BusinessMirror
The Philippine Stock Exchange (PSE) is tightening the rules governing the bourse’s securities, borrowing and lending (SBL) program, recently approving a set of safeguards and sanctions for trading participants.
The SBL rules, which will take effect at the end of next week, follows the approval of the Securities and Exchange Commission given earlier this month.
SBL transactions refer to the lending of securities from one party to another, to be secured by a form of collateral and paid for by a negotiated fee or rate.
“The guidelines will take effect on March 5,” the exchange said in a memorandum posted on its website on Friday.
The PSE earlier identified seven possible violations of SBL rules by trading participants and their corresponding safeguards.
These violations include the unauthorized lending of a client’s securities, denial of the beneficial owner’s right to vote, failure to share lending fees to beneficial owners of securities, breach of foreign ownership limits, failure to manage collateral received resulting in loss of possible income, requiring unreasonably large value of collateral, and failure to properly distribute manufactured dividends.
The sanctions have been divided to address the violations, such as failure to comply with the PSE’s reporting requirements or failure to properly distribute dividends.
Violations are levied fines between P10,000 and P50,000, while grave situations can result in the suspension of the trading participant.
As a counter to unauthorized lending of securities, trading participants are required to execute a securities lending authorization agreement (SLAA) while agreeing that they are liable in case of breach of representation.
To prevent instances where beneficial owners of stocks are denied their rights to vote, trading participants should also execute masters securities lending agreements and SLAAs to define the right of parties with regard to entitlement.
These agreements will also act as a safeguard for owners so they can avail of manufactured dividends.
Brokers should also have systems to access information on the actual foreign ownership of all securities.
In terms of collateral, trading participants are required to mark-to-market the securities lent alongside the collateral as well as have a system to determine the collateral amounts received by each lending agent.
Lenders and lending agents should also identify the acceptable types of collateral while taking into account the various factors that may affect these.
On top of these, the SEC requires trading participants to update their written supervisory procedures to indemnify abuses relative to SBL transactions, and put into place the proper safeguards. These procedures are subject to audit by both the PSE and SEC.
On February 17, the PSE also suspended the rules on listing by introduction saying that these are now under review. The exchange added that it will continue to process applications submitted prior to the suspension. Read more...
No comments:
Post a Comment