MANILA -A powerful group of fund managers is urging the Securities and Exchange Commission (SEC) to follow through with a proposal that would tighten cross ownership rules among listed companies and protect minority stockholders.
The proposal, which will prohibit subsidiaries from buying voting shares of their parent companies, was released as a draft memorandum circular two years ago and has yet to be approved.
The Fund Managers Association of the Philippines and MBG Investment Management Inc. are asking the corporate watchdog to pass the new regulation.
“Cross-shareholdings between parent and subsidiary companies provide a platform for major shareholders to exercise control over companies. This control could result in self-serving decisions and actions that don’t always align with the interests of minority shareholders,” according to a joint-letter addressed to the SEC last June 23.
“Furthermore, the complex structure of shareholdings between parent companies and their subsidiaries often obscures the true ownership, leading to a lack of transparency in the companies’ control,” it added.
This type of corporate layering is common in Asia with the exception of India, according to a 2022 report released by the Organization for Economic Cooperation and Development (OECD).
OECD said these types of cross-shareholdings were a concern because these “may reinforce the status quo and suppress changes in the management and possibly business model.”