SEC Partners with OECD to Boost PH Capital Market; Launches Comprehensive Capital Market Review

​The Organisation for Economic Co-operation and Development (OECD) has released an in-depth assessment of the Philippine capital market, and outlined recommendations to strengthen the country’s market framework for a more sustainable economic growth.

The global policy forum unveiled the OECD Capital Market Review of the Philippines, in an event hosted by the Securities and Exchange Commission (SEC) on December 11 at The SEC Headquarters in Makati City.

Carmine Di Noia, OECD Director for Financial and Enterprise Affairs, noted in his presentation of the report, “I am optimistic that there is a clear momentum in the Philippine economy, that many important reforms already in the works will also support capital markets and that there is a genuine will to address perceived areas for improvement.”

Conducted at the request of the SEC in late 2023 to provide an objective, third[1]party, and globally-informed perspective of the Philippine capital market, the OECD developed the report through discussions with market stakeholders, including government authorities, industry organizations, market infrastructure providers, investors, legal and financial advisors, and securities exchanges.

“The SEC welcomes the assessment by the OECD of the market conditions and issues that have shaped our financial system over the years,” SEC Chairperson Emilio B. Aquino said.

“The report serves as a helpful guide for the SEC and affirms some of the priority areas that we have identified in order to bring us at par with our Asian peers. We remain committed to fostering a robust and dynamic capital market, consistent with our goal of becoming one of the best in Southeast Asia,” he added.

Policy Recommendations

Among the chief recommendations of the OECD was to strengthen enforcement of existing corporate governance policies to build investor confidence in the Philippine capital market. It noted that the publication of corporate governance reports is a key aspect of maintaining standards of transparency and accountability within companies.

For the development of the stock exchange, the OECD stressed the potential of around 400 private enterprises to go public, encouraging both the SEC and the Philippine Stock Exchange to strengthen measures that would make listing more attractive to such companies.

One of the barriers noted by the OECD is the perception that public equity offerings involve a lengthy process, requiring the approval of both the SEC and PSE.

Accordingly, the OECD recommends how the SEC and PSE can pursue a joint initiative to shorten the process. Regulators may also commit to a shorter approval period for initial public offerings (IPOs), providing companies with greater certainty and predictability and encouraging more to go public.

Meanwhile, the OECD noted that the bond market could serve as another vital source of financing for corporations through streamlined registration processes and improved transparency by local credit ratings agencies.

It also highlighted the need to deepen the investor base by relaxing certain measures for institutional investors in order to increase their participation in the market.

“To deliver on the 6.5-8% GDP growth targets for 2024-28 of the Philippine Development Plan (PDP), the country needs to close the large infrastructure investment gap and raise the capital per worker to the level of peer countries,” the OECD report noted.

“To achieve this, the Philippines requires a well-functioning capital market to mobilise and allocate resources efficiently in the economy. Moreover, reforms to boost pensions and savings can also work as a conduit for more inclusive growth as set out in the PDP.”

Efforts to Boost the Capital Market

The SEC has been actively implementing reforms aimed at boosting the capital market, in line with the OECD’s recommendations, since the report was initiated in 2023.

Last year, the SEC streamlined the requirements and process for public offerings by clarifying the number of years of financial information that must be submitted, and by strictly implementing a 45-day processing period.

The SEC also approved the shortened settlement cycle for equity trades to two days from three days. This allowed investors to receive proceeds from securities trades within two days, while reducing risk exposure for trading participants by one day.

This year, the SEC ordered the removal of the minimum commission charged by stock brokers to enhance market flexibility and competitiveness, and issued guidelines for IPO cornerstone investors to stimulate demand.

To support the expansion of several industries, the SEC simplified the registration of securities for power generation companies, and wholesale and retail electricity distributors; and real estate companies issuing investment contracts and profit-sharing deals through rental pool agreements.

In parallel, the SEC intensified its efforts to urge small and medium-sized businesses to leverage crowdfunding as a market-based funding alternative through roadshows spearheaded by its Office for the Advancement of Strategic Investments in SMEs (OASIS).

“The results of the OECD assessment is a testament that we are moving in the right direction,” Mr. Aquino said. “The SEC is doing everything in its power to continue these reforms and follow through with our vision of a more robust and dynamic financial sector.”