SERVING as director of an exchange is a privilege rather than a vested right, the Securities and Exchange Commission (SEC) said as it defended a term-limit rule challenged by two Philippine Stock Exchange (PSE) broker-directors before the Court of Appeals (CA).
SEC Chairman Francis Lim said the regulation did not deprive shareholders of their right to elect directors, arguing that such right remains subject to qualifications prescribed by law and SEC regulations.
“We see no deprivation of shareholders’ rights. Shareholders remain free to elect the directors of their choice from among those who are qualified under the law and SEC regulations,” he said.
The statement came after PSE broker-directors Eddie Gobing and Ma. Vivian Yuchengco asked the CA to nullify the Commission Memorandum Circular (MC) 17, Series of 2026, which imposed term limits on broker-directors.
Gobing and Yuchengco filed a petition for certiorari and prohibition on Aug. 5, claiming that the SEC exceeded its authority and infringed on shareholders’ right to elect directors.
The petitioners also asked the appellate court to prohibit the SEC from implementing the circular.
They argued that while the SEC had the authority to promote good corporate governance, there was no legal basis to impose qualifications or disqualifications on broker-directors beyond those provided by law.
Lim rejected the argument that the rule restricted shareholders’ rights, saying the law does not provide an unrestricted right to elect any particular individual regardless of regulatory qualifications.
“The law does not recognize an unfettered right to elect any specific individual regardless of applicable regulatory qualifications,” he said.
The SEC chairman said the regulator had both the authority and duty to prescribe governance standards aimed at protecting market integrity and strengthening investor confidence.
“Serving as a director of an exchange is a privilege, not a vested right,” Lim said.
Lim also defended the need for board renewal, saying good governance requires fresh perspectives and commitment to advancing the long-term interests of the capital market above individual or institutional interests.
“We are disappointed that, despite the SEC providing a reasonable two-year transition period for the implementation of this reform — following extensive consultations — we now find ourselves having to defend it in court,” he said.
Lim said that the SEC respected the judicial process and was prepared to defend the rule in court.
