The Philippine Stock Exchange (PSE) is looking to attract companies listed in foreign exchanges through a planned issuance of global Philippine depository receipts (GPDR).
This after the Securities and Exchange Commission (SEC) flagged the activity of overseas brokers that attract investors to foreign-exchange listed stocks through their platforms, notably stockbroker eToro.
In the draft rules it released for comment last week, the PSE said GPDRs will allow local investors to enjoy the economic benefit of investing in overseas-listed stocks without possessing voting rights.
“The listing and trading of GPDRs are intended to provide local investors investment opportunities outside the Philippine market and allow them to build a globally diversified portfolio through GPDRs. Investors can buy and sell GPDRs quoted in Philippine pesos through any PSE Trading Participant during trading hours of the Exchange,” the PSE said.
Under the draft rules, a GPDR shall be freely tradable in the PSE on a sponsored or unsponsored basis.
For sponsored GPDRs, a foreign company which issued securities in an overseas exchange has to enter into an agreement with a Philippine-based GPDR issuer, which are normally banks, stockbrokers and investment houses, to sell GPDRs representing such securities in the PSE.
“…Unsponsored GPDRs are issued by a Philippine-based GPDR issuer which acts as an intermediary but does not have a formal agreement with the underlying company in the overseas market,” the PSE said.
“Each GPDR, whether sponsored or unsponsored, represents a security listed on an overseas exchange and deposited with a custodian appointed by the GPDR Issuer in the relevant home market. The underlying securities are registered in the name of the custodian and held on behalf of the GPDR issuer who, in turn, holds the beneficial interest in the underlying securities,” the PSE added.
In March, the SEC flagged the activities of brokerage firm eToro that attract local investors to invest in overseas-listed securities.
The SEC in a notice said eToro – which is regulated in the United Kingdom, Europe, Australia, Gibraltar and the United States and has 10 offices worldwide including centers in the US, UK, Israel, Cyprus and Australia – is not authorized to sell or offer securities to the public in the Philippines.
SEC particularly raised concern over eToro’s business of offering a crypto exchange, an exchange for trading commodities, currencies, indices as well as an online brokerage platform with a limited selection of stocks and exchange-traded funds.
eToro also offers fractional investing in which an individual can buy a fraction of a single share of a company, a practice allowed in the US, for small investors.
The SEC said while eToro is a registered broker/dealer in different jurisdictions, the Philippines requires an issuing entity to register first and secure a license from the SEC before it could offer securities and investment products to the public.
This is to satisfy the procedure for an issuing entity to file information statements including the issuance price, the use of the proceeds and the nature of the securities.
It also stressed that an issuing entity must possess a secondary license to sell or offer securities to the public.
The SEC said the public should “exercise caution before investing in these kinds of unregistered online investment platforms and their representatives.”
Individuals or parties that act as salesmen, brokers, dealers or agents, representatives, promoters, recruiters, influencers, endorsers and enablers of the eToro platform face possible jail time of 21 years or a fine of P5 million, the SEC warned.
