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When Gen. Ricardo Carnicero, then military commander of Dapitan, asked the political detainee Jose Rizal what reforms should be done in Las Islas Pilipinas as at August of 1892, Rizal pointed out two clear actions: reform all branches of the (Spanish) administration and improve the morality of the governance. Such recommendations were brought up to then Governor-General Eulogio Despujol at the central government in Manila. 

At the Integrity Forum II held on March 4, 2013 at the Hotel Intercontinental Manila, the guest speaker was Securities and Exchange Commissioner (SEC) Teresita J. Herbosa, who directly answered the issue asked of her by a representative business community, audience at the co-hosted event of the Makati Business Club (MBC) and the European Chamber of Commerce of the Philippines (ECCP): "The SEC reforms to strengthen an ethical and competitive business environment." Atty. Herbosa quoted Rizal’s above advice to Gen. Carnicero, made a century and 20 years ago, as valid and applicable today as they were then -- we need cooperative reforms and strengthened morality in government and in our people. Rizal said so.

Teresita Herbosa is the great-granddaughter of Lucia Rizal, the fifth child of Francisco Mercado and Teodora Alonzo, and the older sister of Philippine national hero, Dr. Jose Rizal. The great-grandniece of Rizal believes that "the changes that Rizal had wanted to be implemented are a good premise for any particular reform that may be adopted in support of good governance." With regard to her own efforts towards reforms at the SEC, she stressed that these must be consistent and aligned with the changes being made at the national level.

The SEC, which is under the Executive branch of government (under the Department of Finance) is guided by the Aquino administration’s agenda, which focuses on anti-corruption, transparent, accountable and participatory governance to spur rapid and sustained economic growth that would uplift and empower the poor and vulnerable in society, according to the SEC head. She pointed out that Rizal’s prescription for a healthy and happy government for the people and by the people is through the cooperation and coordination of the three branches of government: the Executive, Legislative and Judicial branches.

"To date, there has been no court conviction for securities law violations such as price manipulation and insider trading," Atty. Herbosa regrets. She described the incongruence of a situation where the SEC has issued a cease and desist order (CDO), which is challenged in the regular courts which could hold implementation of the CDO. Thus the entity subject of the CDO may continue doing what the SEC had restrained it to do. Atty. Herbosa also disclosed that while there is a provision in the Securities Regulation Code that allows the SEC to fine three times the illegal profits of those who engage in insider trading, there is a critical typographical error in the cross-reference to the provision which prevents SEC from imposing that fine. An amendment, or an entirely new law will have to be filed in the Legislature. But "a legislative agenda that deviates from that of the Executive [branch] makes difficult the passage of laws meant to sanction business related activities such as securities laws violations," Atty. Herbosa said.

The SEC, as an organization, has had an ethical reputation probably better than the other prominent offices under the Department of Finance. Even regulatory capture (control of regulator by regulated industries) has not been accused of the SEC. The reason for this is that the opportunity for corruption could come more to those regulated than the regulators, because the primary bases of the regulator-regulated interaction are the self-disclosures of those regulated. Due diligence by the SEC on the General Information Sheet (GIS) and AFS (Audited Financial Statements) filed yearly and on major changes by companies is only on random basis for a sample 100 companies for the preceding year. SEC departments nevertheless monitor industry groups, and close study of particular companies is done when these are under special watch from internal SEC intelligence or from outside informants. Atty. Herbosa challenged companies and other organizations overseen by the SEC (associations, foundations, nongovernmental organizations or NGOs) to abide by a strict code of honor in submitting true and honest GIS and AFS, and to voluntarily offer themselves for closer SEC guidance when needed.

The SEC filings "make up the largest corporate database in the country which the SEC guards with its life," Atty. Herbosa said. Coordinated and shared data bases among the government offices has made monitoring and effective collections, as well as regulatory administration and operations easier and effective, in this day of fast and sophisticated technology. Among other government offices who would be able to cross-reference disclosures made at the SEC is the Bureau of Internal Revenue (BIR) who has relentlessly been tracking unpaid and due taxes. File honest reports, the SEC enjoins. Wrongdoing will eventually catch up with the wrongdoer and pull him/her down, the SEC head warns.

The SEC has issued the following and has acted on these in the exercise of its regulatory oversight: proposed rules on foreign ownership of companies, balancing constitutional constraints and the development of capital markets; treatment of retirement benefits and retained earnings with special consideration of minority stockholders; monitoring of related party transactions through conglomerate mappings to protect investor risks; creation of the Investor Protection and Surveillance Department and acquisition of surveillance system to monitor stock trading activity and participants; and the conduct of actual on site audits of regulated, licensed and accredited persons and entities.

On the corporate governance aspect, the SEC has adopted the Annual Corporate Governance Report, and is now accrediting training providers for corporate governance (partnering with ICD -- Institute of Corporate Directors -- on the ASEAN Scorecard). The SEC has made the provision mandatory in the Revised Code of Corporate Governance to limit the terms of independent directors.

On the administrative and operational sides, the SEC now requires SEC accountants to undergo financial specialist certification (with the help of the Philippine Institute of Certified Public Accountants or PICPA) to strengthen and elevate the capability of the SEC to understand, follow and control the activities of financial institutions involved in esoteric financial products and creative accounting treatments. The business registration process has been streamlined to rule out "red tape" delays and unnecessary complications. For a normal start-up business application, the SEC promises a within-the-day approval.

Atty. Herbosa expressed deep concern about the deteriorating standards of ethics, specially in the younger generations who have been too exposed to the selfishness and greed of too many bad examples in government and in private practice. The foundation for any and all changes must be the high moral ground of honesty and integrity, as is the raison d’etre for the Integrity Forum, and similar efforts to improve not only the perceived reputation, but also the collective soul of the country.

Rizal might have chastised whoever it was who blurted out that he preferred a government "run like hell by Filipinos," seeing how much still has to be done about corruption in government today. Rizal, the ultimate reformist for his beloved country, cried out, "Why independence, if the slaves of today will be the tyrants of tomorrow?" Could Rizal have taken it that the Filipinos would relive the corruption of the Spanish rulers in his time? Corruption and lack of integrity in governance is the worst tyranny in a country. Rizal said so.

Source: Business World; Opinion; 11 March 2013