PSE asks for more time to spin off surveillance unit

The Philippine Stock Exchange (PSE) has asked the Securities and Exchange Commission (SEC) more time to put its compliance and surveillance department in order to show that it can really police its members and that all investigations are free of any undue interference.

Newly-installed PSE president Cayetano Paderanga told reporters yesterday that he had asked more time to review a SEC directive calling for the creation of an independent corporation to take charge of the bourse’s compliance and surveillance functions.

"I asked the SEC if they could give us more time to study it closely, to decide whether the Compliance and Surveillance Group (CSG) should be spun off as a separate company or whether we have to make all the arrangements so the SEC is convinced of the autonomy of that group.

So within the next three to six months, we will have to convince the SEC that it is autonomous," Paderanga said.

The SEC earlier reiterated the need for the PSE to spin off its CSG into a new corporation to ensure the integrity and fairness of the exchange. The move followed a PSE audit which exposed fraud and other violations by a number of brokerage houses.

The commission earlier said it was considering hiring a group to take charge of the PSE’s compliance and surveillance functions to maintain objectivity of audits. The SEC has received reports that several brokers have been wielding their influence on investigations being conducted by the CSG. This has impeded the CSG’s investigation and resolution of cases, the SEC said.

The PSE, however, has objected to the creation of an independent compliance and surveillance corporation as this would entail additional costs.

The CSG is a critical unit of the PSE that monitors market conditions and trading activities to detect violations of the securities law and exchange rules including sales practices and financial and operational requirements. It also monitors compliance by listed companies with continuing listing obligations and duties of members of the managing body of issuers to minority shareholders.

The SEC said the CSG shall not be subordinated or otherwise controlled in its activity by the board or PSE management and shall be responsible for carrying out the PSE’s disciplinary role.

It would be recalled that in 1999, CSG personnel tendered their resignation on fears that the board would whitewash the investigation conducted on stock transactions involving BW Resources Corp. There were reports that some PSE governors during that time used their authority to prevent the CSG from inspecting the books and records of certain brokerage houses.

The investigation into BW was due to the phenomenal rise in the share prices of the company from only P1.98 per share to a peak of P107 per share in just a short period of time. The shares have since fallen to below their par value of P1.

During an audit conducted by the SEC on brokerage houses that have heavily traded shares of BW, 75 brokers were found to have violated securities rules and regulations.