Request for Comments on the Proposed Rules and Regulations on Minimum Public Ownership of Publicly Listed Companies

May 31, 2017 SEC MSRD TO : Publicly Listed Companies, Trading Participants the Investing Public and All Other Interested Parties SUBJECT : Request for Comments on the Proposed Rules and Regulations on Minimum Public Ownership of Publicly Listed Companies NOTICE The Securities and Exchange Commission intends to issue Rules and Regulations on Minimum Public Ownership (MPO) of Philippine Publicly Listed Companies (PLCs). Hence, the Commission is inviting the PLCs, trading participants, the investing public and other interested parties to submit their views, comments and inputs to the proposed rules. The draft SEC Memorandum Circular proposing to increase the public float of PLCs is hereto attached for your reference. Commenters may submit, not later than 15 June 2017, their views, comments and inputs by email to [emailprotected] and [emailprotected] . Issued on May 31, 2017. ATTACHMENT SEC MEMORANDUM CIRCULAR NO. _____ Series of 2017. TO : ALL CONCERNED SUBJECT : RULES AND REGULATIONS ON MINIMUM PUBLIC OWNERSHIP OF PUBLICLY LISTED COMPANIES WHEREAS, Section 2 of the Securities Regulation Code (SRC) declares that it is the policy of the State, among others, to promote the development of the Philippine capital market and encourage the widest participation of ownership in enterprises; WHEREAS, Section 8.1 of the SRC provides authority to the Commission to approve applications for registration of securities before being sold or distributed within the Philippines; WHEREAS, the public ownership of a company is determined through its public float. Public float refers to the portion of the issued and outstanding shares that are freely available and tradable in the market and are non-strategic in nature or those not meant for the purpose of gaining substantial influence on how the company is being managed; WHEREAS, there is a need to promulgate these rules and regulations to increase the public ownership level of Philippine listed companies (PLCs) to ensure that the objectives of the SRC are met; WHEREAS, a higher public ownership increases market depth and is essential for sustaining a continuous market for listed securities to provide liquidity which in turn attracts good-quality and long-term investors; WHEREAS, the increase in liquidity improves market efficiency, reduces volatility and helps in better price discovery; WHEREAS, a large and dispersed shareholding lowers the opportunities for collusive market action or price manipulation and encourages good governance; WHEREAS, a higher public ownership increases the free float market capitalization which enhances the Philippines' relative weight in globally tracked free float-adjusted market capitalization weighted indices and in turn helps attract more capital especially with the ongoing ASEAN integration; WHEREAS, the SRC authorizes the Commission to issue rules and regulations to make effective the provisions of the SRC; NOW, THEREFORE, the Commission hereby issues and promulgates the following rules and regulations governing the increase of public ownership level of PLCs. Section 1. Definition of Terms. A. Public Float of a company shall refer to the portion of the issued and outstanding shares that are freely available and tradable in the market and are non-strategic in nature or those not meant for the purpose of gaining substantial influence on how the company is being managed. Significant shareholdings of 10% or more of the total issued and outstanding shares of the company are considered strategic and thus, excluded in the public float of the company. B. Publicly Listed Companies (PLCs) shall refer to companies with existing registration statements filed with the Commission and whose shares are listed and traded in an exchange. C. Minimum Public Ownership (MPO) of a company shall be measured by its Minimum Public Float. Section 2. Minimum Public Ownership Requirement for PLCs. A. Starting 1 July 2017, all companies filing a registration statement pursuant to Sections 8 and 12 of the SRC and with intention to list their shares for trading in an exchange shall apply for registration with a public float of at least 20% of the companies' issued and outstanding shares; B. Companies with existing registration statements filed with the Commission and whose shares are listed and traded in an exchange shall increase their public float to at least fifteen percent (15%) on or before the end of 2018; C. Companies with existing registration statements filed with the Commission and whose shares are listed and traded in an exchange shall increase their public float to at least twenty percent (20%) on or before the end of 2020; D. This requirement of minimum public ownership shall form part of the requirement for the registration of securities; E. Non-compliance of the above requirements shall subject PLCs to the administrative sanctions provided under Section 54 of the SRC, including the initiation of suspension and/or revocation proceedings against their Registration Statements pursuant to the pertinent provisions of the SRC. Section 3. Effectivity . These Rules shall take effect fifteen (15) days following the completion of its publication in two (2) newspapers of general circulation in the Philippines. Pasay City, Metro Manila, _____________ 2017. For the Commission: TERESITA J. HERBOSA Chairperson