• Offshore companies as stockholders of listed companies

    2
    Emeterio Sd. Perez

    Emeterio Sd. Perez

    IF Chairperson Teresita Herbosa of the Securities and Exchange Commission and the four commissioners are really serious in making publicly listed companies (PLC) truly public, then they should study the ownership filings posted on the website of the Philippine Stock Exchange. By reviewing them, they would learn if these postings are compliant with the SEC’s full disclosure rule.

    For the public, the data on who owns what are what makes the market; they are probably next only to financials in importance. Since PLCs have already been religiously submitting audited annual and quarterly reports, there is no question that most, if not all, have already been fully informing the public about their financial performance.

    Since PLCs have already been religiously submitting audited annual and quarterly reports, there is no question that most, if not all, have already been fully informing the public about their financial performance.

    There is no question that PLCs in general have perfected the ART of full disclosure, where A stands for accuracy, R for relevance and T for timeliness. Yet, they have to understand the need of the public for COMPLETE information on what the Statement of Beneficial Ownership (SBO) is all about, particularly on what could be defined as significant acquisitions.

    Yes, the public understands the amounts paid as contained in the SBOs. How about who sells what? Why deprive the public of knowing who the sellers are of a big block of listed shares? Why limit the information to the identity of the buyer or buyers only?

    It is really surprising that until now, an SBO does not yet name the seller, especially if he or she is an insider who knows the goings-on inside the boardroom. Is it because this is the global practice? In a case like this, the public could only guess why a member of the majority group, which usually belong to the same family or are related to each other, either sells or buys blocks of shares. Lucky are those with links to company insiders.

    * * *

    IF the basic ownership filing as being done today and tolerated by the SEC is not complete, then how about the disclosure on corporate stockholders of companies that are incorporated elsewhere? How will SEC officials be able to audit these entities that are in faraway places but are significant stockholders of publicly listed companies?

    There is no problem if such stockholders are disclosed as associates or subsidiaries of big conglomerates. The bigger issue here is why certain PLCs list such significant corporate stockholders without fully disclosing their owners.

    The SEC, if its officials would care to know, has a big problem in requiring the full disclosure of the background of corporate stockholders. But it could have settled this issue if only it had resolved an old query that I raised 13 years ago. In it, I sought the full disclosure of the details of an agreement between two stockholders of a listed conglomerate. The SEC refused to act on my query because it said only PLCs, not stockholders, are covered by the full disclosure rule. Nevertheless, the SEC promised to issue a legal opinion on my query but it never came.

    Anyway, I cited the query because it is time for the SEC to revisit not necessarily the issue I had raised many years ago, but the use of offshore companies as significant stockholders if not by PLCs themselves then by their corporate stockholders. The SEC need not ban the use of offshore companies as stockholders but it should require the listed companies to fully disclosure their owners.

    * * *

    WHATEVER happened to the order of the Supreme Court for the Securities and Exchange Commission to look into the ownership profile of Philippine Long Distance Telephone Co. on whether it violated a provision of the Constitution limiting foreign ownership in public utilities to 40 percent?

    In its order, the high court had ordered the SEC to determine “the extent of allowable foreign ownership in PLDT, and if there is a violation . . . to impose the appropriate sanctions under the law.” Records show that PLDT has since issued 150 million voting preferred shares that effectively diluted the ownership of First Pacific group to the legal limit. Did the SEC then find the telephone company guilty of violating the 60-40 percent Filipino-foreign ownership ratio?

    Nothing has been posted on the SEC website if, in fact, PLDT has been penalized for its past “sins.”

    This is not the first time that the SEC has shown itself to be more investor friendly than functioning as a regulatory agency.

    Many years ago, the high court ordered the SEC to penalize Union Bank of the Philippines accordingly. As computed by SEC examiners, the bank should have paid over a million pesos in fines, which was ultimately reduced to just a little more than P200,000.

    esdperez@gmail.com

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    2 Comments

    1. I guess that’s how insiders,management make money. I don’t know if SEC is making money too.