Reasonableness test on the SEC fees

Unreasonable and untimely.

That, in a nutshell, was how the Philippine Chamber of Commerce and Industry and several leading business organizations in the country had described the proposed revised fees and charges of the Securities and Exchange Commission (SEC).

In contrast, those business groups did not raise a howl when the SEC did something similar in 2017.

Aside from assailing the factual basis, they said the planned impositions would discourage foreign investors from coming in and make things difficult for those already in the country.

Based on their computation, if the fee increases were allowed, the SEC’s collections would amount to several billions of pesos that are way above its genuine financial requirements.

The concerns raised by the business groups are valid and take into account the adverse economic conditions that the country is going through at present.

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Note that the SEC’s primary mission is to register and supervise the operation of domestic corporations, which include issuers of securities and other financial instruments in the capital market, so they can contribute to the development of the economy.

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In other words, it is a regulator (or watchdog) of corporations that do business with the public. It is meant to be a service office, not a profit center. Its charter did not design it to be a revenue-raising arm of the government like the Bureau of Internal Revenue and the Bureau of Customs.

There is no question the SEC is authorized to impose and collect fees from entities and persons that require its approval before they can engage in their businesses. But that authority is not unrestricted or a matter of discretion on its part. In a long line of decisions, the Supreme Court had ruled that a regulatory fee must “… bear a reasonable relation to the probable expenses of regulation, taking into account not only the costs of direct regulation but also its incidental consequences as well.”

The phrase “incidental consequences” is significant. It is a reminder to the regulator to make sure the fees it imposes would not produce adverse results to the applicant and the public. The question is posed: Do the proposed SEC fees meet the criteria laid down by the high court?

Would they be commensurate to the actual cost, in terms of time and effort, of reviewing and evaluating the application or act subject of the fee before it is approved or disapproved?

Would the fees, because of their exorbitant cost, not compel the applicant to pass them on to its clients or customers? It’s an incidental consequence that may not be avoided.

Note that when a filing or submission is made using a form document or template issued by the SEC, which is its standard practice, or otherwise a matter of filling the blanks, its evaluation would hardly cause a sweat, much less require the expertise of a lawyer or an accountant.

That task can even be (and had been) done by students who are on OJT (on-the-job training) at the SEC with minimal supervision.

The high fees may be chicken feed to the country’s top 100 companies, but definitely not so for small- and medium-scale enterprises (SMEs) that, at this time, still have to recover from the adverse effects of the pandemic.

If the SMEs cannot afford those fees, they cannot be faulted should they opt not to go through any process that would require SEC approval and simply go “underground” with the hope that their insignificance in the business hierarchy would not motivate the SEC to run after them.

The concerns raised by the business groups about the deleterious effects of the proposed fees on the economy cannot be ignored by the SEC. Reason, not bureaucratic hubris, should govern the resolution of the issues they had raised.

In light of the SEC’s reported adamance to reconsider its proposed fee increases for various reasons, the Anti-Red Tape Authority may have to enter the picture and perform its mandate to make it easy to do business in the Philippines. INQ

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