• The rich public


    Emeterio Sd. Perez

    HOW do the acquisitions by members of the families who own and control the shares of their own listed companies affect the 10-percent minimum public ownership rule of the Securities and Exchange Commission (SEC)?

    This is a poser that only the SEC officials could provide the answer to, but probably would not, for reason or reasons they would rather not want public investors to know.

    Even Due Diligencer cannot and would not dare make a guess or estimate for fear of misleading public stockholders in their decision whether to sell or buy additional listed shares.

    Here is a follow-up question: What if insiders bought some listed shares then resold the same for potential profit?

    These questions need answers from the SEC as the regulatory authority. It is up to the five-person commission to explain its findings if Chairperson Teresita Herbosa and the four other commissioners had studied the trend of insiders’ acquisitions of listed shares.

    Herbosa and company have yet to explain why public investors who own at least 10 percent of listed common shares are denied board representation.

    Why should they be expected to answer the questions? As a matter of delicadeza, they should have been required to fully disclose their affiliation with any of the listed companies before their appointment as commissioners.

    Misleading PORs

    Even the public ownership reports (POR) posted on the website of the Philippine Stock Exchange are not reliable.

    As suggested in earlier Due Diligencers, certain listed companies make the public their majority stockholders in their companies’ PORs. If investors outside the families really own the common shares attributed to them, they should have been allowed to elect their own nominees to the board.

    In the first place, how could public investors control any of the 300 or so listed companies even if the PORs show them as majority stockholders? This is not possible since the business owners would never allow anyone outside the family to even take a peek inside the boardrooms.

    In previous columns, Due Diligencer also suggested the need to review the 10-percent minimum public ownership rule. The suggestions also included the need to review the POR presentation by including the ownership of voting preferred shares in the computations.

    The SEC’s five-person regulatory body has not made anything to enforce the minimum public ownership rule. Do the public investors really own at least 10 percent of outstanding common shares?

    Be the regulator

    Due Diligencer is not asking the SEC to be pro-public. The regulatory body should only be fair in dealing with both the public and the business owners.

    As a regulator, the SEC should require listed companies to be truthful in listing the ownership of voting shares in their PORs, whether common or preferred shares.

    As has long been the practice, a POR lists only the number of common shares because the SEC tolerates such kind of ownership disclosure. If the rule allows this, then change the rule. After all, the SEC is THE regulator.
    Having been company lawyers before they were appointed commissioners, the SEC’s top officials, in fact, should have been transparent about their dealings with listed companies. Did any of the SEC’s five commissioners do any kind of lawyering for any of the listed companies in the past? Their response may adversely affect their credibility only in the beginning but nevertheless, would clear them of any vested interests in the long run.

    By the way, public investors should not carry the burden of disclosing what they know about certain listed companies through their own sources inside the boardrooms. Why blame them and hold them responsible for trading on inside information that has not yet been fully disclosed?

    Due Diligencer is not justifying insider trading. Public investors are also rich and may even be richer than some business owners. Who are these public investors? Just asking.



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