By James Loyola
The Securities and Exchange Commission (SEC) en banc committee has ordered the revocation of the Certificate of Incorporation of popular online media firm Rappler, Inc. and its parent company Rappler Holdings Corporation in a decision that may affect media giants that have issued Philippine Depositary Receipts.
“The En Banc finds Rappler, Inc. and Rappler Holdings Corporation, a mass media entity and its alter ego, liable for violating the constitutional and statutory Foreign Equity Restrictions in Mass Media, enforceable through laws and rules within the mandate of the Commission,” the SEC order said.
The SEC accused Rappler of violating constitutional restrictions on ownership and control of mass media entities because of funds coming from Omidyar Network, a fund created by eBay founder and entrepreneur Pierre Omidyar.
“Philippine Depositary Receipts (PDRs) do not indicate ownership. This means our foreign investors, Omidyar Network and North Base Media, do not own Rappler. They invest, but they don’t own. Rappler remains 100 percent Filipino-owned,” Rappler said in a statement after President Duterte threatened to investigate its ownership.
In response to the SEC decision, Rappler said “the SEC’s kill order revoking Rappler’s license to operate is the first of its kind in history – both for the Commission and for Philippine media.
“What this means for you, and for us, is that the Commission is ordering us to close shop… All because they focused on one clause in one of our contracts which we submitted to – and was accepted by – the SEC in 2015.”
In 2015, Rappler issued 12.03 million PDRs to North Base Media Ltd. and 7.22 million PDRs to Omidyar Network Fund LLC, a foreign company.
In December 22, 2016, the Office of the Solicitor General asked the SEC En Banc to investigate Rappler for possible violation of the Constitution’s restriction on foreign ownership of media entities.
The SEC said the PDRs issued to Omidyar Network are equity derivatives since these impose obligations on Rappler Holdings as well as Rappler Inc. and gives legal and economic rights originally reserved to shareholders.
The agency noted that these obligations are not present in the PDRs issued to North Base Media.
Because the SEC deemed that Omidyar Network has been granted control and financial returns through the PDR, it ruled that Rappler violated the Constitution.
As administrative penalty, the SEC ordered that the Omidyar PDR is declared void “for being a fraudulent transaction” and revoked the certificates of incorporation of Rappler, Inc. and Rappler Holdings Corporation.
It also forwarded its decision to the Department of Justice for “appropriate action.”
“We intend to not only contest this through all legal processes available to us, but also to fight for our freedom to do journalism and for your right to be heard through an independent platform like Rappler.
“Despite the decision, Rappler will continue to operate as it files the necessary motions for reconsideration with the courts. It will continue to defend and uphold the freedom of the press, which is guaranteed by the Constitution,” Rappler said in a statement.