Francis Lim defends SEC board term limits as PSE directors sue

Insider Spotlight

• Francis Lim is making board renewal a defining governance battle, arguing PSE directorships are regulatory privileges rather than lifetime entitlements.
• The SEC insists shareholders’ rights remain intact because investors can still elect any candidate who meets qualifications set by law and regulation.
• Beyond the courtroom fight, Lim says the reforms are aimed at closing the Philippines’ governance gap with regional markets and rebuilding investor confidence.

A fight over who gets to keep a seat on the Philippine Stock Exchange (PSE) board is becoming the biggest test yet of Securities and Exchange Commission (SEC) chair Francis Ed. Lim’s governance agenda.

After two veteran exchange directors asked the Court of Appeals to strike down the SEC’s new term limits for broker directors, Lim made clear the regulator has no intention of backing down.

“Serving as a director of an exchange is a privilege, not a vested right,” Lim said in a statement on Friday. 

“It is subject to the qualifications and regulatory standards prescribed by law and the SEC,” he added. 

The comments were Lim’s first public response since longtime PSE directors Eddie T. Gobing and Ma. Vivian Yuchengco challenged SEC Memorandum Circular No. 17, arguing the regulator exceeded its authority and unlawfully restricted shareholders’ rights.

Francis Ed. Lim

SEC chair 

No loss of shareholder rights

But Lim rejected that argument, saying shareholders remain free to choose directors who meet the qualifications prescribed by law and SEC regulations.

“We see no deprivation of shareholders’ rights. Shareholders remain free to elect the directors of their choice from among those who are qualified under the law and SEC regulations,” Lim said. 

 “The SEC has both the authority and the duty to prescribe governance standards that protect the integrity of our markets and enhance investor confidence,” he added. 

Reform worth defending

Lim also expressed disappointment that the regulator was being forced to defend the measure despite giving affected parties a two-year transition period after extensive consultations.

“We are disappointed that, despite the SEC providing a reasonable two-year transition period for the implementation of this reform—following extensive consultations—we now find ourselves having to defend it in court,” he said. 

He argued that effective governance requires board renewal rather than allowing incumbents to remain indefinitely.

“Good governance requires board renewal, fresh perspectives, and a commitment to advancing the long-term interests of our capital market above individual or institutional interests," Lim said. 

The bigger picture 

Lim said the dispute should be viewed in the context of efforts to improve the competitiveness of the Philippine capital market.

“The Philippine capital markets have lagged behind many of our regional peers for far too long," Lim explained. 

“If we are serious about transforming our capital markets, meaningful reforms cannot be put aside simply because they are difficult or face resistance. Real transformation requires the courage and resolve to see them through," he said. 

—Edited by Miguel R. Camus