PSE wants brokers’ capital hiked to P100M

The Philippine Stock Exchange (PSE) plans to jack up the minimum capital for existing trading participants to P100 million on a staggered basis through end-2024, a move seen to drive consolidation and strengthen the stockbrokerage industry in the aftermath of the R&L Investment debacle.

More reforms will likewise be proposed to ensure that each trading participant will have a complete set of employees that will attain the segregation of duties, PSE president Ramon Monzon said in a press briefing on Wednesday night.

It was reported in November that 50-year-old stockbrokerage R&L was hit by a P700-million stock theft involving a rouge settlement clerk, Marlo Moron, who perpetrated the scam since 2011. This was the first major scandal to hit the local stockbrokerage industry since 2017, when DW Capital was brought down by P2.6 billion worth of unauthorized trades sanctioned by the firm’s own nominee, Derwin Wong.

“What nobody has written about in R&L is that no investor will lose money because R&L owners will make it good. I pity the owners, they are selling their house and assets [to cover any funding shortfall],” Monzon said.

The proposed increase in minimum unimpaired capital, which will more than triple the current minimum level of P30 million, will be proposed by Monzon to the PSE’s board during the next meeting. The proposed P100-million capital base is at par with the minimum requirement for any new trading participant at present.

“The fact that the SEC (Securities and Exchange Commission) imposed a P100-million [minimum capital for new brokers] 15 years ago, there must be a reason. They must have determined that that is the correct capitalization,” he said.

But Monzon acknowledged that this big capital hike could not be implemented immediately.

“We’re thinking of doing it in stages. Let’s say by the end of 2021, everybody should be at P50 million. At the end of 2024, everybody should be at P100 million,” Monzon said.

“This is still in the planning phase. If you don’t hit P100 million, you won’t be removed as a broker but you can’t be a clearing broker anymore so your trades will have to be coursed through another broker (with clearing function),” Monzon said.

Monzon said this might cause consolidation among existing brokerage houses. There are 130 trading participants in the Philippines while Singapore and Thailand, which have five to 10 times the local trading volume, have only about 26 brokerage houses, he noted.

To date, trading participants are required to increase their unimpaired capital to P100 million, but without a deadline.