Finance Secretary Carlos Dominguez said over the weekend the government will not tolerate the actions of private institutions that prevent the development of the capital markets.
Dominguez cited the Philippine Stock Exchange’s failure to comply with the provision of the Securities Regulation Code on the allocation of their shares to other shareholders. It was one of conditions for the approval by the Securities and Exchange Commission of PSE’s plan to acquire Philippine Dealing System Holdings Inc.
“The development of the capital market is being slowed down by the PSE’s protracted compliance with the law. The Duterte administration will no longer tolerate private institutions thwarting the goal of achieving a robust and inclusive financial system,” Dominguez said in a statement.
Dominguez recalled that three months after President Duterte took office, he already told the PSE in September 2016 to follow the law on the allocation of PSE shares to other shareholders so that it could comply with the 20-percent ownership limit of Exchanges and Exchange Controllers as mandated under the SRC.
This was a requirement before the PSE could proceed with acquiring 100 percent of the outstanding capital stock of the PDS Holdings.
The PSE has been planning to acquire a majority stake in PDS Holdings, which serves as the holding firm for fixed-income trading platform Philippine Dealing and Exchange Corp., Philippine Depositary and Trust Corp. and Philippine Securities Settlement Corp.
PDEx is the dealing exchange for fixed-income securities while PDTC acts as depository and registry for participants for both fixed income and equity securities.
“As of now, 16 months later, they are not compliant,” Dominguez said.
The PSE said Thursday it obtained the approval of the SEC to conduct a stock rights offering worth P3.1 billion, a key development that could finally facilitate the merger of the bond and stock exchanges.
SEC secretary Armando Pan said the regulator cleared local stock rights offering that could result in the reduction in stockbrokers’ ownership in the exchange to less than 20 percent as required under the Securities Regulation Code.
The PSE plans to offer up to 11.5 million common shares to eligible shareholders at a price of up to P275 per share.
The exchange plans to use the net proceeds from the rights offering to pay corporate debt, finance product development and fund capital expenditures.
The PSE set the offering period tentatively on Feb. 5 to 9 and the listing date on Feb. 23.
The planned rights offering is expected to reduce brokers’ ownership in the local bourse to less than 20 percent as required by the Securities Regulation Code.
The reduction in the brokers’s stake is one the requirements that SEC asked before allowing PSE to take a majority stake in the bond exchange.