PSE Veterans Challenge SEC’s 10-Year Term Limit Rule at Court of Appeals

Two of the longest-serving broker-directors of the Philippine Stock Exchange (PSE), Ma. Vivian Yuchengco and Eddie T. Gobing, have escalated their opposition to the Securities and Exchange Commission’s (SEC) new term-limit regulation by filing a petition before the Court of Appeals. The petition, submitted on August 5, 2026, seeks to nullify SEC Memorandum Circular No. 17, Series of 2026, which caps the cumulative tenure of broker-directors on the PSE board at 10 years.

Yuchengco and Gobing argue that the SEC exceeded its regulatory authority under the Securities Regulation Code and the Revised Corporation Code by imposing term limits not explicitly authorized by law. They contend that the circular infringes on constitutional protections of due process and equal protection by singling out broker representatives for these restrictions. Additionally, they assert that limiting the eligibility of long-serving directors interferes with shareholders’ rights to elect their preferred representatives.

This legal challenge raises a fundamental question for the appellate court: whether board membership on the country’s sole securities exchange is primarily a matter of private shareholder choice or a regulated privilege subject to governance standards imposed in the public interest. This distinction is critical because the PSE functions not only as a listed corporation but also as a self-regulatory organization with responsibilities affecting brokers, listed companies, and investors.

The SEC has defended its authority and responsibility to set governance standards for the PSE, emphasizing the need to prevent board entrenchment and promote broader representation. The 10-year term limit was part of a compromise that included a two-year transition period allowing incumbent broker-directors to complete their current terms and remain eligible for election in the next two annual board races.

In an exclusive statement, SEC Chair Francis Lim expressed disappointment that the commission must defend the rule in court despite extensive consultations and the transition period. Lim rejected claims that the regulation deprives shareholders of voting rights, clarifying that shareholders remain free to elect directors who meet qualifications established by law and SEC regulations. He emphasized that the law does not guarantee an unfettered right to elect any individual regardless of regulatory qualifications and that the SEC has a duty to uphold market integrity and investor confidence.

The petitioners maintain that while the SEC has authority to regulate director qualifications and tenure in specific contexts, it lacks blanket power to impose mandatory term limits on ordinary broker-directors. They also dispute the SEC’s reliance on international governance principles, noting that reports from the International Organization of Securities Commissions do not mandate tenure limits for regular directors.

Beyond the legal arguments, the governance implications are significant. Yuchengco has served on the PSE board for approximately 28 years, and Gobing for about 25 years, highlighting concerns about board entrenchment and the need for fresh perspectives. Historically, Yuchengco and the Philippine Association of Securities Brokers and Dealers have previously contested SEC restrictions on broker voting rights, indicating a longstanding tension between broker shareholder rights and SEC oversight.

The current dispute emerges amid efforts to deepen the Philippine capital market, which continues to lag behind regional peers in liquidity, listings, and investor participation. SEC Chair Lim frames the controversy as part of a broader push to reform market governance and strengthen the capital market’s competitiveness.

Lim stated that meaningful reforms are necessary to transform the Philippine capital markets and cannot be set aside simply because they face resistance or are difficult to implement. While the courts will ultimately decide whether the SEC acted within its authority, the debate also invites investors to consider whether expertise in managing the country’s only securities exchange should be concentrated among a few individuals serving broker seats for decades.