SEC bars PSE from halting trade of Benguet shares
By Lala Rimando, abs-cbnNEWS.com/Newsbreak | 10/27/2009 1:00 PM
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MANILA – The Securities and Exchange Commission (SEC) intervened in the Philippine Stock Exchange’s (PSE) decision to implement a one-month trading halt on the shares of Benguet Corporation.
On Monday afternoon, October 26, the SEC ordered the PSE not to push through with its order to suspend the trading of the mining firm’s shares by Tuesday, October 27, as the regulator considers the circumstances leading to the trading suspension.
A week ago, on October 19, the PSE board decided to suspend the trading of Benguet’s shares for violating non-disclosure rules. The exchange said Benguet failed to inform the exchange that it had received default notices from its creditors. Benguet has unpaid P1.2 billion loans to a group of creditors. (Read: PSE suspends trading of Benguet shares)
SEC said the Romualdez-led mining firm sought the regulator’s intervention. In a letter dated October 22, Benguet claimed that it did not violate the PSE Revised Disclosure Rules and that the creditors did not follow procedural requirements in collectively serving a notice of default.
On Monday morning, October 26, the PSE advised Benguet through a letter that it will push through with the trading suspension as scheduled “unless otherwise directed in writing by the [SEC].”
In the afternoon of the same day, SEC, in a “strict directive” to the PSE, its directors, officers, agents and assigns, said the exchange should “not to impose the penalties, or do any act that may render moot or ineffectual whatever action the Commission may take in connection with the said letter.” This was to give time for the SEC to review Benguet’s request.
The SEC also required PSE to comment on the letter of Benguet within 5 business days.
In turn, the PSE said it will “provide the Commission with the relevant information on the violations committed by the Corporation as well as the basis for the imposition by the Exchange of the corresponding penalties.”
SRO status
Last August, the SEC also intervened when the PSE was about to halt the trading of the shares of another listed firm, San Miguel Corporation.
The diversifying conglomerate failed to submit a standard quarterly report on time. The PSE rules require the submission of the report from all listed companies as part of structured efforts to update investors of the traded firms' latest financial status and plans.
The mandate from SEC to accommodate San Miguel's request for a new deadline means San Miguel had 18 additional days from the original cut-off submission date. This broke the 5-day deadline extension allowed in the rules of PSE. (Read: PSE, SEC spare the rod for San Miguel)
The SEC has granted the PSE a Self-Regulatory Organization (SRO) status since 2000. An SRO allows the bourse to implement its own policies and establish penalties on erring stock brokers, traders and listed companies.
PSE's Market Regulation unit ensures that the listed firms follow disclosure rules.
In the case of Benguet, PSE said Benguet failed to disclose that it has received at least 3 notices of default from creditors for failing to pay an already restructured loan with a P1.2 billion balance.
A notice of default is a formal warning sent by a lender to a borrower who is in default of the terms of a loan. The filing of a notice of default is the initial step in the legal process of foreclosure.
Under the Revised Disclosure Rules of the PSE, a listed company that violated the disclosure requirements for the third time within a 12-month period will be penalized with one month trading suspension.
Last April, the PSE halted the trading of Benguet shares for an hour after Philippine National Bank, the trustee for the pooled properties that Benguet offered as loan collateral, issued a Notice of Default. (Read: Benguet Corp defaults on loan; trading halted)
Romualdez
At the helm of Benguet Corp., the oldest mining company in the Philippines, is Benjamin Philip Romualdez.
Romualdez, the firm's president and chief executive officer, is also the president of the high profile mining industry group, the Chamber of Mines of the Philippines.
The mining firm's CEO is the brother of Leyte Rep. Ferdinand Martin Romualdez who was recently dragged into a scandal for allegedly picking a $20,000 dinner tab for President Arroyo and her entourage in a recent official visit to Washington. The dinner cost became hot topic amid increasing hunger rates and widening national budget gap.
Eventually, Rep. Martin's lawyer said it was the congressman's New York-based architect brother, Daniel Andrew Romualdez, who hosted and paid for the lavish dinner.
The Romualdez brothers--Benjamin Philip, Rep. Ferdinand Martin, and Daniel Andrew--are the sons of Benjamin "Kokoy" Romualdez, the younger brother of former First Lady Imelda Marcos.
The Romualdezes are still battling various sequestration cases for allegedly acquiring shares in various companies through their political connections.
Some shares in Benguet Corp. are still the subject of over 2 decade-long ownership dispute.
Shares in Benguet were acquired by "Kokoy" through his companies, Palm Avenue Holdings and Palm Avenue Realty Inc., using loans from government banks. The Presidential Commission on Good Government (PCGG) sequestered about 28% of Benguet’s shares but the Romualdezes had been voting them since 1992 because of favorable court rulings.
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