The Securities and Exchange Commission (SEC) is considering stricter disclosure requirements for companies involved in government projects, following appeals from fund managers seeking greater transparency in public spending.
In late March, eleven fixed-income investors submitted letters to the SEC and the national treasury, urging enhanced rules for use-of-proceeds disclosures and improved transparency in infrastructure expenditures. The investors called for coordinated regulatory action, including measures to strengthen institutional independence as part of anti-corruption initiatives and better standards for project selection and evaluation.
SEC Chair Francis Lim acknowledged that current regulations already align with global standards but emphasized the commission's openness to feedback.
"On the disclosures, our regulations adopted global standards. Nonetheless, we welcome feedback and remain committed to upholding market integrity and investor confidence," Lim stated.
Lim revealed that the SEC is exploring proposals to classify companies with substantial government contracts as "corporations vested with public interest," which would subject them to additional corporate governance requirements. These could include mandatory governance and audit committees, along with periodic reporting on how government funds are utilized—similar to disclosures required for initial public offerings.
SEC Commissioner Rogelio Quevedo noted that regulatory reviews were already underway before the investors' appeal. The commission is developing a broader definition of "corporations vested with public interest" to extend oversight beyond publicly listed firms.
Quevedo highlighted specific concerns regarding companies with large government contracts but minimal capitalization, particularly in flood control projects.
"We have noted that flood control companies have billions of contracts. But the capitalization is only P1 million," he pointed out.
He also mentioned that sustainability-linked financing is increasingly being used in such projects, underscoring the need for more rigorous oversight. The proposed reforms aim to close regulatory gaps and ensure that firms handling significant public funds operate with heightened accountability and transparency.