PSE to re-audit 12 brokers

The Philippine Stock Exchange (PSE) will re-conduct an audit of the books and records of 12 brokers that were earlier found to have violated provisions of the Securities Regulation Code.

Jose P. Aquino, head of the Securities and Exchange Commission’s Markets Regulation Department, said they have allowed the PSE’s compliance and surveillance group to scrutinize the books, records and financial statements of the erring brokers instead of an earlier proposal that the re-audit be conducted by a third-party accounting firm.

Aquino said the brokers objected to the plan as this would entail additional costs for them since they have their own external auditors.

The re-audit is intended to determine whether the 12 brokers have already corrected their respective deficiencies, Aquino said.

Aquino said the provisional licenses issued to the brokers are set to expire on March 31. Thus, these brokers should be able to put their books and records in order by the end of March, otherwise they would not be issued new licenses.

BH Chua was one of the 12 broker firms earlier found to have allegedly violated provisions of the SRC, following a joint audit conducted by the SEC and the PSE’s compliance and surveillance group last October.

BH Chua reportedly failed to comply with the agency’s minimum net capital requirement and the books-and-records rule.

The audit was in line with the SEC’s efforts to safeguard the interest of the public and ensure that broker firms comply with the securities law.

Under the SRC, the commission may, on its own initiative, conduct periodic or parrallel examinations of PSE member-brokers to validate the exchange’s findings.

The alleged violations were uncovered after a PSE audit similarly exposed fraud and other violations by Asian Capital Equities Inc., a broker firm recently taken over by the PSE due to its capital deficiency.

Among the SRC provisions violated by ACE were Sec. 26, which declares it unlawful to engage in anything that operates as a fraud or deceit upon any person.

The other violations concerned restrictions on the borrowings by members, brokers and dealers as a percentage of net capital as well as the obligation to provide the SEC with records and reports at any time deemed as necessary for the protection of investors.