TWO Philippine Stock Exchange (PSE) broker-directors have asked the Court of Appeals (CA) to nullify a Securities and Exchange Commission (SEC) circular imposing term limits on broker-directors, arguing that the regulator exceeded its authority and infringed on shareholders’ right to elect directors.
In a petition for certiorari and prohibition filed on Aug. 5, Eddie Gobing and Ma. Vivian Yuchengco sought to have SEC Memorandum Circular (MC) 17, Series of 2026 declared null and void. They also asked the appellate court to prohibit the SEC from implementing the circular.
The petitioners said that while the SEC has the authority to promote good corporate governance, it has no legal basis to impose qualifications or disqualifications for broker-directors beyond those provided by law.
“There is no question that the Securities and Exchange Commission has the power and authority to promote corporate governance through the issuance of rules consistent with international best practices,” they said in the petition.
“In its claimed desire to promote good corporate governance, however, the SEC ironically seeks to exclude those with the most experience and insight in managing and directing the affairs of the Exchange, just so other ‘qualified brokers’ may be given an opportunity to serve on the board,” they added.
Gobing and Yuchengco argued that the circular interfered with shareholders’ right to elect directors by disqualifying long-serving broker-directors.
“The only way they can sit on the board is if the SEC disqualifies long-serving broker directors who, because of their experience and qualifications, have consistently received the greatest number of votes from the shareholders during the annual elections,” they said.
The allegedly “arbitrary, unreasonable, and discriminatory” circular was said to disenfranchise stockholders from “meaningfully participating in the control and management of the exchange through the exercise of their right to vote and to be voted for as members of the governing board.”
They further alleged that the SEC had “taken it upon itself to decide for the stockholders of the exchange who should represent them on the board, even demonstrating an unwarranted preference for foreigners, and has weaponized term limits to prevent a certain group of individuals from ever again serving as directors.”
MC 17 limits broker-directors of an exchange to a cumulative 10 years of service and requires a two-year cooling-off period after every five consecutive years before they may serve again as broker-directors.
SEC representatives were not immediately available for comment. The regulator has previously said that the circular aims to strengthen corporate governance, encourage broader representation on exchange boards and align the country’s capital market with international best practices.
The SEC has also said that it was prepared to defend the measure before the courts.