SEC ends Class A, B share system to streamline trades

The Securities and Exchange Commission (SEC) has ordered all listed companies to scrap the decades-old classification of common shares into Class A and Class B to simplify equity trading and reduce administrative inefficiencies.

Citing a memorandum circular issued on 7 August, the SEC said Friday it moved to repeal the 1973 rule that created the two share classes to monitor compliance with the 40 percent foreign ownership limit.

Class A shares were reserved for Filipino citizens, while Class B shares could be owned by both Filipinos and foreigners.

Price disparities

The regulator said the classification has led to price disparities between share types and caused settlement delays for traders and the Securities Clearing Corporation of the Philippines.

Advances in the Philippine Stock Exchange’s trading system now allow for real-time monitoring of foreign ownership, making the old system unnecessary.

Under the new rules, listed companies with Class A and B shares must amend their articles of incorporation within a year to reflect the change. Until then, buyers will still receive the specific class of shares they purchase.

Share disposal procedures outlined

The SEC also outlined procedures for disposing of shares if a trade breaches foreign ownership limits.

Excess shares must be sold immediately, with proceeds returned to the foreign investor.

Violations will be penalized under the Securities Regulation Code after due process.