SEC eyes P120M minimum paid-up capital for broker-dealers

The Securities and Exchange Commission (SEC) on Friday said it is proposing to raise the minimum capital floor for broker-dealers to update its capitalization rules, making it in line with international market standards.

In a statement, the SEC said it issued on September 30 the proposed amendments to certain provisions of Rules 28.1 and 33.1 of the 2015 Implementing Rules and Regulations of Republic Act No. 8799, or the Securities Regulation Code (SRC), for public comment.

The proposed amendments are for the unimpaired paid-up capital (UPC) and surety bond requirements of broker-dealers.

In particular, the proposal seeks to impose a uniform minimum UPC of P120 million for all broker-dealers —whether exchange trading participants or non-exchange broker-dealers— including first-time registrants and those acquiring the business of existing broker-dealer companies.

The proposal effectively increases the current UPC requirement of P100 million, and discontinues the alternative P30 million UPC requirement for certain existing broker-dealers not seeking authorization to engage in market-making transactions.

“The proposal takes into account the decline in the real value of the existing capital requirement due to inflation, and considers the International Organization of Securities Commissions principle that capital requirements for market intermediaries should reflect the risks they undertake,” the SEC said.

Meanwhile, the SEC said broker-dealers dealing purely in proprietary shares and not holding securities for their clients are excluded from the proposed minimum UPC requirement.

The UPC of such entities will remain unchanged at P2.5 million, according to the corporate regulator.

“The proposed rules further remove the prescribed surety bond —amounting to at least P10 million for brokers and at least P2 million for dealers— under the P30 million alternative UPC requirement,” the SEC said.

“The exchange is instead given flexibility by setting its own rules, subject to the approval of the SEC,” it added.

To give broker-dealers time to comply with the proposed minimum UPC, the commission said it is planning to implement the proposed adjustment in phases.

The existing P100-million requirement for all participants will be in effect until December 31, 2029.

The adjusted P120-million UPC requirement will then take effect on December 31, 2030.

Moreover, the SEC said that beginning December 31, 2028, exchange trading participants will also be required to post a surety bond of at least P20 million until they fully attain the required UPC

“Failure to comply will subject the broker-dealer to applicable sanctions under the SRC and other SEC issuances,” it said.

The SEC said the public may comment on the draft rules to the Commission until October 14, 2026. —LDF, GMA News