SEC proposes tiered public ownership rules for IPO listings

THE Securities and Exchange Commission (SEC) has released for public comment a draft memorandum circular proposing a tiered minimum public ownership framework for companies seeking to list shares on the stock exchange.

The draft circular, issued on Dec. 3, is open for comments until Dec. 23. It seeks to establish a tiered approach to public ownership requirements based on the size of the issuer, balancing factors such as market liquidity, investor protection, capital formation, and market competitiveness.

“A tiered minimum public ownership framework provides a proportionate and market-aligned approach that preserves the long-term benefits of adequate public float while addressing potential constraints in demand absorption for large issuances, thereby supporting capital formation and encouraging more companies to pursue listing in the Philippines,” the circular said.

In earlier statements, SEC Chairperson Francisco Ed. Lim said the plan to implement a tiered minimum public float requirement was prompted by the limitations of the current 20% rule, which he described as a “one-size-fits-all” approach that does not account for differences in company market capitalization.

Under the draft rules, companies planning to list on an exchange will be assigned to one of five tiers based on their expected market value at listing.

Tier I companies with a market value of up to P500 million must maintain a minimum initial public float of 33%. Tier II companies valued between P500 million and P1 billion must have at least 25% public float, but not less than P165 million in shares.

Tier III companies with a market value from P1 billion to P50 billion are required to maintain at least 20% public float worth a minimum of P250 million. Tier IV companies valued between P50 billion and P150 billion must have at least 15% public float, valued at no less than P10 billion, while Tier V companies with market value above P150 billion must maintain at least 12% public float worth at least P22.5 billion.

After listing, companies are required to maintain a fixed minimum level of public ownership corresponding to their initial public offering (IPO) tier.

Tiers I, II, and III must maintain at least 20% public ownership, Tier IV at least 15%, and Tier V at least 12%.

The commission said that if public ownership falls below the required level, the company must report the shortfall to the SEC by the next business day, submit a business plan within 10 days, and has up to 12 months to restore the minimum float.

The draft also requires companies to implement internal policies and procedures to monitor minimum public ownership and provide regular reports to the SEC.

Companies must submit a public ownership report and updates on progress within 15 days after each month-end until the public float meets the required minimum.

“Companies who made their IPOs before the effectivity of these rules shall be subject to the maintenance requirement of 20% provided under SEC Memorandum Circular No. 13, series of 2017,” the draft memorandum read.

Last month, Mr. Lim told reporters he hopes the draft will be approved in time for January next year.

“Maybe in Q1 or even earlier, but I probably won’t be able to accomplish everything this year. At least we can start fresh next year since everything is already in place, right?” he said. — Alexandria Grace C. Magno