Jose P. Aquino, head of the SEC’s Markets Regulation Department, refused to divulge the identities of the erring brokers but said the deficiency ranges from P5 million to P20 million.
Aquino said the ball is now in the hands of the PSE whether to take over the operations of the poorly-capitalized broker firms.
The SEC, however, will no longer renew the licenses of the five brokers to further safeguard the interest of the investing public.
The thematic audit, which ran from October 1 to November 30, 2003, was intended to check broker-dealer firms‚ compliance with the provisions of the Securities Regulation Code and to avoid potential gaps in separate on-site inspections.
This was is in line with the corporate watchdog agency’s efforts to provide adequate protection to the public and ensure that broker firms comply with the securities law.
Aquino said the Commission may, on its own initiative, conduct periodic or parrallel examinations of PSE member-brokers to validate the exchange’s findings.
Aquino said the SEC will not hesitate to enforce sanctions against broker firms that will be found in violation of the securities law.
It would be recalled that in 1999 some broker-firms owned by PSE directors refused to open their books and records to the exchange’s Compliance and Surveillance Group (CSG).
This was the same reason why the SEC ordered last year the creation of a separate Compliance and Surveillance Department to look into possible violations of securities regulations by stockbrokers.
The CSG is a critical unit of the PSE that monitors market conditions and trading activities to detect violations of the securities law and exchange rules including sales practices and financial and operational requirements.
It also monitors compliance by listed companies with continuing listing obligations.
SEC said the new CSG, when spun off, must not be controlled in its activity by the PSE board or management and must be responsible for carrying out the exchange’s disciplinary role.
The need to create an independent CSG was due to criticisms that some PSE governors tamper with the findings of the bourse’s surveillance unit to cover up the misdeeds of their peers.
In 1999, the entire CSG under the management of lawyer Ruben Almadro resigned on fears that the PSE board would whitewash the investigation conducted on stock transactions involving BW Resources Corp. of businessman Dante Tan.
The investigation into BW was due to the phenomenal rise in the share prices of the company from only P1.98 per share to a peak of P107 per share in just a short period of time. The shares have since fallen to below their par value of P1.
During an audit conducted by the SEC on brokerage houses that have heavily traded shares of BW, 75 brokers were found to have violated securities rules and regulations. The SEC generated P12 million in revenues from the collection of administrative fines from these erring brokers.