SEC broker director term limits challenged before Court of Appeals

Insider Spotlight

• Petition filed: Veteran Philippine Stock Exchange directors Eddie T. Gobing and Ma. Vivian Yuchengco asked the Court of Appeals to nullify SEC Memorandum Circular No. 17, Series of 2026
• Key claim: The petition argues the circular imposing term limits on broker directors violates constitutional guarantees of due process and equal protection and exceeds the SEC’s statutory authority
• What’s at stake: A ruling could reshape corporate governance rules for the Philippine Stock Exchange and clarify the SEC’s rule-making powers over exchanges
  
  
  
  

Two long-serving directors of the Philippine Stock Exchange (PSE) have asked the Court of Appeals to strike down a Securities and Exchange Commission (SEC) circular that imposes term limits on broker directors, arguing the regulator exceeded its authority and unlawfully curtailed shareholders’ rights.

In a Petition for Certiorari and Prohibition filed before the Court of Appeals in Manila, petitioners Eddie T. Gobing and Ma. Vivian Yuchengco challenged SEC Memorandum Circular No. 17, Series of 2026, which limits broker directors of an exchange to a maximum cumulative term of 10 years and requires a one-year cooling-off period after five cumulative years of service.

Why it matters

The case tests the extent of the SEC’s power to regulate corporate governance in exchanges, particularly the Philippine Stock Exchange, the country’s only securities exchange. A favorable ruling for the petitioners could invalidate the regulator’s latest governance reforms and clarify the limits of delegated rule-making authority.

The petitioners, both incumbent PSE directors with decades of board service, argued that the circular arbitrarily prevents shareholders from electing directors who have consistently received the highest number of votes in annual elections.

According to the petition, the circular violates constitutional guarantees of due process and equal protection because it singles out broker directors for term limits without a reasonable basis while permanently excluding experienced directors from future service.

The legal argument

Gobing and Yuchengco also contended that the SEC acted beyond the authority granted under the Securities Regulation Code and the Revised Corporation Code. They argued that while existing laws authorize the SEC to promote corporate governance and prescribe qualifications for independent directors, no statute empowers the regulator to impose term limits on broker directors of an exchange.

The petition further claimed that the SEC misapplied international corporate governance principles, asserting that reports from the International Organization of Securities Commissions do not recommend compulsory term limits for regular directors.

The petitioners asked the Court of Appeals to declare SEC Memorandum Circular No. 17 unconstitutional and void, and to prohibit the SEC from implementing the measure.

What’s next

Records show the petition was filed with the Court of Appeals on Aug. 5.

The SEC will have the opportunity to submit its comment before the appellate court determines whether the challenged circular should remain in force while the case is pending. —Daxim L. Lucas | Ed: Corrie S. Narisma