SEC rationalizing penalties for corporate violations

MANILA, Philippines - The Securities and Exchange Commission (SEC) is rationalizing its guidelines in penalizing companies that violate licensing, reportorial and regulatory requirements.

Stiffer penalties and sanctions are seen to dissuade firms from committing violations while beefing up the agency’s funds to upgrade its manpower and monitoring systems, the SEC said.

In a public notice, SEC said it formulated the Consolidated Scale of Fines and Penalties now open for public comment.

“The clarity of obligations and understandability of the consequences of violations is attained when the fines and penalties are updated and contained in one issuance,” the SEC said.

Hence, the corporate regulator said it is ideal for it to adopt a consolidated scale of fines covering the sanctions for violations of the various laws and rules.

Specifically, the proposed rules took into consideration the guidelines that took into effect since 2002 like the rules for non-compliance on reportorial requirements, revised guidelines on foundations and scale of penalties for lending companies.

Under the revised scale, violations will be presented according to three dimensions: licensing that focuses on market activities without prior registration; reportorial that highlights non-submission or late filing of records; and operational, prudential and other requirements that take on failure to perform a prescribed activities or adopt a mandated principle, standard or procedure.

The SEC has posted a steady increase in its collection of fines and penalties, hitting P213.73 million last year from P199.02 million in 2011, P148.96 million in 2010, P139.69 million in 2009, P110.7 million in 2008 and P103.14 million in 2007.

“The increase could be attributed to the SEC’s efforts to monitor compliance of registered corporations,” the agency said.

“There is however, a concern that the numerous and repeated violations for which fines were imposed reflect that existing rates per scale of fines and penalties are not sufficient deterrent for corporations to violate the requirements,” it added.

Gerard M. Lukban, commission secretary of the SEC, said the corporate regulator has received a Department of Finance directive for a regular adjustment of fines and penalties.

“It has been evaluated that the SEC hasn’t adjusted these fees and charges for 10 years already,” Lukban said in an interview.

The agency will look into public comments, which can be submitted on or before Dec. 22, before the SEC en banc approves the final guidelines.

Lukban said the new rules will take effect early next year. The SEC will benefit from higher collections starting 2015 when additional funds are disbursed to the agency, he added.

“What we’re trying to achieve here is that the office can be self-sustaining,” he said.

“Based on our immediate vision for the office, [priorities are] the enhancement of human resources including the systems that we use,” Lukban said.

Late last month, the SEC announced its plan to substantially jack up transaction fees and charges to cope up with increased operational costs.

In 2012, the agency recorded P2.707 billion in collections, up from P1.8 billion in 2011 and P1.3 billion in 2010.

The SEC earns from the registration for initial public offerings, bond offerings and issuance of commercial papers. Last year, the corporate regulator’s generated income from four follow-on offerings and 10 bond issuances hit P96.5 billion.