Saving the bourse - Sketches

There was a mad rush to sell at the stock market yesterday, with foreign fund managers fleeing. What apparently triggered the flight was several senators' accusation that the Philippine Stock Exchange, in investigating Best World Resources stock manipulation and insider trading allegedly by Dante Tan, conveniently left out Wealth Securities owned by the PSE's former chief, Wilson Sy, partner of presidential friend Willy Ocier.

The PSE's Ruben Almadro, who conducted the probe, reiterated that there was no proof against Wealth. Almadro, who claimed millions of pesos changed hands at Tan's press conference last week, also accused Senators Nikki Coseteng and Tito Guingona of asking him "guide... trick questions obviously prepared by unknown quarters."

The market reacted by plunging 74 points. Can this bourse be saved? One foreign broker said yesterday he expected better times ahead, but it seemed like wishful thinking.

After listening to the opposing parties in this scandal, it is tempting to say that it takes a crook to catch a crook. And there are those who believe Tan is crying foul chiefly because he was the only one who got his hand caught in the cookie jar, that he was the only one who didn't get away. What about the securities firms that habitually engage in insider trading?

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The PSE is feeling its way in the Best World case since there is no local jurisprudence on stock manipulation and insider trading although these are criminal offenses under Philippine laws, according to PSE officials.

Almadro said rules of the Philippine bourse are patterned after those in the United States. Even in the States, however, charges of anomalous trading are decided on a case-to-case basis, Almadro said. The toughest part is proving manipulative intent. Almadro said this is often established only by circumstantial evidence.

In Tan's case, Almadro said, "the repititiveness of over-the-counter transactions would show manipulative intent."

PSE president Jose Luis Yulo Jr. wants to emphasize that the report on the BW case should not scare away investors since it shows that the Philippine bourse is finally instituting reforms.

But how significant are the reforms? Will they be mainly cosmetic, with the PSE electing a new board in a few days?

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The report on the BW case includes recommendations to reduce opportunities for insider trading and stock manipulation. The proposed reforms include new corporate rules as well as legislative measures.

The PSE is also studying bourses in other countries for ways of improving transparency and building up the integrity of the Philippine exchange, Yulo says.

"We have demystified the exchange," he maintains.

For the first time, he said, all the rules of the bourse have been codified and put together in five volumes that you can access on the PSE website.

A trading institute has been set up, together with a public information center for those who want to know how they can put their hard-earned money in the stock market.

For PSE employees, a performance evaluation scheme has been developed and a handbook issued for discipline.

Maybe Yulo is right and this scandal will finally lead to much needed reforms in the stock market. But at this point, everyone seems to be covered with mud and no one gets public sympathy in this mess. Not Tan or any of the presidential friends, not the brokers, not the PSE, not the Securities and Exchange Commission. Not Stanley Ho. And certainly not President Erap, whose efforts to protect his friends contributed to the collapse of the stock market.

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BUZZ: Into his second year in office, President Erap still hasn't gotten used to the bad press that often goes with the job of a democratically elected chief executive. Last Friday he was again fuming over some newspaper items, including a survey that showed he would lose in a snap poll. The President wanted to know why newspapers couldn't highlight the good news, why articles were slanted against him. But he hasn't lost his sense of humor. He pointed to newspaper banners that read, "Mayon erupts." His suggested head for his latest anti-media harangue: "Erap erupts."