Business groups back term limits for broker-directors

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March 21, 2026 | 12:00am

MANILA, Philippines — The Securities and Exchange Commission (SEC)’s plan to impose a term limit on broker-directors of an exchange has secured backing from some of the country’s largest business groups.

The Management Association of the Philippines, Financial Executives Institute of the Philippines, Institute of Corporate Directors, Capital Markets Development Foundation Inc. and Investment House Association of the Philippines have issued a joint statement expressing their support for the SEC’s draft memorandum circular proposing term limits for broker-directors of an exchange.

The groups said the introduction of reasonable tenure limits for broker-directors would represent a constructive step toward reinforcing independence, reducing potential conflicts of interest and enhancing the credibility of the securities exchange system.

“The proposed circular introducing reasonable term limits for broker-directors would be a valuable step toward reinforcing the integrity and resilience of the Philippine capital markets,” the groups said.

“Term limits do not diminish shareholder choice —they activate it. They ensure that the right to vote is exercised on a continuing basis, with stockholders periodically selecting from among other qualified brokers to bring fresh perspectives and renewed accountability to the board,” they said.

The groups said financial institutions and listed companies already comply with enhanced governance requirements and as such, securities exchanges, given their regulatory role, must also adhere to safeguards that ensure independence and accountability.

Term limits for broker-directors, they said, serve critical objectives such as preventing concentration of influence by long-serving directors and reducing regulatory capture through board renewal.

Further, it enhances investor confidence by ensuring credible and independent oversight and by giving other brokers a chance to serve on exchange boards, thereby bringing new perspectives and insights to the governance of exchanges.

The groups noted that global financial markets widely adopt tenure limits and independence requirements for exchange boards —measures which safeguard against entrenched interests and reinforce the integrity of exchanges as both market operators and regulators.

“The Securities Regulation Code (SRC) requires fair representation of exchange members, but this must be balanced with the broader public interest. Reasonable tenure limits preserve broker participation while preventing indefinite dominance by a small group of market participants,” the groups said, adding that the SEC’s proposal represents a constructive governance reform consistent with its supervisory authority under the SRC.

“Securities exchanges perform critical regulatory functions in the capital markets, and their governance structures must be designed to safeguard independence, prevent conflicts of interest and maintain investor confidence. Principles of administrative law and international best practices support the authority of regulators to adopt governance safeguards necessary to achieve these objectives,” they said.

The SEC is planning to impose a maximum cumulative term of 10 years on broker-directors elected to the board of exchanges in an effort “to ensure fair and effective representation in an exchange and give qualified brokers opportunities to serve and provide new perspectives on the board of an exchange.”

The commission sought comments, suggestions, and inputs from concerned stakeholders on the draft circular, with the deadline for submission ending yesterday.

Broker-directors are those elected as members of the board or equivalent body of an exchange who represent the brokerage firms and trading participants that have been authorized to operate as brokers or broker-dealers and trading participants of the exchange.

Under the SEC’s proposed guidelines, a broker-director may be elected for a term of one year, subject to a maximum cumulative period of 10 years, whether consecutive or intermittent, in the same exchange.

After serving a cumulative term of five years, whether consecutive or intermittent, the broker-director will observe a two-year cooling-off period prior to being eligible for reelection as a broker-director, provided that any broker-director elected as such after the effectivity of the circular is not covered by the cooling-off period.

A service for a fraction of a year exceeding six months will be considered as one full year for purposes of computing the five-year term and 10-year maximum cumulative service.

The proposed guidelines indicated that, subject to a 10-year maximum cumulative period, re-elected broker-directors will be allowed to serve a fresh term of up to five cumulative years following the cooling-off period.

The SEC’s plan, if implemented, would affect some current broker-directors of the Philippine Stock Exchange, including Ma. Vivian Yuchengco, who has held a seat for 28 years; Eddie Gobing (25 years); Wilson Sy (12 years) and Diosdado Arroyo (six years).