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The SEC found that Rappler has control issues. Control is not just
about ownership of stock. The Securities Regulation Code (SRC) has a very
broad definition of control which goes beyond ownership of shares. The
PDRs are derivative instruments covered by the SRC, hence, the law’s
provisions govern any transaction in connection to PDRs.
In addition, the SEC ruled that it does not matter when the foreigner
exercises control, or in what instances the foreigner would step in. What
matters is that there be none. As worded by the SEC, “It does not matter
what capacity or device gives the foreigner control, as stockholder or holder
otherwise, there must be none. It does not matter if control is available only
in certain occasions; there must be no occasion.”
The SEC concluded that Rappler issued the PDRs to illegally skirt the
strict ownership and control requirements of Philippine law. The ON PDRs
were declared void and Rappler’s Certificate of Registration with the SEC
was revoked.
As its defense, Rappler reasoned that the PDR provisions are not
enough to be considered as “control” of the corporation. In addition, it
alleged that “control” is actually defined as ownership of shares, not simply
management control. On this, the SEC stated that “any” control is
“control.”
The petition also assailed that Rappler and RHC were deprived of its
right to due process when the SEC hastily decided to cancel its Certificates
of Incorporation. It argued that a different procedure, which was not made
known to Rappler and RHC, was applied in their case. Adding that the SEC
en banc did not consider the evidence presented to counter the claims and
that it should have been allowed to fix the contentious provision in
Omidyar's PDR.
Conclusion
The main issue of the case boils down to whether or not Rappler is
engage in mass media. And the answer is in the affirmative. Consequently,
the constitutional prohibition against foreign ownership is violated by
Rappler. Thus, the SEC ruling should be upheld.
The SEC, in a strict legal sense, had the full discretion and authority
to revoke the certificates of incorporation of Rappler and RHC. But was the
penalty too harsh? Of course it was. Nevertheless, it may have been
necessary. Otherwise, it would have given the impression that it was valid
for corporations in the mass media to surrender control to foreign entities,
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at least temporarily, in exchange for funding, at least until the SEC ordered
them to be divest such foreign control.
In promulgating its decision, the SEC may have done more than
exercising its regulatory functions. It may have unintentionally reinforced
mass media by ensuring its practitioners’ integrity, independence and
nationality. It has also reminded the nation of the importance of press
freedom. That it is a matter worth discussing and worth fighting for. In the
end, the power of the press must prevail as a vital element in a free society,
but always, and necessarily, in accordance with law and the Constitution.
Prepared By:
Student #: 1566-17
Section Plato
February 28, 2018