Even before the Securities and Exchange Commission’s (SEC) order to revoke the registration of Rappler could take effect, Malacañang could decide to maintain or withdraw accreditation of the online news provider, the SEC chief said on Friday.
“That’s their own independent decision,” said SEC Chair Teresita Herbosa.
Speaking during the Pandesal Forum in Quezon City, Herbosa noted that Malacañang was not a party to the case brought against Rappler by the SEC, whose decision was not yet executory until the court’s final ruling.
“But in this case, they (Malacañang) have their own standards and their own basis for allowing access to Malacañang by journalists, reporters, and they felt that because of that (SEC) decision it was signal for them to consider the accreditation or recognition of some people regarding access,” Herbosa said.
She was asked what she thought of Malacañang using the SEC’s order revoking Rappler’s incorporation to justify its order to stop Rappler’s reporter, Pia Ranada, from covering this beat.
“We don’t mind people criticizing our decision. We don’t mind them saying it’s wrong and presenting their arguments. What we really hate is to inject something political into it,” she said, referring to criticisms that the SEC was contributing to attacks against press freedom.
She said she was unaware how Malacañang accredited reporters. “I would think they have the discretion to determine whether to allow access,” Herbosa said.
Claiming violation of the constitutional mandate for Filipino ownership and control of mass media, as well as other pertinent laws, the SEC issued an order in January revoking the certificate of incorporation of Rappler Inc. and its controlling stockholder, Rappler Holdings Corp. (RHC). The SEC also voided the Philippine depositary receipts (PDRs) issued by Rappler Holdings to Omidyar Network Fund LLC, a fund created by eBay founder Pierre Omidyar, saying this was a “fraudulent” transaction under the Securities Regulation Code.
Rappler has contested the SEC’s ruling before the Court of Appeals.
As a parallelism, Herbosa said the SEC was also responsible for accrediting auditing firms before they could serve as external auditors of publicly listed companies. If the external auditor had deficiencies in the financial statements, their accreditation could not be renewed, she said.
Herbosa said the SEC had looked at two other mass media companies which had issued PDRs.
“That’s what we used also as basis for comparison to find out if the provisions for PDRs were the same for all,” she said.
PDRs refer to derivative instruments that are based on the value of equities as underlying assets but don’t grant ownership to the holder. The two other media companies with PDRs referred to by Herbosa were ABS-CBN and GMA 7.
Unlike the PDRs issued by ABS-CBN and GMA 7, the Omidyar PDRs were voided by the SEC because they carried provisions for “negative control.”
The SEC stressed that the foreign equity restriction on mass media prohibited anything less than 100-percent control and it defined “control” as “embracing not only stock ownership, but also other schemes that grant influence over corporate policy, actions and structure—even sometimes.”
To protect its investment, the SEC noted that “Omidyar Network had RHC agree to secure approval for at least two-thirds of all the PDR holders before RHC takes any action that would prejudice the rights of Omidyar Network …”
This was thus interpreted as Omidyar Network specifically wanting to have some degree of control over Rappler’s corporate policy. As such, Rappler was accused of colluding to “grant control or to become a dummy, as long as Omidyar was not given equity per se.”
RHC itself has issued PDRs not just to Omidyar but to Washington DC-based NBM Rappler LP, a unit of North Base Media. However, it’s only those PDRs issued to Omidyar—in exchange for about a million dollars—that were voided by the SEC.