Term limits set in PSE board

Broker-directors to serve for maximum 10 years

MANILA, Philippines — The Securities and Exchange Commission (SEC) is pushing through with its controversial move to impose a term limit on broker-directors of an exchange, but will give incumbent broker-directors a two-year transition period, allowing them to complete their current term and remain eligible for election in the next two annual elections.

The two-year transition period was first reported by The STAR business editor Iris Gonzales in her column earlier this month.

The term limit for broker-directors of an exchange has been formalized through SEC Memorandum Circular 17, Series of 2026, to strengthen governance standards, promote fair representation and align market regulation with international best practices.

“Strong institutions require regular renewal, independent oversight and broader representation,” SEC chairperson Francis Lim said.

“By setting reasonable term limits for broker-directors, the SEC seeks to strengthen market governance, mitigate potential conflicts of interest, level the playing field among the different categories of directors in exchanges and align our regulatory framework with internationally recognized standards, while ensuring a fair and orderly transition,” he said.

Under the circular, a broker-director may be elected for a term of one year, subject to a maximum cumulative period of 10 years, whether consecutive or intermittent, in the same exchange.

After serving a cumulative term of five years, whether consecutive or intermittent, the broker-director will observe a one-year cooling-off period before being eligible for reelection.

The cooling-off period was reduced in the circular from an earlier proposed two-year cooling-off period.

The circular indicated that the five-year and 10-year maximum periods will be reckoned from the date of the next annual stockholders’ meeting following the fifth or 10th cumulative annual election, or from such other meeting date approved by the commission, whichever is applicable.

It said that service for a fraction of a year exceeding six months would be considered as one full year in computing the five-year term and 10-year maximum cumulative service.

Reelected broker-directors will be allowed to serve a fresh term of up to five cumulative years following the cooling-off period, subject to the 10-year maximum cumulative period.

To ease the transition, the SEC is providing a two-year transition period for incumbent broker-directors.

As such, incumbent broker-directors who would have been otherwise disqualified or required to undergo cooling-off by reason of the cumulative years of service as such, at the time of the circular’s effectivity will be allowed to complete their current term.

They are eligible for nomination and election as broker-director in the two succeeding annual elections, “provided that such period may be shortened by the commission, through an appropriate issuance, for good cause and/or under specific conditions.”

The circular said that during the two-year transition period, the exchange for the equities market would undertake the phased reconstitution of its board to promote broader representation and diversity of experience.

This includes the election of two foreign independent directors with international market expertise, broker-directors representing foreign brokerage firms and directors with investment banking or capital markets experience, taking into account the importance of good governance and minority shareholder protection.