Santiago F. Dumlao Jr. l July 19, 2023 l Business Mirror
Part three
THIS time we focus on the Securities and Exchange Commission (SEC) and its role in the capital markets. This role is central because it administers the implementation of the Securities Regulation Code (SRC).
The SRC declares it the state policy to “establish a socially conscious, free market that regulates itself, encourage the widest participation of ownership in enterprise, enhance the democratization of wealth, promote the development of the capital market (and) protect investors,….” (Section 2). By law, the SEC is the lead government agency for capital market development.
We propose to highlight some notable efforts undertaken or being undertaken by SEC to assure us that indeed the SEC is moving the progress of capital market development.
Since the SEC, the regulator, must register all securities for public sale, and since securities “fuel” the capital market, the number and speed with which securities are registered and their value are the major indicators of progress, i.e, to broaden the capital market.
To give itself a target, SEC adopted the 888@888 initiative, giving 888 companies access to the capital market by the 88th anniversary of SEC in 2024. Starting with 274 listed companies (as of April 2022), SEC targeted to reach additional 717 new listed companies (a higher internal goal), to cover the 888 declared goal.
The record shows that in 2021, 51 issues were registered with value of P365.7 Billion. In 2022, 46 issues were registered with value of P388.1 Billion. In Jan-May 2023, 23 issues were registered with value of P146.4 Billion.
In the Capital Market Development Council in June 2023, the SEC reported that of the 888 target, 627 have been achieved representing 70.61 percent of target. There are still 261 in number of Companies/Issuers needed to be listed/to access capital market to hit the 888 target. The usefulness of targeting is in its power to goad action.
For a closer look at these efforts to access the capital market, the SEC, through the Office for the Advancement of Strategic Investments in SMEs (OASIS), is expediting collaboration efforts with various government and private sector agencies in developing the appropriate ecosystem for SMEs through promotional activities. In support, the SEC is conducting Roadshows on Capital Formation for MSMEs and Startups, scheduled all over the country. As a result of the Roadshows, 4 companies are undergoing initial preparations for their IPOs coordinated with the PSE. This attention being given to MSMEs underscores the need and desire to mainstream them into the capital market – which is not just for big corporates. It’s about the state policy of encouraging the widest participation of ownership in enterprises.
On the side of expanding the investor base, the SEC has its ongoing “Capital Market Promotion and Awareness Inter-Agency Network,” i.e. “Campaign” to expand and intensify its investor education program. Starting with 18 partners in 2020, it has now 26 national level organizations and 75 local level organizations, a total of 101 partners. I don’t think the power and effectiveness of these large groups have been harnessed yet to effectiveness, but the foundational initiative is in place.
And then, in the matter of applying technology to SEC’s processes which in its benefits cascade to the promotion of capital market development, we have SEC’s PhilFintech Innovation Office (PhilFINNO). This was launched in July 2021 “to keep up with technological advancements in the finance industry.” The expectation is “to fully leverage the capabilities of modern digital technologies to enhance monitoring, increase investor confidence and trust, safeguard the investing public and better serve the country.”
These are just a peephole view of what the SEC is doing. There are many more initiatives. By the nature of its role as regulator, the SEC is tasked to establish frameworks and rules for the conduct of capital market activities requiring guidance, direction and regulation in the public interest. SEC’s initiatives in the pipeline include the following:
(a) Rules on digital assets offerings and digital assets exchange
(b) Cybersecurity framework
(c) Framework for electricity forward market
(d) Islamic finance framework (Guidelines on issuance of Sukuk bonds)
(e) Framework for commodity futures market
(f) Sustainable finance greening program / framework
(g) Sustainable finance taxonomy (together with the Financial Sector Forum)
(h) Electronic “SEC Education, Analytics and Research Computing Hub” (e-Search)
(i) E-Sparc document signing and verification system
(j) E-Secure
SEC Chairman Emil B. Aquino has declared his intention to concentrate his attention to capital market development during his renaming term in office. He has scored bene meritus in his job. We can expect him to continue to deliver. Ad Majorem Dei Gloriam.
*** Santiago F. Dumlao is the Secretary General of the Association of Credit Rating Agencies in Asia and chairman of the market governance board and market policy committee of the Philippine Dealing & Exchange Corp. His views do not necessarily reflect those of the BusinessMirror’s.