SEC postpones higher public float rule

MANILA, Philippines — The Securities and Exchange Commission (SEC), the corporate regulator, is postponing the higher public float requirement for companies that are already listed in the market given the prevailing market conditions.

However, the new entrants have already been slapped a higher public float of 20 percent from the previous 10 percent. 

In a recent interview, SEC chairperson Teresita Herbosa said the commission is still studying when the higher public float would be imposed for existing listed companies.  

“We have to put it off because the market is down,” Herbosa said.  

Last year, the SEC doubled the minimum public float requirement for listed companies to 20 percent from 10 percent for new market entrants after putting this off several times given the prevailing market conditions.

Eventually, the SEC would like to raise the public float to 25 percent, 30 percent, and then to 35 percent.

But Herbosa said the timetable for this has yet to be determined.  

“The average in ASEAN is at 20 to 25 percent, so ours is already within the range,” she said. 

Furthermore, she said, 20 percent is enough for minority shareholders to be able to secure at least one seat in a company’s board.  

According to the SEC circular on public float, all companies filing a registration statement, pursuant to Sections 8 and 12 of the Securities Regulation Code and with intention to list their shares for trading in the exchange, must apply for registration with a public float of at least 20 percent of the companies’ issued and outstanding shares. 

The public float refers to the portion of share of a corporation that are owned by public investors. It is freely available and tradable in the market and are non-strategic in nature or those not meant for the purpose of gaining substantial influence on how the company is being managed. 

According to the SEC, significant shareholdings of 10 percent or more of the total issued and outstanding shares of the company are considered strategic and, thus, excluded in the public float of the company. 

The minimum public ownership (MPO) of a company shall be measured by its minimum public float.

The SEC warned that non-compliance of the minimum public ownership requirements may result to publicly listed companies being subjected to the administrative sanctions provided under Section 54 of the Securities Regulation Code. 

Furthermore, they may also be subject to higher tax rate. 

This is because, according to the Bureau of Internal Revenue (BIR), all publicly listed companies are required, at all times, to maintain a minimum public ownership (MPO) as prescribed by the SEC to enjoy preferential tax treatment.   

So far, no new companies have braved the stock market this year given the prevailing volatility. Volumes have been relatively thin, trading at the 7,500 level the past several months after soaring above the 8,000 mark last year.