The Securities and Exchange Commission (SEC) is proposing term limits for broker-directors on exchange boards to bolster governance and broaden participation in the nation’s capital markets.
According to a draft memorandum circular released for public comment, the SEC said broker-directors would be elected for one-year terms but could only serve a maximum cumulative period of 10 years, whether consecutive or intermittent.
A broker-director who has served a total of five years should also observe a two-year cooling-off period before running again for the same position. The regulator noted that any service exceeding six months would be counted as 1 full year when computing a director’s tenure.
Broker-directors represent trading participants or brokerage firms authorized to operate as brokers or broker-dealers in an exchange.
In the local bourse, the 15-man Philippine Stock Exchange (PSE) board consists of a president-director, five broker-directors and nine non-broker directors.
Current PSE broker-directors include Diosdado Arroyo, Eddie Gobing, Anthony Te, Wilson Sy and Ma. Vivian Yuchengco.
The SEC said the proposed rule aims to “promote fair representation and give more qualified brokers the opportunity to serve on the governing board of an exchange.”
The draft circular also outlines penalties for violations. Exchanges that fail to comply with the maximum term limit may face a basic fine of P1 million per broker-director for every year of violation, plus an additional P30,000 for every month the director continues to serve beyond the allowed term.
The SEC said it is accepting comments from stakeholders on the proposed rules until March 16 before finalizing the policy.
Early this year, the regulator also imposed a 9-year maximum cumulative term for independent directors of listed firms to strengthen board independence and align local practices with international standards.
Once that maximum term is reached, a director will be perpetually barred from re-election as an independent director of the same company.
