SEC: No review of ABS-CBN, GMA PDRs after Rappler

MANILA, Philippines – The Securities and Exchange Commission (SEC) said that it will not review listed ABS-CBN Corporation’s and GMA Network Incorporated’s securities, as their Philippine Depositary Receipts (PDRs) were offered to the public, unlike those of Rappler Incorporated.

Earlier this week, the SEC decided to revoke Rappler’s license and void PDRs issued to Omidyar Network Fund LLC, alleging it violated a constitutional rule because of a “repugnant” provision. Rappler is appealing the decision, which is not yet final and executory.

Following the SEC decision against Rappler, there were speculations that it would go after news giants ABS-CBN and GMA, since the two had also issued PDRs in the past.

SEC chairperson Teresita Herbosa denied this, and cited the difference between the PDRs Rappler issued to Omidyar and those of GMA and ABS-CBN.

“The case was only about Rappler. We have no reason to review the others because as far as I remember, all the other PDRs were submitted to us because they were being offered to the public. Together with the application of registration for the securities, you have to submit all the PDRs because we evaluate,” Herbosa told reporters on the sidelines of a financial technology ball in Pasay City late Thursday, January 18.

In the case of Rappler, Herbosa said the media firm did not need to submit the PDRs to SEC.

“What it (Rappler) filed for was a notice of exemption (in 2015). They were not going to offer it publicly. They were just going to sell it to that person or Omidyar,” Herbosa added.

A PDR is a security that grants the holder the right to the delivery of sale of the underlying shares, but not ownership. 

The concerned Omidyar PDR provision states that parent firm Rappler Holdings Corporation needs to seek approval of two-thirds of PDR holders on corporate matters. For the SEC, this is a violation of the foreign equity restrictions under the Philippine Constitution.

Rappler lawyer Francis Lim, however, clarified that the provision only gives Omidyar ground to give up its investments in case of changes in Rappler’s corporate matters. He pointed out that the provision does not give the foreign investor veto power.

SEC investigation

The SEC intiated its probe into Rappler after it received a “referral letter” from the Office of the Solicitor General (OSG)  in December 2016, asking it to conduct an investigation into Rappler “for any possible contravention of the strict requirements of the 1987 Constitution.”

“I understand that there were press releases in the papers from themselves. They (Rappler) were discussing the ownership structure and I think that is when the Office of the Solicitor General referred to us [to probe into Rappler] because the PDR, being a form of security, is under our jurisdiction,” she said.

The press release she was referring to was the announcement of an investment from Omidyar Network in November 2015. The announcement, however, only states Omidyar’s investment through PDRs, not the ownership structure of Rappler. (READ: Omidyar Network invests in Rappler)

The SEC conducted an “internal, inter-departmental investigation into Rappler” between December 2016 to July 2017. The regulator then issued a show-cause order to Rappler in August 2017.

Five months later, the corporate securities regulator meted the most severe penalty to Rappler, which is the revocation of its incorporation papers – a penalty that Rappler lawyer Francis Lim and others in his profession view as “too severe.” (READ: If there was a violation, Rappler not given time to cure it – lawyer)

‘Not politically motivated’

Herbosa also pointed out that the SEC decision vs Rappler was “not politically motivated” and accused those who say so of attempting “to divert people’s attention to what is the real issue.”

Rappler had called the SEC ruling as a form of “political harassment” of the Duterte administration, as President Rodrigo Duterte himself had repeatedly attacked the news group over its reports that are criticial of his administration, particularly his flagship war on drugs. (READ: The Impunity Series)

In his second State of the Nation Address in July 2017, Duterte claimed that Rappler is “fully owned by Americans,” an allegation that Rappler has repeatedly denied. Back then, Rappler had called the President’s claims “a form of harassment.”  (READ: Debunking lies about Rappler)

Days after the SEC decision, Justice Secretary Vitaliano Aguirre II ordered the National Bureau of Investigation to do a case build-up against Rappler for “possible violation of the Constitution and other laws.” 

Apart from corporate foreign control and possible violation of the anti-dummy law, Aguirre said his department’s investigation into Rappler will also look at “other laws” as well.

Rappler slammed the investigation as a fishing expedition, meant to harass the news organization and silence a critical press. More and more independent organizations had condemned these moves as attacks on press freedom.

On Thursday, the NBI issued subpoenas to Rappler CEO Maria Ressa and a former reporter over a cyber libel complaint filed by a businessman for a story posted on the news site in May 2012. The NBI said this is separate from the justice department’s SEC-related investigation into Rappler.

The National Union of Journalists of the Philippines (NUJP) has organized a solidarity gathering on January 19 dubbed “Black Friday Protest for Freedom” to rally support for Rappler and press freedom in the country. – Rappler.com