SEC cancels Rappler's license to do business

Story updated to include statement of Presidential Spokesperson Harry Roque.

Metro Manila (CNN Philippines, January 15) — The Securities and Exchange Commission (SEC) is revoking news agency Rappler's license to do business.

In a 29-page decision dated January 11, the SEC cancelled Rappler's certificate of incorporation and referred its decision to the Department of Justice for "appropriate action." The decision covers Rappler, Inc., the media entity, and Rappler Holdings Corp.

The SEC said the company was liable for violating SEC rules by engaging in a fraudulent transaction and circumventing constitutional restrictions on foreign ownership.

According to SEC, Rappler "intentionally created an elaborate scheme" to justify the receipt of over a $1 million from a foreign investor, Omidyar Network (ON). ON is an investment company owned by eBay auction site founder Pierre Omidyar.

It further said Rappler is a "mass media entity that sold control to foreigners," and it undertook a "deceptive scheme to circumvent the Constitution." The Constitution prohibits foreign ownership in media institutions.

Rappler has repeatedly said it is owned and managed by Filipinos. It was founded in 2012 by a team led by veteran journalist Maria Ressa.

The SEC decision was signed by Chairperson Teresita Herbosa, and Commissioners Antonieta Ibe, Ephyro Luis Amatong, and Emilio Aquino. The fourth commissioner, Blas James Viterbo, did not take part in the final ruling.

Rappler to go to court

Rappler CEO Maria Ressa announced in a media briefing on Monday they will question the decision in court.

"If warranted, we will even go to the Supreme Court... This is a press freedom case, because the decision was just so quick," Rappler's Investigative Desk head Chay Hofilena added.

In a post addressing its readers on Monday, Rappler decried the decision as "pure and simple harassment," an attack on freedom of the press. It said the ruling was "first of its kind in history — both for the Commission and for Philippine media."

Ressa and Hofilena said they will not back down against efforts to silence critical media.

"We will continue bringing you the news, holding the powerful to account for their actions and decisions, calling attention to government lapses that further disempower the disadvantaged," Rappler wrote in its editorial statement.

"We will hold the line... We ask you to stand with us again at this difficult time," it added.

SEC claims deceit

In recounting the facts of the case, SEC said in 2013 and 2014, Rappler, Inc. received over $1 million from foreign investors. This was supposedly in exchange for a grant of control and financial returns.

The SEC also said the company formed Rappler Holdings Corporation "for the sole purpose of issuing [Philippine Depositary Receipts]."

The SEC decision declared void a PDR of one of Rappler's foreign investors, Omidyar Network, and questioned the corporate deal.

A PDR is a financial instrument that foreign entities can buy into for financial returns in a local company but not in the form of dividends which are tied to ownership.

"Because Omidyar was the later purchaser... it caused the insertion of certain provisions that assure control over other PDR holders, and also over the corporate policies of Rappler, Inc. and its alter ego Rappler Holdings Corporation," the decision read.

The SEC said while the PDR was not a stock that indicates ownership, it gives holders "certain rights derived from equity and reserved to Filipinos."

However, Rappler said PDRs do not give ownership rights, and other large companies have a similar set-up. It also clarified the investment does not affect editorial operations.

Ressa likened PDRs to betting on a horse, with no assurance of control over how the horse is run or of financial returns.

"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.

According to its website, North Base Media says it is a "global venture-capital firm with a singular focus on media, content and information technologies in the world's fastest growing markets."

Rappler also reported that SEC accepted Omidyar-related documents in 2015.

Malacanang, OSG speak up

The Office of the Solicitor General (OSG) welcomed the decision on Monday.

"This decision demonstrates that even influential media outfits cannot skirt the restrictions set forth in the Constitution. Rappler is free to seek redress before our courts," said Solicitor-General Jose Calida.

"The OSG is ready to defend the sound decision of the SEC in any forum," he added.

Malacanang on Monday acknowledged the SEC decision.

"We respect the SEC decision that Rappler contravenes the strict requirements of the law that the ownership and the management of mass media entities must be wholly-owned by Filipinos," Presidential Spokesperson Harry Roque said Monday.

"Rappler may wish to exhaust all available legal remedies until the decision becomes final," he added.

Duterte had 'no hand' in SEC decision

In an interview with CNN Philippines Monday, Roque added the Palace had no hand in the SEC decision.

"We have nothing to do with the SEC decision. That was a very sound decision of the SEC," Roque said.

Roque added the accusation may have had weight if the President appointed the SEC's commissioners, however, that wasn't the case.

"The President did not even appoint a majority of that Commission. Accuse us of that if the chairman and the commissioners were appointed by the President - they were not," he added.

President Rodrigo Duterte has repeatedly slammed Rappler for its critical reportage of his administration. In his second State of the Nation Address in July 2017, Duterte accused Rappler of being under American ownership.

NUJP slams decision

Meanwhile, the National Union of Journalists of the Philippines expressed outrage on Monday at the turn of events against the news agency.

"We are sure Rappler, as it has said, is capable of mounting a legal defense against what amounts to their closure," the group said.

"As it does so, the NUJP declares it full support to Rappler and all other independent media outfits that the state has threatened and may threaten to shut down," it added.

The group called on all Filipino journalists to come together and "resist every and all attempts to silence us."

It noted the Duterte administration has also been critical of other media agencies, particularly the Philippine Daily Inquirer and broadcast network ABS-CBN.