PSE's Violation of Section 33.2 (h) of the SRC with the Appointment of Atty. Val Antonio Suarez as PSE President

December 1, 2010 SEC-MRD OPINION Philippine Stock Exchange Inc. Exchange Plaza Ayala Avenue Makati City Fax: 891-9004 Attention: Atty. Aissa V. Encarnacion, Corporate Secretary Atty. Joselito V. Banaag, General Counsel Gentlemen : As early as 30 July 2010, the Market Regulation Department of the SEC, informed the PSE of its findings that the appointment by the PSE Board of Atty. Val Antonio B. Suarez as PSE President and CEO violates Section 33.2 (h) of the Securities Regulation Code (SRC). Considering that Atty. Suarez's wife is currently a top official, director, stockholder and registered salesman of a brokerage firm, Atty. Suarez is indirectly associated with a broker. MRD's findings and PSE's response were reported to the Commission en banc, and acting on the same, the Commission in its meeting on 12 August 2010 adopted the following resolution: SEC RES. No. 367, s. of 2010 "RESOLVED, To DIRECT MRD to inform PSE in writing that the Commission is maintaining its position that PSE has violated Section 33.2 (h) of the SRC with the appointment of Atty. Val Antonio Suarez as PSE President, and that this position is without prejudice to the Certiorari case now pending before the Court of Appeals." The above ruling was conveyed to PSE through MRD's letter dated 19 August 2010 which was received by the Exchange on even date. In MRD's letter dated 6 September 2010, PSE was directed to comply with Section 33.2 (h) of the SRC, and pursuant to the above-quoted resolution, the Commission ordered PSE to show cause within five (5) days from receipt of the letter-notice, why it should not be sanctioned for not complying with the said provision of the SRC. In its letter dated 20 September 2010, PSE requested MRD for a copy of the SEC en banc decision as PSE claimed that it has not been furnished a copy of any decision of the SEC en banc. To date, PSE has not complied with Section 33.2 (h) of the SRC with regard to the appointment of its President. cDCHaS In view of the foregoing, the Commission in its meeting on 25 November 2010 adopted the following resolution: SEC RES. No. 553, s. of 2010 "RESOLVED, To IMPOSE upon PSE the basic fine of PhP1,000,000.00 plus PhP1,000.00 daily fine for continuing violation of Section 33.2 (h) of the SRC pursuant to Section 54 of the SRC. The PhP1,000,000.00 basic fine shall be paid within five (5) days from receipt of the notice. The PhP1,000.00 daily fine shall likewise commence from receipt of the notice and accrues until PSE complies with Section 33.2 (h) of the SRC." The PSE is hereby directed to comply with the above resolution. Very truly yours, (SGD.) JOSE P. AQUINO Director