SEC sets 10-year term cap for broker directors
The Securities and Exchange Commission (SEC) has imposed term limits on broker directors of exchanges, a move aimed at promoting broader representation and strengthening governance standards in the capital markets.
Under SEC Memorandum Circular No. 17, Series of 2026, broker directors may now serve a maximum cumulative term of 10 years in the same exchange, whether consecutive or intermittent.
“Strong institutions require regular renewal, independent oversight and broader representation,” SEC Chair Francis Lim said.
“By setting reasonable term limits for broker directors, the SEC seeks to strengthen market governance, mitigate potential conflicts of interest, level the playing field among the different categories of directors in exchanges and align our regulatory framework with internationally recognized standards, while ensuring a fair and orderly transition,” Lim added.
The circular also requires broker directors to undergo a one-year cooling-off period after completing a cumulative five-year term before they can seek reelection.
The SEC defined a broker director as a board member of an exchange representing brokerage firms or trading participants authorized to operate as brokers, broker-dealers or trading participants.
Meanwhile, an exchange refers to an organized marketplace that brings together buyers and sellers and executes trades of securities and commodities authorized by the SEC.
The regulator said the new rules were meant to ensure “fair and effective representation” in exchanges and provide qualified brokers opportunities to serve and contribute new perspectives to boards.
Under the circular, service exceeding six months in a given year would already count as one full year for purposes of computing the five-year and 10-year limits.
Reelected broker directors may serve another cumulative term of up to five years following the mandatory cooling-off period, subject to the overall 10-year limit.
The SEC said exchanges would be responsible for ensuring that broker directors continuously meet all qualifications and are free from disqualifications under the circular and other regulations.
Violations would carry penalties of up to P1 million per broker director seat, plus an additional P30,000 daily fine for every month a broker director remains in office beyond the allowable term.
The circular warned that third or succeeding offenses could lead to the suspension or revocation of an exchange’s secondary or primary license.
The SEC also introduced transitional rules for incumbent broker directors.
Those who have already served beyond the cumulative term limit at the time the circular takes effect would still be allowed to complete their current term and remain eligible for nomination and election as broker directors for the next two annual elections.
During the two-year transition period, the equities market exchange is expected to gradually reconstitute its board to promote broader representation and diversity of experience.
