The Securities and Exchange Commission (SEC) wants to impose a minimum 25-percent public ownership requirement starting 2020 plus a five-year grace period in a bid to boost activity in the local stock market.
The minimum free float—the portion of a company’s shares held by the general public and not by controlling shareholders and officers—is currently set at 10 percent.
SEC Commissioner Ephyro Luis B. Amatong told the Inquirer the new rules could be released within the first half of next year.
Moreover, companies will be given five years to comply with the liquidity-boosting measure, he added.
“Realistically we will implement it next year,” Amatong said at the sidelines of the Sustainable Finance Forum organised by ING Bank last week.
Amatong clarified that the final policy has yet to be approved by the SEC.
“That’s the internal thinking,” he added.
He said the SEC was confident it could push through with the measure.
“There are some [companies] who object but the majority that are active do not have a problem,” he said. “We think it’s good for the market.”
The proposal to increase the public ownership requirement for all listed companies was floated as early as last year but the SEC put the plan on hold due to poor market conditions.
Instead, the corporate regulator imposed the rule only on new listings.
Requiring companies to widen their ownership to the broader public is expected to increase activity in the stock market.
Apart from more liquidity, the SEC believes a more diverse ownership base will reduce instances of stock manipulation.
It noted that the Philippines lags behind its neighbors that have an average minimum float of 25 percent. The SEC said investors that own more than 10 percent of issued and outstanding shares were not considered in the free float of a company.
Under the SEC’s earlier-proposed guidelines, firms whose public ownership falls below the minimum will have 12 months to remedy the deficiency. Failure to do so will expose these companies to penalties, including the revocation of their registration.