Directors’ term cap gets FMAP backing

A Securities and Exchange Commission (SEC) proposal to cap the tenure of long-serving broker-directors at the Philippine Stock Exchange (PSE) is drawing strong backing from fund managers and top business groups, who warn of risks to market integrity.

The Fund Managers Association of the Philippines (FMAP), whose members oversee about P8 trillion in assets, said the governance of the stock exchange is a matter of public interest, given its dual role as both market operator and self-regulator.

“Board composition at the exchange level is therefore a concern of all market participants,” the group said.

Under the draft SEC circular, broker-directors would be limited to one-year terms, with cumulative service capped at 10 years. A two-year cooling-off period would also be imposed after five cumulative years of service.

FMAP said the proposal addresses long-standing concerns over extended tenures, noting that some directors have served for more than two decades — raising questions about independence and openness to reform even in the absence of misconduct.

Necessary reform

The group added that the measure would align broker-directors with existing governance rules, as independent and sectoral directors are already subject to term limits.

Backing the proposal, a coalition of major business organizations, including the Management Association of the Philippines, Financial Executives Institute of the Philippines, Institute of Corporate Directors, Capital Markets Development Foundation, and the Investment House Association of the Philippines, described the move as a necessary safeguard for market integrity.

The groups warned that without periodic leadership renewal, there is a risk of undue influence and regulatory capture within institutions that are tasked with overseeing market participants.

“Because exchanges regulate market participants, their governance structures directly affect fairness and credibility,” the groups said.

They also emphasized that securities exchanges are not ordinary corporations and must meet higher standards of accountability as self-regulatory organizations.

The coalition rejected claims that term limits could undermine shareholder rights, saying such measures instead strengthen accountability by ensuring regular leadership turnover.

“Term limits do not diminish shareholder choice — they activate it,” the groups said.

The SEC proposal comes as the Philippines seeks to improve its standing among regional capital markets, with stakeholders pointing to governance reforms as critical to attracting long-term institutional investments.

FMAP and the business groups urged the commission to proceed with the measure, saying stronger oversight at the exchange level would help reinforce trust and stability in the country’s financial system.