SEC’s overcrowded 5-person collegial body


ARTHALAND Corp. (Alco) has adopted a stock option plan that will not qualify Chief Justice Artemio Panganiban to get elected to the board as an independent director.
In a filing, Alco said among the company insiders who are qualified to avail themselves of a stock option are “the members of the board, with the exception of the independent directors.”

The exception won’t make it attractive to nominees for independent directors, who, anyway, have been rendered obsolete members of the board.

It will be recalled that Chairperson Teresita Herbosa of the Securities and Exchange Commission (SEC) has allowed Panganiban to buy shares issued by Metro Pacific Investments Corp. under a stock option plan.

Of the four SEC commissioners, only Raul J. Palabrica, an appointee of then President Gloria Macapagal-Arroyo, did not agree with Herbosa. (For a complete story on this, please read my column “Defining 10% minimum public ownership,” which appeared on this space on Dec. 31, 2015.)

This was an unforgettable SEC ruling that showed how Herbosa and three of the commissioners could not defend the commission’s rules against conflict of interest. SEC Director Tina Callangan has tried to implement said rule against Panganiban, but the Herbosa-led commission reversed her effort.

What is the purpose of institutionalizing the SEC if its officials readily give up their authority simply because they have been overwhelmed by the reasoning of an ex-chief justice?

Overpopulated commission

The SEC is overpopulated with five commissioners, including the chairperson. I offered this assessment over a cup of coffee on Tuesday with former SEC Chairman Perfecto R. Yasay Jr., who, incidentally, has accepted the post of acting foreign affairs secretary under President-elect Rodrigo Duterte, until the expiration of the ban against the appointment of Duterte’s losing running mate, Sen. Allan Peter Cayetano.

As a regulatory body, the SEC does not need a chairperson and four commissioners.

Having lost its jurisdiction over corporate intramurals to regular courts designated by the Supreme Court, a five-person commission has nothing much to do anymore. It needs only three commissioners, including the chairperson. It can even function efficiently even with only an executive director directing the execution of its functions.

Time was when members of a family fought over the ownership of a company, they brought their battles to be resolved at the SEC. The litigation took a long time to resolve that a number of cases even reached the High Tribunal.

That was the SEC then, until 2001, when the amended securities law took effect. It took our legislators more than four years to make the necessary changes to the law, minus the family wars over their companies. Corporate fights have been transferred to regular courts.

Three-person commission
It took our lawmakers more than four years to amend the Securities Regulation Code. They clipped the SEC’s power over corporate battles but forgot to reduce the number of members of the five-person commission.

Our 300 or so legislators failed to study the composition of the SEC’s five-person collegial body that does not need a chairman and four commissioners anymore after they took away the commission’s power to litigate corporate cases.

After years of arguing either for or against certain provisions of the securities law, our legislators probably were too tired to review the amendments they had introduced. For them, it was enough that the SEC did not exercise litigation power; they forget that as a regulatory body without litigation power, it did not need a chairperson and four commissioners.

Perhaps, there is a reason for Congress to retain a five-person SEC collegial body. After all, a President has so many people to thank after getting the votes to become a temporary tenant of Malacañang. He can pay back his loyal supporters by appointing them to well-paying government posts such as the SEC’s five-person regulatory body.


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  1. Sir E.S. Perez, this is a big problem that a new president have to face. If what I read is true, Pres-elect Rod Duterte have to appoint 6000 positions to his new administration. If this is true, if the president will scrutinize and read all applications of every appointments, say 100 a day which is on the high side, he will lose two months of his six year term.
    During the American peace time up to the term of Pres. Elpidio Quriino, only the Secretaries are appointed by the president as undersecretaries bureau directors and below were considered CARER POSITION. And I am glad that President-elect Rody Duterte, in a television interview, said that he consider retaining the Usecs of the Aquino Administration provided they have a good tract records. This will make it easier for President-elect Rody Duterte to concentrate on his 8 point economic agenda and other promises to the people when elected like solving drugs and other heinous crimes in six months as he can to start on DAY , HIGH NOON OF JUNE 3, 2016.

  2. Noel Garcia on

    SEC is inutile in implementing its own rules particularly Teresita Herbosa who does not possess the quality of Former SEC Chairperson Rosario Lopez