Big business groups back term limit for exchange directors

MANILA, Philippine — Key business groups support the imposition of term limits on broker directors of securities exchanges, saying such reform could strengthen governance and investor confidence.

In a joint statement Thursday, several business groups endorsed the draft memorandum circular of the Securities and Exchange Commission.

Institute of Corporate Directors, Financial Executives Institute of the Philippines, Management Association of the Philippines, Capital Markets Development Foundation Inc. and Investment House Association of the Philippines are among those that signed the statement.

The SEC wants to introduce tenure limits for broker directors, a step the groups described as “constructive” in promoting board independence, reducing conflicts of interest and improving the credibility of the securities exchange system.

READ: SEC floats 10-year cap on broker directors’ tenure in exchanges

Self-regulatory

They emphasized that securities exchanges are not ordinary corporations but function as self-regulatory organizations under the Securities Regulation Code.

As such, exchanges are tasked with monitoring trading, supervising brokers, enforcing rules and preventing market manipulation—roles that make their governance a matter of public interest.

Given these responsibilities, the groups said the SEC has broad authority to regulate exchange governance structures.

The mandate includes implementing measures to address risks of undue influence, regulatory capture and conflicts of interest.

READ: BIZ BUZZ: Stricter screening of independent directors bites PSE

Bringing fresh perspectives

They added that term limits would not restrict shareholder rights, but instead encourage more active participation by ensuring that stockholders periodically elect qualified brokers to the board.

The term limits, they said, could bring fresh perspectives and strengthen accountability.

The groups also noted that while the Revised Corporation Code provides general governance rules, regulators may impose stricter standards on entities with significant public responsibilities, such as financial institutions and listed firms.

Securities exchanges, given their dual role as market operators and regulators, should be held to similar standards.

They outlined four key benefits of the proposal:

• preventing the concentration of influence among long-serving directors,
• reducing regulatory capture through board renewal,
• enhancing investor confidence; and
• widening opportunities for other brokers to serve on exchange boards.

READ: Understanding the Philippine stock market

In line with global practices

The statement also pointed to global practices, noting that tenure limits and independence requirements are widely adopted in financial markets to safeguard integrity and prevent entrenched interests.

While the Securities Regulation Code mandates fair representation of exchange members, the groups said this must be balanced with the broader public interest. This includes maintaining independence and accountability in exchange governance, they added.

They concluded that the SEC’s proposal is consistent with its mandate and international best practices, and would help reinforce the integrity and resilience of the Philippine capital markets. /dda