While attributing the ongoing slump in the local stock market to the flood control corruption scandal, the heads of regulatory agencies should look first in their own backyard.
“I just hope they do a very good and credible investigation with really concrete positive results. That’s the only thing that could bring back confidence in the market,” Philippine Stock Exchange Inc. President and CEO Ramon Monzon was quoted in recent business news reports as saying.
When Securities and Exchange Commission chairman Francisco Ed. Lim apologized three weeks ago over the fictitious report of a P1.7-trillion stock market wipeout in August due to the flood control scandal, he said his “sole intent was to underscore the vital importance of integrity in our markets and the devastating impact corruption can have on investor confidence.”
While it is true that reports about widespread corruption in flood control projects adversely affect investor confidence in the local bourse, there are also anomalies in the stock market involving brokerage firms that affect investor behavior.
“The local stock market is not expected to recover from its ongoing slump unless positive results emerge from ongoing investigations into corruption in flood control projects,” Monzon said in an interview published on Oct. 2 in The Philippine Star, adding that the market is in “very bad” shape.
Addressing the 57th annual Financial Executives Institute of the Philippines conference last Oct. 7, Lim said, “Investors aren’t fleeing because of weak fundamentals; they’re fleeing because of weak integrity. It’s a stark reminder that corruption is a weapon of mass wealth destruction…. When trust breaks down, capital dries up, and everyone — government, business and the public — pays the price.”
But, as Bicol Saro Rep. Terry Ridon, chairman of the House infrastructure committee, pointed out, market data showed the decline in the Philippine Stock Exchange Index began months before the flood control controversy burst in July, with President Ferdinand Marcos Jr.’s “mahiya naman kayo” remarks in his state of the nation address.
Sonny Africa, executive director of think tank IBON Foundation, also argued during an interview on ANC three weeks ago that perception of corruption is not the sole reason for the market decline.
“All investment decisions have a lot of uncertainty in them… could diminish investor confidence with fears about corruption and leakages. But we also have to be clear: corruption in some ways can actually fuel growth to the extent that the government infrastructure drive for the past 3-4 years, especially, has bumped up because of a lot of corruption-ridden pork barrel projects. Actually, that has increased economic growth…. Investors will look for profit-seeking opportunities and, unfortunately, corruption does create profit-seeking opportunities, whether for the contractors or the small-scale infrastructure projects,” he pointed out.
Ridon’s statement that the ongoing corruption scandal “was a convenient but inaccurate explanation for the market’s weakness and for the broader slowdown in the economy” seems to have a basis. The weakening of the stock market, he asserted, is independent of the flood control corruption scandal. “It may have compounded it, but it certainly is not the sole reason for the weakening stock market.”
More than the flood control scandal, the SEC and PSE should be more concerned about individual investors who have been losing sleep for several months, worrying about their hard-earned money that was entrusted to brokerage firms that have gone astray.
Reports earlier this month said the Capital Markets Integrity Corp., the independent watchdog of the PSE, has penalized 40 stock brokerage houses for various violations committed between December 2024 and Oct. 1, 2025.
Among these brokerage firms is Equitiworld Securities Inc., which was placed under CMIC management in November 2024, five months after the SEC identified numerous violations by the firm through a special audit.
The CMIC special audit showed material discrepancies in the reported stock and cash positions of Equitiworld totaling 154.91 million shares worth P46.14 million. By the end of June 2024, a Risk-Based Capital Adequacy Ratio Report found the company had zero cash on hand, contrary to what appeared in the company’s system software that showed P23.6 million. Three months prior, the PSE imposed a short suspension due to repeated late cash payments.
In July 2024, Equitiworld, owned by former Makati Stock Exchange director Antonio A. Lopa, became the first stock brokerage to close since 2019, when R&L Investments Corp. collapsed after an employee misappropriated P700 million worth of client shares.
Almost a year later, the CMIC issued a memorandum dated June 11, saying it found some shares among Equitiworld’s assets were “intact,” meaning the shares are not subject to ongoing investigation related to alleged discrepancies in the broker’s books.
Five months after the SEC approved the release of verified, “intact” shares to Equitiworld’s clients and after payment of “trade fees” for the transfer of their intact shares, Equitiworld’s clients remain uncertain if they could still recover the full amount of their investments.
“What’s taking them so long? In the long run, those responsible may no longer be found. Then, how will they be held accountable? It is also questionable how that happened; there have been similar cases before,” said one investor who entrusted his lifetime savings to Equitiworld. He said it appeared that the brokerage firm had a good reputation, being owned by one of the country’s big business leaders.
To really bring back confidence in the market, the regulatory agencies should keep their house in order , put an end to irregularities that create anxiety among investors who end up bearing the brunt of the erring brokerage firms’ infractions.
The views in this column are those of the author and do not necessarily reflect the views of VERA Files.
This column also appeared in The Manila Times.
