SEC, PSE cite issues with SME Exchange bill on listed firms’ regulation

THE Securities and Exchange Commission (SEC) and Philippine Stock Exchange (PSE) said they support bill that will establish a Small and Medium Enterprises (SMEs) Stock Exchange, but noted that there are possible overlaps with existing regulations.

The Senate Committee on Trade, Commerce and Entrepreneurship on Monday held initial hearings on Senate Bill No. 341, written by Senator Cynthia A. Villar, which seeks to encourage SMEs to make initial public offerings (IPO)s.

The PSE currently trades Small, Medium and Emerging stocks on a separate board. Eligible firms must have minimum authorized capital of P100 million, of which at least 25% is subscribed and fully paid.

The committee’s chairman, Sen. Aquilino L. Pimentel III, noted that the bill needs to be refined, as it offers no advantage for enterprises that opt to go public through the bill’s proposed SME Stock Exchange.

“Even if we establish by law a small and medium exchange, the listing is still voluntary, meron din syang two choices, possible na walang mag-list dun (there are two choices, and it is possible no one will want to list there),” Mr. Pimentel said during the hearing Monday.

“And because of the concept of investor protection, the strictness of the PSE will have to also be expected to be implemented in the other exchange, so walang lamang (to ensure a level playing field, or encourage the view that) it’s easier to list here.”

SEC Corporate Governance and Finance Department Officer-in-Charge Rachel Esther J. Gumtang-Remalante said the Commission supports the bill, but noted that the establishment of a stock exchange by law could affect the SEC.

Section 3 of the bill provides that the new Exchange is “selfregulatory,” though it may be placed under the authority of the Office of the President for policy coordination.

“If you create an SME exchange, what would be the effect in the authority of the SEC, in actually authorizing exchanges?”

The bill also provided for the creation of a Board of Governors, which will include the Governor of the Bangko Sentral ng Pilipinas, a representative of the SEC and the PSE and five members.

Ms. Remalante said creating the proposed stock exchange by law will be “different from how exchanges are set up internationally.”

PSE Chief Operating Officer Roel A. Refran said the PSE supports the bill, which is consistent with its efforts to give SMEs more access to financing.

When asked if the new exchange will compete with the current board, Mr. Refran said “The scenario will be competition.”

“But, when we look at other jurisdictions, the trend nowadays is consolidation,” he added, noting that for the Philippines consolidation might “grow the market.” —