CA denies Rappler appeal in SEC case

MANILA, Philippines -The Court of Appeals (CA) upheld its 2018 decision declaring that online news outfit Rappler is not 100 percent owned by Filipinos.

In a 25-page resolution promulgated Feb. 21, the CA denied the motion for reconsideration filed by Rappler and the holding company, Rappler Holdings Corporation (RHC), to reverse the ruling by the Securities and Exchange Commission (SEC).

The Appeals Court said the motion for reconsideration filed by Rapper lacked merit.

“After careful scrutiny of the instant motion, this Court finds that it presents no compelling reason to justify the reconsideration of this Court’s decision dated 26 July 2018. The arguments raised by petitioners are essentially the same as those that have already been discussed and were exhaustively passed upon in this Court’s decision,” read the appeals court ruling written by Associate Justice Rafael Antonio Santos.

 “In summary, a motion for reconsideration grounded on arguments already submitted to the court and found to be without merit may be denied summarily, as it would be a useless ritual for this Court to reiterate itself. Here, petitioners did not raise any new matter of issue in its motion. Accordingly, this Court finds no cogent justification to reconsider its decision dated 26 July 2018,” the Court said.

The Court reiterated that there was no violation on the part of SEC when it evaluated and revoked Rappler’s articles of incorporation for violating the ownership restrictions.

The Court said that while there was no full compliance with the procedure under the 2016 SEC Rules, there was, however substantial compliance with the requirements of procedural due process.

The appeals court also reiterated that Rappler is a mass media entity despite its argument that its online nature was not among the “mass media” acknowledged under the law because its actions, as well as its articles of incorporations and by-laws, stated that it is in the business of operating news, information and social network services.

The Court added that an online article published by Rappler itself stated that it is an “‘all-digital news organization’ and ‘online news site’ that merges traditional television broadcasting with the internet and combines the discipline and credibility of traditional print and TV journalists’ so that it can ‘join broadcasting network giants.'”

“Therefore, applying the Full Beneficial Ownership Test, RHC cannot claim that it fully owns the Rappler shares since it does not exclusively exercise the right to vote on the Rappler shares. By virtue of clause 12.2.2, Omidyar Network is granted the power to direct the voting on the Rappler shared,” it explained.

With regards to Omidyar Network’s action of donating all its Philippine Depositary Receipts to Rappler’s staff, which Rappler claims to have already cured what was previously found objectionable by the SEC, the Court said further study was needed.

“It is incumbent upon the SEC to evaluate the terms and conditions of said alleged supervening donation and its legal effect, particularly, whether the same has the effect of mitigating, if not curing the violation it found petitioners to have committed.”

“If so, this may warrant a re-examination of the sanction of revocation of petitioners’ Certificates of Incorporation imposed by the SEC en banc in the assailed decision,” it added.

“In view of the said directive, this Court will refrain from discussing the donation so as not to preempt the evaluation, and the subsequent finding and conclusion to be reached by the SEC. Besides, this Court notes that petitioners are merely seeking partial reconsideration of this Court’s decision, which means that its ruling remanding the case and directing the SEC to conduct an evaluation of the legal effect of the alleged donation stands and binds petitioners,” the Court further stated.

The case stemmed when SEC canceled the articles of incorporation of Rappler and RHC for “existing for no other purpose than to effect a deceptive scheme to circumvent the Constitution.”

It cited foreign equity restriction in the Constitution, Presidential Decree and the Securities Regulation Code that provide that “the ownership and management of mass media shall be limited to citizens of the Philippines, or to corporations or associations wholly owned and managed by such citizens.”

The SEC also declared Omidyar Philippine Depository Receipts (PDR) void for “being a fraudulent transaction within the ambit of Section 26.1 of the Securities Regulation Code.”

The agency conducted its investigation upon the request of the Office of the Solicitor General.

In October 2015, RHC issued 7,217,257 PDRs covering shares of Rappler Inc. designated as ON PDRs because they were sold to Omidyar Network Fund LLC, a foreign juridical entity.

RHC publicly reported that it received an investment from Omidyar Network LLC.

It also issued PDRs covering shares of Rappler Inc. to NBM Rappler L.P., a foreign juridical entity. NBM Rappler L.P. was founded and co-owned by North Base Media Ltd., a foreign juridical entity. 

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