Veteran PSE directors take SEC term rule to court

MANILA, Philippines — Two longtime Philippine Stock Exchange (PSE) directors have asked the Court of Appeals to strike down a Securities and Exchange Commission (SEC) rule that limits the tenure of broker-directors.

Eddie T. Gobing and Ma. Vivian Yuchengco filed a petition for certiorari and prohibition challenging SEC Memorandum Circular No. 17, series of 2026.

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“The SEC acted with grave abuse of discretion amounting to lack or excess of jurisdiction,” the petition read.

They also argued that the circular was unconstitutional and ultra vires, or beyond the regulator’s statutory authority.

The rule limits a broker-director to a maximum cumulative tenure of 10 years in the same exchange, whether served consecutively or intermittently.

After completing five cumulative years, a broker-director must observe a one-year cooling-off period before becoming eligible for reelection.

A reelected director may then serve another term of up to five cumulative years, subject to the overall 10-year ceiling.

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The circular also imposes a basic penalty of P1 million per broker for every year of violation. A continuing penalty of P30,000 applies for each month that the director remains seated beyond the limit.

Gobing and Yuchengco argued that the policy violates the constitutional guarantees of due process and equal protection.

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They said it also restricts stockholders’ rights to vote and to be voted for as members of the exchange’s board.

READ: SEC bans independent directorship beyond 9 years

The petitioners claimed the rule would exclude experienced directors to make room for other brokers who may not have secured enough shareholder votes to win a board seat.

Yuchengco has served on the PSE board for a cumulative 29 years and was its chairperson from 2002 to 2003. Gobing has served for a cumulative 27 years.

The petition cited their repeated reelection as evidence of shareholder confidence.

Yuchengco received the highest number of votes among elected directors in 2025 and 2026, while Gobing obtained the second-highest number in 2026.

The petitioners also questioned the SEC’s reliance on international corporate governance practices. They said the cited International Organization of Securities Commissions report did not make a specific recommendation on term limits.

They further argued that the Revised Corporation Code expressly authorizes the SEC to prescribe term limits for independent directors, but not for regular or non-independent directors such as broker-directors.

The circular was issued on May 21 and took effect on June 6 following its publication. Gobing and Yuchengco asked the appellate court to declare the measure unconstitutional and void. They also want the SEC ordered to desist from implementing it. /pai