Biz Buzz: Nagging foreign ownership problem

The Securities and Exchange Commission has called for a public dialogue this Friday on a proposed compliance framework to address the Supreme Court’s ruling on the foreign equity in telecom giant Philippine Long Distance Telephone Co.—a ruling that also affects utilities and industries subject to the 40-percent constitutional cap on foreign ownership.

A provision in the final high tribunal ruling says that the 60-40 ownership requirement in favor of Filipino citizens “must apply separately to each class of shares, whether common, preferred non-voting, preferred voting or any other class of shares.”

A draft of the compliance guidelines prepared by the SEC suggests that if the issuer has a series of shares with different rights, privileges and limitations, the covered corporation must observe the same ownership restrictions for various series of shares.

The SEC draft talks lengthily about the issuance of Philippine depositary receipts (PDRs) as a remedy. Some stock market veterans have also asked the SEC to consider allowing non-voting third party custodianship of foreign-owned shares. Under one proposal that came out during discussions with the Philippine Stock Exchange, the foreign-owned shares may be transferred to either Securities Clearing Corporation of the Philippines (SCCP) or a custodian bank, which foreign houses normally use as custodian of shares.

“The shares bought by a foreign fund will not be transferred to its account and will be retained under the SCCP or any local custodian and voting rights won’t be given to [the buyer],” said a source privy to the discussions with the SEC. Under such a formula, the voting rights will automatically go to the management, which is presumably Filipino-controlled.

Another option is a Thai model wherein a separate board will be created for foreign-owned shares, but stock market veterans doubt its viability. “In the past, we created a dollar board in the stock market and that didn’t work,” one source explained.

The SEC, for its part, is willing to hear creative solutions to the problem, which has a far-reaching impact on corporate Philippines.

Does this hanging question mean the issuance by PLDT and other affected companies of voting preferred shares will not suffice as remedy? That’s what everyone is concerned about.—Doris C. Dumlao

Awaiting Calata report

Market players are also awaiting with bated breath the results of the SEC’s probe on the trading of shares of agriculture product distributor Calata Corp., which was the subject of questionable trades shortly after the company’s stock market debut.

The investigation results may be presented to the SEC en banc this week, our sources said. If there’s any recommendation for prosecution, it has to be approved by the SEC en banc. After the Philippine Stock Exchange penalized some of its own members in relation to the Calata issue, the next question is whether there is any solid case that can be endorsed to the Department of Justice for prosecution.

Thus far, nobody has gone to jail for stock price manipulation in this country.—Doris C. Dumlao

IMF fence mending

International Monetary Fund managing director Christine Lagarde is set to visit the Philippines next week, giving government officials a big publicity coup in the middle of the country’s widely celebrated economic revival.

But she won’t be the first IMF chief to visit the Philippines. In 2007, then IMF chief Rodrigo de Rato also visited the country and expressed elation at having had the chance to “witness firsthand the economic revival underway in the Philippine economy.”

And before him, IMF chief Michel Camdessus visited the Philippines in the mid-1990s, heaping praise on the country just a few years before the East Asian financial crisis swept across the region.

(So perhaps we should wish that Ms. Lagarde’s praise for us be a little more muted this time around?)

In any case, the Philippines is just one of the countries that the IMF chief will visit. She will also be touring Malaysia and Cambodia and attend the East Asia Summit, an acknowledgement of the rising economic power of the region.

More importantly, we’re told that the IMF chief’s real reason for going on a whistlestop tour is to mend fences with the governments around the region, most specially Malaysia, coming on the heels of the IMF’s widely criticized policy prescriptions in the wake of the 1997 crisis.—Daxim L. Lucas

Nonoc flip-flop

Not a few local government officials of Nonoc Island, off Surigao City—along with executives of Shuley Mines Inc.—are shocked and outraged that the leadership of the Mines and Geosciences Bureau (MGB) seems to be pressuring its regional director to recall the firm’s ore transport permit (OTP).

According to a source (and some documents shown to Biz Buzz), some very influential people seem to be pressuring regional director Roger de Dios to revoke Shuley’s OTP despite its release only last October 12. The OTP allowed Shuley Mines to resume operations on Nonoc Island. The company has, of course, patiently waited for the release of the OTP over the last 14 months and complied with all the requirements.

Surprise, surprise … the moment the permit was given, MGB director Leo Jasareno asked De Dios to recall the permit.

The islanders of Nonoc, most of whom make a living from the nickel mining industry, are equally frustrated, we hear. The locals, led by Talisay barangay captain Florencio Ramiso, have thrown their support behind the MGB’s regional director since they fear that the withdrawal of the ore transport permit would mean job losses for them, and the loss of livelihood for thousands of families on the nickel-rich island.

Shuley Mines is also bracing for a court battle, we hear, as they plan to question the flip-flop of the MGB’s national office.—

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