BIZ BUZZ: Stricter screening of independent directors bites PSE

Securities and Exchange Commission (SEC) chair Francis Lim’s stricter implementation of existing rules on independent directors has drawn first blood—and it was shed by no less than the local stock exchange that he once headed.

Investment veteran and former banker Andrew Jerome Gan stepped down as independent director of the Philippine Stock Exchange (PSE) effective Nov.5, the bourse disclosed, without citing any reason.

From what we gather, the PSE leaders still very much wanted Gan to keep his seat. Gan knows the lay of the land, having been the director of the Capital Markets Integrity Corp. from 2014 to 2023.

Over the decades, Gan invested in various businesses, including Fifi L’Amour, a sparkling wine business; Nuovo Moda, the Philippine franchisee of the Italian fashion group Stefanel (in partnership with SM) and Globo Land Development (in partnership with the Madrigal-Vazquez family). He likewise dabbled in private equity work in Cambodia.

Several sources said that the PSE, however, could not keep Gan as the self-regulatory organization had failed to get further exemption from the SEC.

But wait, didn’t he join the PSE board as an independent director only in 2023? It means that he hasn’t even reached the three-year term limit prescribed by the SEC. And he’s far from the nine-year ultimate term limit.

As it turned out, it had nothing to do with the term limit. The SEC cited a provision in the Securities Regulation Code that Gan could not remain as an independent director because he is related by affinity to a stockbroker.

Lim himself confirmed this. “[It is] expressly prohibited because his sister is the wife of a broker,” Lim told Biz Buzz, when asked about the matter.

“The PSE must be a model of good governance. It will be a powerful message from the top to our publicly listed companies if PSE makes it to the Top 50 PLCs (publicly listed companies) in the Asean (Association of Southeast Asian Nations),” Lim explained.

Recall that in 2010, something similar happened at the bourse. The SEC flagged that then PSE chief operating officer Val Suarez’s wife was an employee of a brokerage house. Suarez resigned and the PSE was penalized.

This time around, the PSE had been able to secure exemptions for Gan in 2023 and 2024, our sources said.

But starting this year, the SEC is stricter, not just in counting the number of years. It will also probe into a person’s relations, whether by blood or marriage, to determine whether one could qualify as an independent director.