Reynolds issue to serve as test case for stock exchange

After failing to pass the test on the BW Resources trading scam, the Philippine Stock Exchange will next gauge its effectiveness as a self-regulatory organization (SRO) as soon as the Securities and Exchange Commission issues its ruling on an appeal made by a brokerage firm implicated in another trading anomaly.

PSE president Ramon T. Garcia said they are awaiting the SEC’s decision on the appeal of DBP-Daiwa Securities (Phils.) Inc. to overrule the PSE’s imposition of fines on the stockbrokers involved in the price-rigging case of aluminum maker Reynolds Philippines Corp.

The PSE has charged eight brokers with basic fines and monetary penalties after an investigation yielded evidence of trading violations such as kiting, wash sale and the abuse of the Exchange’s electronic facility (EQ Trade) for the purpose of manipulating the stock’s price.

A motion for reconsideration filed by brokers who refused to pay the fines was also denied by the PSE. The PSE’s Business Conduct and Ethics Committee – a mix of professional PSE managers and stockbroker-members – decided to slap fines ranging from P20,000 to P35,000 per broker.

Prices of RPC stocks unusually soared in the first half of last year, at one time making it the heaviest traded issue, despite the company’s mediocre financial performance and debt problems.

"This will be a test case on our status as an SRO; it will determine if we are going to put into review our powers and limitations as an SRO," Garcia said.

Early last year, the SEC suspended the Exchange’s SRO status following the brouhaha over the release of the report on the scandal-plagued BW Resources. It was the SEC which then took over the BW investigation from the PSE. – Conrado Diaz Jr.