MANILA, Philippines – The Supreme Court (SC) voided the directives of the Securities and Exchange Commission (SEC), which required the accreditation of Certified Public Accountants (CPAs) who act as external auditors of companies that issue registered securities and possess secondary licenses.

The High Court en banc unanimously denied the SEC’s petition seeking to reverse the ruling of the Davao City Regional Trial Court on March 20, 2018. The lower court’s decision had declared paragraph 3, Rule 68 of the Implementing Rules and Regulations of the Securities Regulation Code (SRC) and SEC Memorandum Circular No. 13-2009 void.

According to the SC, the provisions are against Republic Act No. 9298 or the Philippine Accountancy Act of 2004. It added that the enforcement of the memorandum is ultra vires or beyond the commission’s supposed powers.

The petition stemmed from the case – filed by Christian Jay Lim, president of the 1Accountants Party List, Inc., as well as other CPAs – for declaratory relief with prayer for preliminary injunction and temporary restraining order against the SEC circulars.

According to them, the rules were issued without the authority of the SEC and violate the accountancy law. They also argued that these regulations violate CPAs’ rights to due process and equal protection of the law.

The decision

In its ruling, the SC said the regulations were based on the Securities Regulation Code and the Corporation Code, which do not apply to CPAs.

“Thus, all other powers granted by the SRC provisions relied upon by petitioner flow from the SEC’s jurisdiction over corporations, and cannot be made to apply to individual CPAs,” the High Court said. “While petitioner may regulate corporations as well as the securities market, such regulation does not extend to an authority to restrict, even in the slightest degree, the practice of accountancy.” 

The SC added that the SEC rules pose additional burden on CPAs.

“Thus, the CPAs are left with no choice but to go through the accreditation process should they wish to conduct a statutory audit of corporate financial statements, when in fact, such is part of the practice of accountancy for which their CPA license already suffices,” the SC said.

It added that the power to supervise CPAs belongs to the Professional Regulatory Board of Accountancy. – Rappler.com