FULL disclosure of material facts is the only source of information that links public investors to listed companies and vice versa. Without it, there would be no Philippine Stock Exchange (PSE) to speak of and write about, where the rich and the very rich would trade on listed stocks.
Without the public, business owners have no way of rating the popularity of the listed companies that they either fully own or control. Only the investors determine which shares to buy and which to unload among their holdings.
In other words, only the public decides when to acquire additional shares issued by any of the more than 300 listed companies, and when to dump them when necessary.
Public investors see to it that the stocks they buy regularly declare dividends that will enable them to earn a little bit more than what banks pay them for their savings accounts. Many, if not all, know when to unload shares from their portfolios, when these stocks don’t pay in terms of return on investments or ROI.
That’s why public investors should be fully informed about the number of issued shares that are traded daily. They should be told why the daily trading volume remains thin compared with the number of shares supposedly sold by listed companies to outsiders who are not members of the inner group usually associated with the majority.
The above is only a scenario but which nevertheless is shown here to demonstrate the helplessness of the public against the majority and business owners and those who may be closely associated with them. Market investors, who don’t usually associate themselves with the controlling stockholders, need to be informed about anything that goes on inside the boardroom.
“Boardroom” refers to the inner sanctum of management and is not confined to the agenda taken up by directors. It encompasses acquisitions and sales of stocks by insiders, the company’s buyback of outstanding shares that are also listed, and information that usually are known only to the management, which is composed mostly of the families who control the business.
If the public were to be asked about the flow of information that affects market transactions, they would probably hide their true attitude towards the full disclosure rule. They would prefer to keep to themselves anything that could potentially hurt the stocks they own for fear of losing the money they have placed in them.
In short, it has become among the management’s prerogatives – which pieces of information to timely disclose and which not to disclose at all. For example, when should a listed company inform the public about a takeover of a listed company by outside group or groups? Should the information be made public even at the planning stage?
The Securities and Exchange Commission (SEC) plays only an oversight role over PSE, which is a self-regulatory organization (SRO). But as regulatory authority, it also exercises disciplinary power over listed companies when the five-person commission so decides.
When the five-person commission finds a violation by the PSE as a listed company, will it penalize it despite the PSE’s status as an SRO?
Whether or not the commission should be more lenient with the PSE as a listed company but stricter with the others could possibly become the SEC’s dilemma.
How SEC chief Teresita Herbosa and the other four commissioners will act on an infraction committed by the PSE as a listed company bears watching.
As for the public, they might as well wait for the final words from the commission not only on the PSE but also on other companies whose shares are publicly traded.
As far as Due Diligencer is concerned, it can only surmise that listed companies should be more generous to the public by releasing information that only insiders know about. There could be more filings that should have been posted on the PSE website but which only the SEC could decide as to their accuracy, relevance and timeliness.