SEC moves to limit term of PSE broker-directors

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March 5, 2026 | 12:00am

MANILA, Philippines —  The Securities and Exchange Commission (SEC) is planning to impose a maximum cumulative term of 10 years on broker-directors elected to the board of the Philippine Stock Exchange Inc. (PSE).

The plan of putting a term limit for broker-directors of the PSE was brought up by SEC chairperson Francis Lim last year, as first reported by The STAR, with the intent of leveling the playing field and providing other brokers the opportunity to serve on the PSE board.

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.

A draft memorandum circular on the term limit of broker-directors of an exchange was issued by the SEC yesterday, seeking comments, suggestions and inputs from concerned stakeholders by March 16.

An exchange is defined by the commission as an organized marketplace or facility that brings together  buyers and sellers and executes trades of securities or commodities, duly authorized to operate as such by the SEC.

Under the 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 the 10-year maximum cumulative period, re-elected broker directors would be allowed to serve a fresh term of up to five cumulative years following the cooling-off period.

The SEC said that covered exchanges that breach the maximum cumulative term limit would be subject to a basic penalty of P1 million per broker director per year and a continuing penalty of P30,000 for every month that such broker director holds the seat.

A third or succeeding offense for the same violation will be subject to suspension or revocation of the exchange’s secondary or primary license.

“In order to develop our capital markets, there is need to ensure fair and effective representation in an exchange and give qualified brokers opportunities to serve and provide new perspectives in the board of an exchange,” the SEC said.

At present, the SEC said there are existing term limits for independent directors and directors representing other market participants in an exchange.

The PSE’s board of directors should be composed of 15 members who are elected by shareholders.

At least 51 percent of the members must be non-brokers-- five independent directors and four directors representing the interests of issuers, investors and other market participants, with each sector having at least one representative.

Broker directors, meanwhile, should not be more than 49 percent of the board and shall proportionately represent the exchange membership in terms of volume/value of trade and paid up capital.

Asked earlier about his position on the SEC’s plan to introduce term limits for PSE broker directors, PSE president and CEO Ramon Monzon said, “If he wants to level the playing field, then all directors should have term limits. If independent directors are to have term limits, then why not for broker directors as well? I think that is leveling the playing field.”

The SEC has previously set a term limit for independent directors of publicly listed companies to strengthen director independence and align with international best practices.

Through Memorandum Circular 7, Series of 2026 issued by the SEC on Jan. 26, an independent director will be elected for a term of one year and will serve a maximum cumulative term of nine years in the same company.