"We plan to look into trades involving PSE shares to determine whether there were brokers that participated in the transaction. If they participated, they have in effect violated our rules and must therefore be prosecuted," SEC chairperson Lilia R. Bautista said.
The SEC issued last December an order prohibiting broker-dealers from purchasing shares for their own account or the account of their subsidiaries and affiliates and their directors, officers and principal stockholders and the spouses and relatives up to the fourth civil degree.
The order also prohibits broker-dealers from reacquiring PSE shares through any other means from third persons for their account or for the account of their related persons.
The order was issued by the SEC to ensure full compliance with the 20-percent single industry share ownership limit rule under the Securities Regulation Code.
The src states that no individual can own more than five percent of the exchange and no single business group can hold more than 20 percent.
While there is no prohibition for employees of broker-dealers to acquire shares in the PSE, if it is proven that the money used by such employees came from the broker-dealers themselves or that they retain control of voting rights and beneficial ownership of such shares, the SEC will consider such purchase as a circumvention of the rule.
To allow more effective monitoring of the percentage limit, a broker-dealer shall be required to fill in the field "Client Code" of the PSE Maktrade system with the customer’s tax identification number, if applicable, each time it places an order to buy or sell PSE shares.
For a customer who does not have a TIN, the broker-dealer shall be required to assign such person a unique code. A broker-dealer who is currently using a different code system to identify its customers has to notify the SEC of such existing system and convey the preferred code that it will be using.
A broker-dealer is also prohibited from soliciting and/or receiving discretionary proxies from customers and a customer shall be prohibited from issuing discretionary proxies in favor of their brokers, relative to PSE shares. This is to prevent any broker-dealer from exercising effective control over voting rights in the PSE beyond the allowable limit.
The PSE is also required to submit to the SEC on a daily basis, either by e-mail or by facsimile, a report, signed by the associated person, of all transactions of PSE shares that the broker-dealer has effected for the day not later than 3 p.m. of the same day.
Bautista said earlier the SEC might be forced to impose a deadline for the exchange to meet the ownership limit rule if brokers refuse to sell their shares.