SEC affirms order to shut down news outlet Rappler

THE Securities and Exchange Commission (SEC) has affirmed its decision to revoke the incorporation papers of the company that operates Rappler, maintaining that the online news outlet violated the constitutional and statutory restrictions on foreign ownership in mass media.

In a 12-page order signed by all five SEC commissioners dated June 28, it directed the agency’s Company Registration and Monitoring Department to effect the revocation of certificate of incorporation of Rappler Inc. and Rappler Holdings Corp.

The SEC said public interest will be served when it affirmed its revocation decision on the news outlet since “it will implement the policy of respecting and fully complying with the provisions of the Constitution, to which every Filipino owes allegiance.”

“Compliance with the constitution and the laws cannot be disregarded to further business interests. To rule otherwise would be to condone a blatant violation of the laws of the land, create a dangerous precedent, and worse, a ‘violate now, cure later’ culture where mass media entities who violate the nationality restriction provisions of the Constitution are effectively accorded a preferential treatment that those that have religiously complied with the same requirement,” the SEC order read.

The SEC order mainly affirmed its decision released on January 11, 2018 that found Rappler to have violated the foreign equity restrictions in mass media when it issued Philippine Depositary Receipts or PDRS that granted Omidyar Network, a foreign entity control over the media organization.

PDRS are a type of investment instrument that accrues interest and can be sold for profit, and used by individuals and corporations as anyone regardless citizenship can invest in with corresponding company shares.

Those Rappler PDRS, however, included a provision that require Filipino stockholders of Rappler to seek the approval of Omidyar Network on fundamental corporate matters, a violation of the absolute constitutional and statutory prohibition on foreign control of mass media.

The SEC said it revoked the certificates of incorporation of Rappler, being the mass media entity that sold control to foreigners, and of Rappler Holdings, which it said is an alter ego that existed for no other purpose aside from effecting a scheme aimed at masking the news outlet’s Constitutional violation.

The SEC also declared the PDRS void pursuant to the Securities Regulation Code, for being a fraudulent transaction.

Rappler appealed the SEC’S decision before the Court of Appeals (CA). While the appeal was pending, Omidyar Network, through its representative, Stephen King, announced its intention to donate the PDRS to the Filipino staff of Rappler.

In a decision dated July 26, 2018, the CA upheld the finding of the SEC that Rappler sold control to foreigners. The appellate court, however, directed the SEC to conduct an evaluation of the legal effect of the alleged supervening donation by Omidyar Network of the PDRS to the staff of Rappler and accordingly remanded the case to the Commission.

The CA affirmed and reiterated its 2018 decision in a resolution dated February 21, 2019.

The Supreme Court on September 25, 2019 then issued a resolution declaring the case closed and terminated. The CA proceeded to issue another resolution dated December 4, 2019 declaring that its 2018 decision has attained finality as of March 21, 2019.

In compliance with the directive of the CA, the SEC, through the Office of the Solicitor General, filed on February 17, 2021 a manifestation containing the findings of a special panel convened by the SEC for the purpose of evaluating the legal effect of the supervening donation.

After a careful study of all the pleadings and arguments of the parties, the special panel concluded that the donation of the PDRS to the staff of Rappler “did not cure the violation” of the news outlet. It found that the transfer neither created nor transferred any right in favor of the donees, which would mitigate or cure the violation already committed.

“The contentions raised by Rappler and RHC have been squarely and adequately addressed by the SEC and the CA in their respective decisions, resolutions and orders, including the latest issuance from the Commission,” the SEC said.

The SEC said the revocation of incorporation papers of Rappler was ordered as early as Januar y 2018 and that the ground for such was affirmed by the CA three times in July 2018, and February 2019 and again on December the same year.

“The decision of the CA has attained finality and the latest resolution of the appellate court only bolsters the Commission’s position that Rappler and RHC violated the Constitution and that their certificates of incorporation should therefore be revoked,” the SEC said.

Rappler, meanwhile, said in a statement that it had been “notified by our lawyers of this ruling that effectively confirmed the shutdown of Rappler.”

It added, “We are entitled to appeal this decision and will do so, especially since the proceedings were highly irregular.”