Francis Lim at SEC

There is a new man at the Securities and Exchange Commission (SEC). During his seven-year term, the veteran litigation and corporate law lawyer of 40 years, Francis Ed. Lim will focus on three things – reform the Philippine Stock Exchange, ease doing business (EOB), especially for small and medium businesses, and make it easy and profitable for companies to raise capital.

If Francis accomplishes all three, at the soonest possible time, he will be the most reformist and best SEC chair ever.

At 90, the SEC is one of the oldest government agencies in Asia. Manila’s stock exchange is one of the oldest in Asia; only Indonesia’s is older. For nine decades, the SEC was complacent with the status quo, seemingly mindless about the ebb and flow of economies in the most dynamic and fastest-growing region in the world.

The Philippine Stock Exchange used to be one of Asia’s biggest. Today, it is one of the smallest – in number of investors (less than three million Filipinos), number of issues (284) and market cap ($313 billion). The Vietnam stock market, which Filipinos helped put up, is even bigger ($324 billion). Worst of all, the PSE is in the grip of an entrenched cartel of brokers who have been serving as directors for over a generation.

In EOB, the Philippines ranks 95th out of 190 economies surveyed. Red tape is crippling. To put up a windmill takes 1,000 signatures and 10 years.

It takes a company to get listed at the PSE more than four months of processing. It’s bloody in cost. An IPO applicant must allocate 20 percent of its share offering to the broker syndicate, the directors of PSE, which the brokers then can retail to their relatives, friends and favored clients. It’s called transparency and fairness, which is a lot of BS.

Francis wants none or little of those BS. He has limited the term of PSE directors to nine years – same as directors of banks as required by the Bangko Sentral ng Pilipinas. Some PSE directors think being a director is a lifetime pastime. Th at now stops. There are now more independent directors in the PSE board – five, including one to represent foreign investors, and another to represent foreign brokers.

An IPO now takes only 40 days to launch, down from four months. That is the case of the biggest IPO, the P60-billion share offering of GCash. Priority is given to retail investors or small savers, with more than 200,00 interested buyers. This could make GCash the largest publicly owned non-utility company.

The SEC chair has cut fees for getting documents from the SEC by as high as 62 percent, from 2023 rates. SMEs get 20 to 50 percent discounts in filing and registration fees. The fee reduction meant a revenue loss of P90 million initially, estimates Lim.

The best Lim reform so far is the One Business Start Date.

A company starts doing business on the day it completes registration of its articles of incorporation with the SEC. In theory now, an SME can start doing business on the day it is incorporated, even while completing requirements for paperwork and permits by other government agencies. Like the LGUs – local government units, today the most corrupt agency of government, after Congress itself.

MSMEs also received about P148.63 million in discounts on registration and capital-related transactions, while businesses received P3.72 million in relief from assessed penalties.

“We have made progress in reducing regulatory friction, but there are still structural barriers that prevent businesses from starting faster and companies from tapping the capital market more efficiently,” says Chair Lim. “Our next task is to address these barriers and build a market that is easier to access, more liquid and more competitive.”

The SEC has expanded its digital services and imposed internal processing timelines, including a “deemed approved” policy for applications that go beyond prescribed periods.

To improve stakeholder assistance, the SEC has rolled out measures to strengthen stakeholder engagement, such as: iMessage, a real-time application tracking and ticketing system for client requests; a unified SEC hotline, 1-4-SEC or 1-4-732, and the reopening of a physical Public Assistance and Complaints Desk at the swanky SEC headquarters in Makati.

The SEC has streamlined regulatory and adjudicatory processes. Case resolution is expedited.

The SEC is working with the World Bank to overhaul the public offering framework by separating regulatory requirements for debt and equity securities. Disclosure requirements will be more proportionate to the type and risks of securities being offered, making capital raising more accessible to companies.

Lim is looking at possible refinements to the Personal Equity and Retirement Account (PERA) framework to make the program more attractive to both employers and employees and encourage greater participation in the capital market.

Other measures introduced during Lim’s first year: a five-year shelf registration framework, tiered minimum public ownership requirements, expanded REIT rules, Sukuk regulations and Southeast Asia’s first Green Equity Guidelines.

The SEC has widened financing options for smaller enterprises through crowdfunding and sector-specific programs for hospitals, agribusinesses and other priority industries.

Long term, Lim wants the Philippines to be among Southeast Asia’s leading capital markets by 2030. Capital market development, he says, must involve both companies seeking financing and Filipinos who could eventually become investors.

“A deeper capital market requires not only more issuers and more investment products. We also need Filipinos who understand how to save, invest and participate in the market responsibly,” he says.

Lim wants high school students to be financially literate with the mandatory teaching of financial literacy as a core subject.

To improve corporate governance, the SEC has filed with the Justice Department the biggest case ever of stock market manipulation and insider trading against the richest Filipino tycoon and his family. The family has two incumbent powerful senators.

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