SEC defers change to public float rule

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THE Securities and Exchange Commission (SEC) will push back to next year its plan to increase the minimum public float requirement for corporations given current market volatility.

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SEC chairperson Teresita Herbosa told reporters that the minimum public ownership requirement of 10 percent would not be adjusted this year.

“2016 is not a good year to increase the public float requirement given the high market volatility. We are looking at increasing it gradually by 2.5 percent, then another 2.5 percent until it reaches 20 percent,” Herbosa said.

The Philippine Stock Exchange, under the express mandate from the SEC, implemented the 10-percent minimum public ownership requirement in 2011.

“We have to wait for the right timing,” she added.

The Philippine Stock Exchange index (PSEi) remains volatile amid China’s economic slowdown and the uncontrolled drop in oil prices, which have fallen below $30 a barrel.

The SEC chief said that the agency’s objective was to put the Philippine capital market on equal footing with its Asean counterparts having a minimum public participation requirement of 20 percent.

“That is our objective, to make it [public float]increase up to 20 percent because in the region such as Hong Kong, Thailand and Singapore, they impose a minimum public float of 20 percent to 25 percent.”

The minimum public float refers to the number of common shares that a company has issued to the public for investors to trade in.

The objective of the law requiring corporations to offer a portion of their shares to the public is to allow the latter to take part in the profit-making activities of companies.

This means that public investors are not mere creditors of corporations who are entitled to dividends—whether cash, stock or property—but also, to some extent, enjoy some degree of control in the running of the affairs of the corporations, considering that these shares, among others, enjoy voting rights in the election of the board of directors and in approving any amendment in a corporation’s Articles of Incorporation.

The Department of Finance has been vocal on its stand to strictly enforce the 20 percent minimum public ownership requirement upon corporations, which would essentially result in much lower taxes, since stock transactions of listed firms are only taxed at the rate of one-half of one percent versus the ordinary 10 percent tax on dividends of unlisted firms.

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