SEC upholds shutdown order vs. Rappler

FILE: Rappler CEO Maria Ressa on December 29, 2016. KING RODRIGUEZ/ Presidential Photo

MANILA – The Securities and Exchange Commission (SEC) on Tuesday night affirmed the administrative penalties slapped against Rappler, Inc. and Rappler Holdings Corp. (RHC), as well as the revocation of their Certificates of Incorporation.

According to the latest SEC decision signed by SEC Chair Emilio B. Aquino and the four SEC commissioners, the commission upheld its Jan. 11, 2018 decision, declaring as void the Philippine Depository Receipts (PDRs) issued to American firm Omidyar Network (ON) by Rappler and RHC since this violated, among others, Section 71.2 of the Securities Regulation Code.

PDRs are an investment instrument that allows domestic and foreign investors to place funds in a local firm.

The SEC, in an earlier press release, said RHC sold 7,217,257 PDRs to Omidyar Network Fund LLC.

On Feb. 28, 2018, ON announced that it has donated its PDRs to 14 Rappler managers.

The latest SEC decision said “the Commission finds that the Donation did not cure the violation by Rappler, Inc. and Rappler Holdings Corporation of Article XVI Section 11(1) of the Constitution and PD (Presidential Decree) No. 1018, and hereby AFFIRMS the administrative penalties imposed in the Decision dated 11 January 2018 declaring VOID the ON PDRs pursuant to Section 71.2 of the Securities Regulation Code and REVOKING the Certificates of Incorporation of Petitioners Rappler, Inc. and Rappler Holdings Corporation.”

It noted that “the fact that the Waiver was issued only during the pendency of the proceedings with the Commission clearly showed that its execution was merely an afterthought, and made for no other purpose than to make it appear and convince the Commission (and the CA) that Omidyar will not exercise control over Rappler even if the same was granted in the ON PDRs.”

“This is supported by the fact that Omidyar specifically negotiated with Rappler and RHC to insert Paragraph 12.2.2 in the ON PDRs to ensure that its investments and interests therein are protected,” it said.

It noted that the Constitution requires 100 percent Filipino ownership of any mass media entity to, among others, protect the country’s best interests and prevent public opinion to be influenced by foreign investors.

It also said the revocation of Rappler and RHC’s Certificates of Incorporation will serve public interest, adding that the Constitution and the laws of the land must be followed and cannot be disregarded “to further business interests.”

“To rule otherwise would be to condone a blatant violation of the laws of the land, create a dangerous precedent, and worse, a ‘violate now, cure later’ culture where mass media entities who violate the nationality restriction provisions of the Constitution are effectively accorded a preferential treatment than those that have religiously complied with the same requirement,” the SEC said.

It added that “no amount of effort can salvage the legal existence of Rappler and RHC,” considering that their Certificates of Incorporation are based on contracts that are “void for being contrary to the Constitution and the laws.”

In an official statement issued Wednesday, Rappler said it has been notified by its lawyers of the SEC ruling.

“We are entitled to appeal this decision and will do so, especially since the proceedings were highly irregular,” it added.