Business groups back SEC’s cumulative 10-year term limit for broker directors

PHILIPPINE business groups have expressed support for the Securities and Exchange Commission’s (SEC) proposed 10-year cumulative term limit for broker directors, saying it would help strengthen independence and investor confidence.

“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 our securities exchange system,” the groups said in a joint statement on Thursday.

The statement was signed by the Institute of Corporate Directors, Financial Executives Institute of the Philippines, Management Association of the Philippines, Capital Markets Development Foundation, Inc., and the Investment House Association of the Philippines.

In a draft memorandum circular, the SEC said it plans to limit broker directors, or individuals representing trading participants on an exchange board, to a maximum cumulative service period of 10 years.

The proposal aims to ensure “fair and effective representation” and allow more qualified brokers to bring “new perspectives” to exchange boards.

The groups said term limits would help prevent the concentration of influence among long-serving directors, reduce the risk of regulatory capture, enhance investor confidence, and allow more brokers to serve.

Citing the Securities Regulation Code (SRC), the groups noted that securities exchanges function as self-regulatory organizations (SROs), with responsibilities that include monitoring trading, supervising brokers, enforcing rules, and preventing market manipulation.

“Because exchanges regulate market participants, their governance structures directly affect fairness and credibility. Oversight of exchange governance is therefore a matter of public interest,” the statement said.

The groups said term limits would not diminish shareholder choice but reinforce 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.

They also noted that while the Revised Corporation Code sets general corporate governance rules, it does not prevent regulators from imposing stricter standards on entities with public responsibilities.

Securities exchanges, given their regulatory role, must follow safeguards that promote independence and accountability, the groups said, adding that financial institutions and listed companies already comply with enhanced governance requirements.

They also cited global practices, noting that financial markets in other jurisdictions have adopted tenure limits and independence requirements for exchange boards.

“These measures safeguard against entrenched interests and reinforce the integrity of exchanges as both market operators and regulators,” they said.

The groups said governance arrangements that affect the independence and effectiveness of exchange oversight fall within the SEC’s regulatory authority.

They added that the proposal to introduce term limits is consistent with the SEC’s supervisory mandate under the SRC and balances fair representation of exchange members with the broader public interest.

“Reasonable tenure limits preserve broker participation while preventing indefinite dominance by a small group of market participants,” they said. — Beatriz Marie D. Cruz