MANILA - A recent audit conducted by the Philippine Stock Exchange (PSE), which found majority of its trading participants in violation of rules, reportedly led to a dispute between some members of the exchange's board and management.

Sources said results of the audit—which found 55 of all 66 brokerage firms in violation of the Securities and Regulation Code and PSE rules and regulations, and was published online—caught the ire of some board of directors who held key positions in some of these firms. (Read: PSE lists erring brokers, dealers)

One of them was Ismael Cruz, PSE broker-director and chairman of IGC Securities Inc.

IGC Securities was fined for several violations, including submitting proxy forms whose signatures did not match those in the company's Customer Account Information Forms.

The dubious proxies were discovered by the Trading Participants Regulation Department (TPRD), a department under the Market Regulation Division (MRD), which polices the activities of brokers and listed companies, and makes sure they adhere to the rules and code of conduct of the PSE and to all related regulatory requirements.

According to sources, an angry Cruz summoned Jinky Alora, head of TPRD, after her superior, then PSE vice president and MRD head Joseph San Pedro, fined IGC Securities for unauthorized use of proxies, an offense under the SRC that could be ground for imprisonment.

Sources said Cruz blew his top during a confrontation with Alora at the PSE brokers' lounge in Makati where some employees were having lunch.

They said Cruz bad-mouthed and berated a flustered Alora for 30 minutes. One recounted that "he was about to slap or punch her" and even shoved his face just "two or three inches away" from hers.

Citing the alleged argument between the two, the sources said Cruz ridiculed the MRD, claiming that other broker-directors in the board also resent the way the division is meting out penalties like a fund-raising activity.

A case of personality differences?

In an interview with abs-cbnNEWS.com, Cruz denied he displayed improper conduct towards Alora.

"These are twisted facts. They made it appear that I even attacked Jinky. That's not true. Jinky's my friend," he said.

"I was just expressing my indignation to this very unjust thing they did to me. I even told her that time I wasn't angry at her and that if I raised my voice, I was sorry," he added, referring to their alleged confrontation.

News of the incident spread among employees of the PSE. Members of the management committee expressed outrage at the reported harsh treatment Alora got from Cruz. Alora filed a complaint against Cruz before the Securities and Exchange Commission (SEC), which tossed the complaint back to the PSE, citing the exchange’s self-regulatory organization status.

A manifesto, which denounced Cruz's behavior was signed by 82 or practically all of PSE employees, was sent to the PSE board for appropriate action.

The manifesto read, "We would like to express our serious concern and disgust towards the recent appalling and unbecoming conduct of Director Ismael Cruz towards Ms. Jinky Alora. We consider the recent attack of Director Cruz...unacceptable. For the past years, we have witnessed directors acting beyond the bounds that delineate them from management."

It ended with "This is the voice of the employees. The employees, by accepting salaries for work done, have not, and will not, sell our dignity and humanity."

'Mob rule'

Reports said Cruz wrote the PSE's Human Resource Department, asking for the names of the manifesto's signatories and threatening to file libel charges against them.

Cruz confirmed to abs-cbnNEWS.com that he indeed wrote a letter to HR, "calling the manifesto libelous."

"This manifesto is a form of mob rule. It's very unprofessional,” he said.

He reiterated that he did nothing wrong. "I wanted to defend myself and my company. I was accused of submitting fraudulent proxies, that's damaging to my reputation."

In fact, he said he went through the right process of appealing the MRD's decision with the Market Integrity Board (MIB) just so he could not be accused of taking advantage of his position as a board member.

The MIB is an autonomous regulatory body under the PSE board that oversees the MRD. It affirms and could reverse or modify decisions made by the MRD. The MIB's decisions, in turn, can be overturned by majority of the PSE board and be appealed before the SEC.

Cruz said he submitted the confirmation of client signatures that MRD was asking, but this was not accepted because the 5-day deadline for submission given to him already lapsed. So he wrote the MIB to appeal and request if he could personally argue his case.

"I wrote MIB but wasn't even given a reply. I just found out I lost my appeal because of technicalities."

Cruz is appealing the MRD’s and MIB’s decisions before the SEC, which is expected to come up with its own ruling in 2 weeks.