New PSE president proposes creation of integrity board

Incoming Philippine Stock Exchange president Francis Lim has expressed confidence that the creation of a market integrity board (MIB) to oversee the bourse’s surveillance unit will bring back public trust and confidence in the stock market and rid the exchange of its "old boys’ club" image.

The MIB – one of the reform measures that Lim seeks to introduce during his term as PSE president – will comprise a retired Supreme Court or Court of Appeals justice as chairman, former Securities and Exchange Commission associate commissioner or a securities law practitioner as vice-chairman an independent director of the PSE board, and two trading participants of the exchange in good standing.

Lim said the MIB, being an oversight body to the PSE’s Compliance and Surveillance Department, is aimed at eradicating the public perception that the stock brokerage community is an "old-boys’ club" protecting each other at the expense of the investing public.

The PSE has long been viewed by critics as corrupt and unprofessional despite efforts to don the cloak of being world-class due to allegations that an "old boys’ club" runs the exchange.

Lim said the approval by the PSE board of its proposed MIB is "clear proof that despite perceived divisiveness in the PSE board, the board acts as one in introducing genuine reforms for the good of the stock market."

"The MIB is a big step that we have undertaken to bring back public trust and confidence in the stock market. I am extremely serious about doing my share in making the PSE a "pillar in the Philippine economy" and a "peer among stock exchanges in the region." I will leave no stone unturned in proposing to my board reforms that will help achieve this vision," Lim said.

Sources said Lim is most likely to recommend recently retired Senior Associate Supreme Court Justice Jose C. Vitug as chairman and former SEC Commissioner Monico Jacob as vice-chairman, respectively, of the MIB. Jacob also used to be the chairman of Petron Corp. He is now handling a number of cases for corporate rehabilitation.

Lim said he proposed the MIB in line with the PSE’s corporate values, which are "integrity with individual interests subordinated to public good" and "teamwork through cooperation and harmony in working together for a common goal."

The MIB shall also initiate studies to enhance the applicable rules relating to audit, compliance and surveillance, adoption for local conditions of best practices on governance among stockbrokers and adopt other measures necessary to strengthen the self-regulatory organization (SRO) functions of the exchange and forcefully impose disciplinary sanctions on the brokers where appropriate.

With the MIB, the CSD will be re-structured and renamed Market Regulatory Office (MRO).

The MRO will carry on the current functions and units of the CSD, namely market surveillance (MS), trading participants regulation (TPR), and the prosecution and enforcement (PE).

The PE is a new unit organized to undertake investigatory processes on the trading participants based on the analysis and reports received.

Lim said the board will continue to uphold measures to ensure that the mandate of the MRO is not undermined by the parties being regulated or otherwise compromise their independence in carrying out their responsibilities as a self-regulatory organization.