thus, there is more transparency in stock market transactions.

He said these stock exchanges have experienced similar problems in the past and have opted to overhaul their organizational structure.

The finance secretary said these are the models that should be followed for a dynamic stock exchange.

According to Pardo, the President has ordered the immediate study of these models and to consider a change in the structure of the PSE, which could be included in the draft Securities Reform Act.

For its part, the Philippine Chamber of Commerce and Industry urged the PSE to open its ownership to non-brokers.

"There is merit to what Pardo is saying that perhaps the PSE should look into broadening its ownership structure to include not just brokers but other stakeholders as well," said PCCI president Miguel Varela.

Like Pardo, he also cited the stock exchanges of other countries, which had already gone the way of demutualization, or undergoing restructuring so that the ownership of the exchange would now go to the players themselves and no single interest would control the market.

"It is the age of transparency, of the free market, of free-access information ... and it will be a wise businessman who takes these as givens in our new economic terrain," Varela said.

"The weakness of the 'old boy' network -- if there is indeed one -- is now being highlighted by the events in the PSE," he said. "I can see a more vigilant stock market emerging out of all these" --