How Does the Philippine Stock Exchange Protect Your Rights as an Investor?

Many people shy away from investing their investable funds in the stock mark. They’re afraid of losing their hard-earned money in this high-risk investment instruments.

Jay G. Peñaflor, our speaker in the BusinessCoach’s How to Invest in the Stock Market seminar on April 16, 2011, attested that you can lose money in the stock market if you’re not vigilant enough. But if you can gather all available information about your investments, gain sound knowledge on the stock market trends and not greedy, you can attend success in your stock market investing.

The Philippine Stock Exchange (PSE) Sr. Market Education Specialist said that Filipinos should not afraid to invest in the stock market, for stock market investors’ money are well protected. And as long as it is diversified and not placed in one basket, the risk of losing money is minimal.

In the Building Wealth with Stocks, A Basic Guide to Investing in the Philippine Stock Market, I learned that PSE and Securities and Exchange Commission (SEC) have put in place several safeguards that promote transparent, fair, and organized buying and selling of stocks where every investor, big or small alike, are protected from fraud, manipulative trading practices and erring stockbrokers.

Here are several safeguards that promote transparent, fair, and organized buying and selling of stocks.

Self Regulatory Organization Status
The PSE is a Self Regulatory Organization (SRO) as granted by the SEC. As such the PSE acts as the “police” of the stock market and it is the SRO status that empowers it to formulate marketplace rules, and impose penalties or sanctions to market participants who will not comply with these rules.

Customer First Policy
Further, PSE regularly monitors and audits the operations of stock broker. It ensures that business and trading practices of stockbrokers conform with the laws stipulated in the Securities Regulation Code of the Philippines including the Customer First Policy, whereby stockbrokers’ orders must always surrender priority to their client.

Risk Based Capital Adequacy
The Risk Based Capital Adequacy is a PSE regulation that ensures that stockbrokers have enought capital to cover its exposure to risks. It also ensures that stockbrokers are financially sound or liquid enough to promptly settle claims and other obligations to client.

Disclosure Rule (10-minute Rule, Online Disclosure System, and Selective Disclosure Rule)
Since timely and reliable company disclosures are essential components of a fair and efficient market, the PSE also sees to it that listed companies promptly disclose only factual and truthful information.
In fact, the PSE requires that material information that may affect a listed company’s share price positively or negatively, are disclosed within 10 minutes after its occurence. This rule embodied in the 10-minute Rule.

Disclosures must also be done first to the PSE so that it will cascade information to every investor and general public through its communication channels and not to a selected group of individuals only. This is also known as the Selective Disclosure Rule.

Also disclosures are transmitted through a sophisticated computer system known as the PSE Online Disclosure System or OdiSy. Non-compliance or violations of listed companies to PSE Disclosure Rules are heavily penalized with fines, suspension, or even delisting from the PSE.

Advanced Warning and Control System
The PSE regulates the stock market through its Market Regulatory Division (MRD). It monitors the market through a word-class and sophisticated surveillance system called Advance Warning and Control System or AWACS.

AWACS is equipped with the critical elements of the surveillance process and provides a robust monitoring and warning mechanism. It is designed to protect the integrity of the equities market from fraud, manipulation, and breaches of marketplace rules, It monitors and detects unusual stock price or volume movement possibly brought about by insider trading and other manipulative trading practices. From the information provided by AWACS, MRD conducts investigation or unusual price and volume movements to identify and prosecute stockbrokers or investors who might have committed price manipulation practices.

Market Integrity Board
The Market Integrity Board is independent body created by the PSE to oversee stockbrokers’ compliance with the rules governing market transactions.

Securities Investors Protection Fund
Another tool created for the protection of investors is the Securities Investors Protection Fund, Inc. or SIPF. The SIRF, which is comparable to the Philippine Deposit Insurance Corporations providing insurance for bank deposits, seeks to build and enhance investor’s confidence in the market and is envisioned to protect the investing public from extraordinary losses, other than the ordinary market fluctuation, arising as a result of fraud, failure of business, or judicial insolvency of PSE-accredited stockbrokers. Protection to investors is automatic upon the opining of an account with a PSE-accredited stockbroker and given by way of compensation for trade-related obligations of stockbrokers to its customers.

These safeguards, along with other investor protection initiatives of the Philippine Stock Exchange, serve to protect the health of the equities market and the integrity of capital formation process, making investing in the Philippine stock market secure.

 

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Stock Market Trading Participants

Prof. Jay G. Peñaflor, our speaker in the BusinessCoach’s How to Invest in the Stock Market seminar, lectured us who are the participants in the stock market trading. In the Philippine Stock Market settings, they are Philippine Stock Exchange (PSE), Publicly Listed Companies, Trading Participants or Stockbrokers, and Stockholders or Investors.

1. Philippine Stock Exchange (PSE)
The role of the PSE goes beyond bringing buyers and sellers together and facilitating sales and purchase of stocks. It makes sure that these transactions are done in an efficient , orderly, fair, and transparent manner. It enforces rules and regulations that its members (publicly listed companies and trading participants) must strictly abide by. In this way, the PSE fulfills its function as the guardians of the stock market.

The PSE also plays a key role in bringing about economic development by providing a centralized environment where companies in need of capital have easier access to funds through stock investors. Companies can sell their shares through Initial Public Offering (IPO) to potential investors. Through this, they can expand their business to produce more goods and services as well as create more jobs. The investing public can own a part of the company with the assurance that their investment interests are safeguarded by the PSE.

2. Publicly Listed Companies
A company becomes publicly listed when its shares are traded in the Philippine Stock Exchange. To become publicly listed company, a company must meet the stringent listing and reportorial requirements of the PSE to safeguard the investor’s interests and ensure transparency.

3. Trading Participants or Stockbrokers
A Stockbroker or Trading Participant acts as an agent/broker between buyer and seller of stocks in the stock market. A Trading Participant is licensed by the SEC (Securities and Exchange Commission) and is a member of the PSE, authorized to execute orders for purchases or sales of stocks.

4. Stockholders or Investors
Investors in stocks or stockholders are those who own shares of stocks of a publicly listed company, at least until the time that they decide to sell them. Stockholders are accorded certain rights set by the PSE. These rights are accorded to them by the company they have now become part owners of.

Learn How Publicly Traded Companies Stocks Traded >>>

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How Do I Start Investing in the Philippine Stock Market

In the BusinessCoach’s How to Invest in the Stock Market seminar I attended last April 16, 2011, Jay G. Peñaflor, a Philippine Stock Exchange Sr. Market Education Specialist, told us participants that getting started in the stock market is a simple process. He revealed to us the four-step process and i.e:

1. Choosing a stockbroker or trading participant.
2. Opening a stockbrokerage account.
3. Placing order to buy best stocks or sell stocks either online or by making a phone call to stock broker.
4. Monitoring and keeping tract of investments.

How do I Choose a Stockbroker?
Mr. Peñaflor told us that there are over 100 licensed stockbrokers accredited by the PSE. Our choice of stockbroker should depend on the type of service we will require and who will best suit our needs. The types of stockbrokers can be classified into Traditional and Online (via Internet).

Traditional brokers are those who assign a licensed salesman to handle our account and take our orders via a written or through phone call.

While Online brokers are those whose main interface with their customer is through the internet. Clients execute their orders and access market information directly online.

Stockbrokers vary in the range of services they offer and the types of customers they serve such as:
*Handling institutional or corporate accounts versus individual retail customers
*Providing advisory services
*Providing research and analysis
*Providing investor education seminars and market briefings

Mr. Peñaflor said that we can get a complete list of accredited stockbrokers of the Philippine Stock Exchange either by visiting www.pse.com.ph or contacting the PSE at (632) 688-7600.

Learn Who are the Stock Market Participants >>>

 

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Investing in the Stock Market: When Should We Start Investing Money

Investing in the Stock Market — Jay G. Peñaflor, a Philippine Stock Exchange Sr. Market Education Specialist and who is also a Certified Securities Specialist (CSS), our speaker in the BusinessCoach’s How to Invest in the Stock Market seminar last April 16, 2011, told us that when it comes to investing in the stock market, time is our most precious asset. The longer our time horizon is, the more time we have to make our money grow.

Mr. Peñaflor revealed to us 10 participants that compounding is, in fact, the single most important reason for me to start investing right now in the stock market. It is the multiplier effect that occurs when earnings or dividends in my investments begin to generate their own earnings.

Every day we invested is a day that our money is working for us. Investing helps us ensure a financially secure and stable future.

Mr. Peñaflor says that those who start investing sooner rather than later have a tremendous advantage. If we keep our money in the good quality stocks over the long-term, and then reinvest the dividends earned as we receive them, our investment grows exponentiallly over time.

Additional post to read: How Much of Your Savings Should You Invest in the Stock Market? >>>

 

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