Perfecto Yasay readily admits to having been offered bribes. "Oh yes, lots of times," says the chairman of the Philippines Securities & Exchange Commission (SEC). Some have even come from friends and family. "The secret is to make sure your price goes up to levels they cannot reach," he says with a smirk.
Yasay is the man seeking to reform what many consider unreformable - the Philippine Stock Exchange (PSE). In his personal crusade to clean up the exchange he is predicting at least one jail sentence for a broker before the year-end.
Yasay sits on the eighth floor of a building that until recently was condemned as structurally unsafe. Those who had written the building off were wrong and the exchange's brokers may feel this is an apt metaphor for the SEC itself. Long written off as toothless - in spite of its quasi-judicial powers - the regulator has been transformed by Yasay, who has sought to emulate his fiery counterparts in the US since he took over in 1995.
Yasay is the son of a missionary and his zeal for reform has if anything increased in recent months. Last month he announced that five brokers had been investigated for dishonest behaviour. Asked what they had done wrong, he said "a whole lot".
Serious violations
"Our findings have discovered at least 10 serious violations by brokers," he notes, "whether they are small, medium or large." Euromoney asks whether that means corruption runs right through the exchange he regulates. "I believe so," he replies. "You call it corruption, I call it violations of our rules. But you're right, it is an act of dishonesty."
His battle with the bourse led the former New York lawyer to the brink in April when he threatened to revoke its licence - an unprecedented move. He was concerned that the exchange was stalling on a reform that governed the way it investigated insider trading. After a two-week stand-off, the exchange agreed to his change - and kept its licence.
Why did the exchange put up such a fight, and why did Yasay feel the need to act so belligerently? "Because it strikes on the very fundamental objections of those brokers who do not want reforms," says the calm and placid Yasay. "They have been opposed to anyone opening their books routinely. It's as if - and I want to underscore 'as if' - they have something to hide. If they have nothing to hide, and they want a transparent securities market, they should allow all of this to happen."
Yasay wants to push through a whole raft of unpopular reforms by June 1. And as he diplomatically puts it: "I believe there are many out there who are in favour of the reforms and with their support we'll be able to weed out the undesirables in the market."
Yasay has political backing for what he is doing - at least for the moment. "I like what he is doing," current finance minister Salvador Enriquez told Euromoney. The new finance minister will be sworn in on June 30, and is expected to concur.
Reforms are welcome. The former exchange president, Vitaliano Nanagas, refers to the bourse as a "country club". The 184 brokers who own seats on the exchange have been so used to an easy life and even easier regulation that many have resisted the moves to introduce costly overheads such as compliance officers.
But little by little changes are being introduced, mainly at the instigation of Yasay. For example, a code of conduct and a code of ethics were finally published at the end of April after nearly six years of trading. There's a long way to go however.
The exchange is in many respects unique. How many stock exchanges begin their annual report with a quotation from Charles Dickens, or reside in two buildings, or eject a tenured president on his birthday, or have nearly as many seats as traded stocks?
The latter is partly a legacy of its birth. The PSE was created via a merger between the Chinese-dominated Manila Stock Exchange and the Spanish Filipino-dominated Makati Stock Exchange. The old exchanges hated each another.
That notwithstanding, reformers came round to the view that one exchange made more sense than two. Difficulties in merging them were only solved at the highest level. Reformers approached newly elected president of the Philippines, Fidel Ramos, at a cocktail party and told him their problem. He picked up a piece of paper and wrote a presidential decree ordering the merger.
Death threats
Neither of the former exchanges was very keen, however. On the day the exchanges were formally unified in 1993, inaugural president Eduardo De Los Angeles and 12 staff had to storm the Manila Exchange's trading floor and announce: "We are now taking over. This is now the Philippine Stock Exchange."
Two buildings were obtained at different ends of town - to house the Makati and Manila camps. These vied to use the name the Philippine Stock Exchange. Again Ramos intervened. He named the building in Makati the Philippine Stock Exchange Plaza and the other the Philippine Stock Exchange Centre. Ramos likes to refer to the merger as a "shotgun wedding" were he was the "officiating priest".
From such inauspicious beginnings the reformers who wanted to turn the stock exchange into a world class organization were always going to face an uphill struggle. The first head of surveillance, Maricel Pascual, proved too effective at uncovering dodgy dealings and received death threats. So many in fact that the government had to put her under 24-hour guard in a safe house. She left after two and a half years.
De Los Angeles was the first non-broker to be president of a stock exchange in the Philippines. He also received death threats, as did his successor, Nanagas. So too has Yasay. "It's part of the job," he says.
Managing the exchange was tough for the soft-spoken De Los Angeles. "I've been a corporate lawyer for 20 years and I'm used to sitting on company boards where the conversation is civilized. But at stock exchange board meetings, members would shout at one another, curse and not care if a person was a woman or not. If a governor didn't like the agenda he simply wouldn't turn up. There would be times when we couldn't even get a quorum."
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