WHEN majority and significant stockholders sell or buy shares in their own company, they should be required to identify in their filings the parties they deal with. The stumbling block to this suggestion is that the market may not have any rule requiring a more comprehensive filing that governs trades by insiders.
As posted on the website of the Philippine Stock Exchange (PSE), only the number of shares insiders buy or sell is shown in the statement of change in beneficial ownership. It is difficult to argue against the practice because that’s how the local stock market works.
Should there be a rule for the full reporting of insider trades?
Yes, there is a need for a rule that would cover the transactions of majority and significant stockholders, particularly those who are members of the board. Let the public investors continue enjoying the secrecy of their trades, but not the insiders who are privy to goings-on in the boardroom and the company itself.
Here is an example: On April 6, Philippine Racing Club Inc. (PRC) posted on the PSE website the sale by Simeon Siy Cua, the company’s president and chief executive officer, of 50 million PRC, or 9.02 percent, on April 1.
The sale reduced Cua’s indirect holding in the company from 53 million PRC shares, or 9.58 percent, to a minority stake of 3 million shares, or 0.54 percent. The filing shows Cua’s more than 3 million PRC shares are lodged with PCD Nominee Corp. making him an indirect stockholder. In addition, Cua also directly owns 134,550 PRC shares, which is what is reported in the list of PRC’s top 100 stockholders.
Prior to the filing of Cua’s sale of PRC shares, no one knew for sure the number of PRC shares he owned as an insider, because most of his holdings were lodged with PCD Nominee Corp.
After unloading much of his PRC holdings, Cua retains his twin post as president and CEO and remains the vice chairman of the board.
As of Dec. 31, 2014, a total of 394.3 million Filipino-owned PRC shares and 73.52 million foreign-owned PRC shares were lodged with PCD Nominee. Based on this filing alone, no one would know who owns what. Even if the public investors were to check the identity of the owners of PCD-held PRC shares in the attachment, they would remain clueless as to the beneficial owners because the attachment identifies only the record holders who are mostly the trading participants.
Among these trading participants, who are listed as PRC stockholders under PCD Nominee, are Cualoping Securities, with 114.47 million shares; Lucky Securities, 32.64 million shares; Maybank ATR Kim Eng Securities, 106.3 million shares; and Venture Securities, 157.59 million shares.
Because PCD Nominee failed to inform public investors about the beneficial owners of the PRC shares held by stockbrokers, it is now up to the Securities and Exchange Commission (SEC) to decide if its ownership posting should be considered an incomplete disclosure or not.
Listed shares for trading
When shares in listed companies are lodged with PCD Nominee, it is understood that these are available for trading. In the case of PRC, this may not necessarily be true as shown on the PSE website since trading results showed the daily volume changed by a few hundred shares only.
So far, Cua’s sale of more than 50 million PRC shares was the biggest volume transacted in years. I would not know how many years ago a similar huge unloading happened but PRC’s postings indicate only a few insider trades have been conducted and they were not as big as that of Cua.
For one, Ramon Ereneta Jr., who directly owns 5,850 PRC shares, increased his indirect holdings to 1,532,300 shares after buying 451,500 shares at P9.50 each on March 6.
By the way, if you are in PRC for dividends, you are in good company.
Businessman Lucio Tan is a PRC stockholder for decades—I don’t know how many decades—he owns 30.3 million PRC shares which are held for him by Allied Banking Corp. Sta. Lucia Land Inc., which is also listed, and Sta. Lucia Realty & Development Corp., hold 64.5 million and 3.4 million PRC shares, respectively. The latter is the majority stockholder of Sta. Lucia Land as owner of 7.45 billion shares, or 87.18 percent.