The Securities and Exchange Commission (SEC) is finalizing the rules governing the disqualification of directors, trustees, and officers of corporations to ensure good corporate governance.

A person shall be disqualified if found administratively liable for any offense involving fraudulent acts, or found liable by a foreign court or equivalent regulatory authority for acts, violations, or misconduct.

The same provision empowers the SEC, as well as the Philippine Competition Commission, to impose other qualifications or disqualifications in its promotion of good corporate governance or as a sanction in its administrative proceedings.

Under the proposed rules, directors, trustees or officers shall be disqualified if, within their tenure, they were convicted by final judgment of an offense punishable by imprisonment for a period exceeding six years, or for violating the Securities Regulation Code.

An independent administrative action for the removal of a director, trustee, and/or officer of a corporation may be commenced upon the motu proprio issuance of a formal charge by the SEC operating department that has jurisdiction over the subject matter, or upon filing of a verified complaint with the operating department.

The formal charge shall specify the grounds for removal of the company official, provide a statement of material or relevant facts, and direct the respondent to file a verified answer within 15 days from receipt.

The SEC will then conduct an initial examination of the allegations in the complaint, after which the director of the concerned operating department may dismiss it outright should it be not compliant with the requirements, or if the Commission or the operating department has no jurisdiction over the subject matter.

In addition to the removal of the director, trustee, and/or officer, the SEC may also issue a permanent cease and desist order, and/or impose a fine from P10,000 to P400,000 for each violation of the Commission’s orders, or any relevant laws and regulations.

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SEC issues guidelines on the disqualification of directors, officers, trustees
Source: Filipino Daily Inquirer