Local Small Investors (LSI) Program in the PSE

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“Pang-mayaman lang ang stocks.”

This used to be the prevailing mindset of Filipinos as regards investing in the stock market. Pang-mayaman — or “only for the rich” — because a huge amount of money is supposedly needed to participate in stock trading. Not anymore.

Local Small Investors (LSI) Program

Thanks to the Philippine Stock Exchange (PSE)’s Local Small Investors (LSI) initiative, retail investors who do not have millions of pesos can now buy and sell stocks in the PSE.

Under the LSI program, a company conducting an Initial Public Offering (IPO) is required to allot a certain percentage of its IPO shares to be offered to “local small investors”.

A local small investor or LSI is a “share subscriber intending to subscribe to a minimum board lot or whose subscription does not exceed P100,000.”

Previously, local small investors were limited to investing a maximum of P25,000 only. Effective September 2018, the LSI limit has been increased to P100,000. Thus, anyone with P100,000 or less can invest in the PSE — disproving the notion that stock trading is “only for the rich”.

Aside from the increase in maximum subscription amount, included in the amended LSI rules beginning September 2018 are the following:

  1. removal of the ten percent (10%) discount for LSIs;
  2. requiring the issuer to provide an appropriate distribution mechanism to facilitate greater participation nationwide; and
  3. requiring the issuer to prioritize in the allocation LSIs with subscriptions lower than P100,000. 

In addition, the PSE will be implementing “clawback” and “clawforward” provisions in cases where there are oversubscription or undersubscription to the 10% LSI allotment.

A “clawback” mechanism allows the issuer to increase the shares allotted to retail stock investors in cases of IPO oversubscription, while a “clawforward” mechanism allots more shares to institutional investors, from the original allotment for retail investors, in cases of undersubscription or underwhelming demand.

The amended LSI rules took effect beginning September 12, 2018.

How to become a Local Small Investor (LSI)?

During IPOs, all issuers are required to automatically allot 10% of the issue size to LSIs. In cases of large IPOs, that is, exceeding P5 billion, the PSE may allow the company to increase the 10% allocation to local small investors.

Now, to take part in the LSI offer, make sure you already have an existing account with any of the licensed stockbrokers in the Philippines. Next, submit the following requirements to your broker:

  • completed LSI application form;
  • signature cards to be verified by the broker upon application;
  • photocopy of two (2) valid government-issued IDs, such as Passport, SSS, GSIS, Driver’s License, or PRC ID;
  • other documents or forms the broker might require.

Again, take note that you will only be given priority allocation as an LSI if you’re buying IPO stocks worth P100,000 or less. If you will invest more than P100,000, you will have to go through the regular IPO investment process.

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About the Author

James Ryan Jonas teaches business strategy, investments, and entrepreneurship at the University of the Philippines (UP). He is also the Executive Director of UP Provident Fund Inc., managing and investing P3.1 Billion ($56 Million) worth of retirement funds on behalf of thousands of UP employees.

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