The Securities and Exchange Commission (SEC) has officially implemented a term limit rule for broker directors serving on exchanges, a move aimed at enhancing corporate governance and ensuring broader board representation in the capital markets.
According to SEC Memorandum Circular No. 17, Series of 2026, broker directors can now serve a maximum cumulative term of 10 years on the same exchange, whether those years are consecutive or intermittent. Additionally, after serving a cumulative five-year term, a broker director must observe a one-year cooling-off period before becoming eligible for reelection.
"This measure promotes fair and effective representation in exchanges while providing qualified brokers with opportunities to serve and bring fresh perspectives to boards," the SEC said.
The regulator noted that the circular aligns with international governance standards from the International Organization of Securities Commissions, which emphasize investor protection and fair representation in self-regulatory organizations like exchanges.
A broker director is defined as a board member representing brokerage firms or trading participants authorized to operate as brokers, broker-dealers, or trading participants of an exchange. Service exceeding six months in a single year counts as a full year for computing the five-year and 10-year limits.
The SEC also set penalties for exchanges that violate the rules: a basic fine of P1 million per broker director seat, plus an additional P30,000 daily penalty for each month the director remains in office beyond the allowed term. Third or subsequent violations could lead to the suspension or revocation of an exchange's secondary or primary license.
Transitional provisions allow incumbent broker directors who have already exceeded the cumulative term limit to complete their current terms and remain eligible for election during the next two annual elections. The circular takes effect 15 days after publication in the Official Gazette or in at least two newspapers of national circulation.
The term limit rule has previously drawn opposition from some business groups and individuals, including GMA Network Inc. and Ma. Vivian Yuchengco, who served as a Philippine Stock Exchange director for about 28 years.