ABS-CBN, GMA acted in good faith in issuing PDRs – SEC

Metro Manila (CNN Philippines, June 11) —The controversial Philippine Depositary Receipts or PDRs issued by the holding companies of ABS-CBN Broadcasting Corporation and GMA Network, Inc were allowed and registered with the government, the Securities and Exchange Commission said Thursday.

In an online House hearing on ABS-CBN's bid for a fresh 25-year franchise, SEC Commissioner Ephyro Amatong said that when the ABS-CBN Holdings Corporation issued PDRs in 1999, and later in 2013, "the prevailing opinion was the PDRs were not evidence of ownership."

Amatong did not go into detail as the issue is among reasons cited by Solicitor General Jose Calida in his petition asking the Supreme Court to void ABS-CBN's franchise, which expired in May. The network was forced to go off air following a cease and desist order issued by the National Telecommunications Commission.

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Amatong said before Calida's petition and the House hearings, no complaints were raised with the SEC about the PDRs, so the regulatory body did not look into possible constitutional violations. Insofar as SEC regulations are concerned, ABS-CBN did not violate any, he said.

Rep. Lawrence Fortun asked if the issuance of PDRs by ABS-CBN Holdings Corporation were "in good faith" considering that it was allowed by the SEC.

"I would say, both ABS-CBN and GMA-7, your honor," Amatong said.

Fortun said the matter "should not be taken against ABS-CBN because ABS-CBN relied on the expert opinion of the very agency that regulates all transactions involving PDRs."

'Foreign ownership ban never breached'

ABS-CBN has repeatedly explained that the PDRs were not the same as shares of stock and do not accord its holders voting rights. The Constitution limits mass media ownership to Filipinos.

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PDRs can be converted into shares of stock, but Amatong said the Philippine Stock Exchange will never allow foreign nationals to do so.

"The PSE has a mechanism that non-Filipinos cannot acquire the shares of media companies," Amatong said.

"As far as we know, there has been no instance where the nationality restrictions for any of our companies that are engaged in fully nationalized or partially nationalized companies have been breached and this is due to the mechanism put in place in the PSE," he added.

ABS-CBN, GMA: PDRs allowed by SEC

Should the Supreme Court later decide against the issuance of PDRs, it will surely provide guidelines "on how to deal with situations where the interpretations of law have changed," Amatong said.

ABS-CBN President and CEO Carlo Katigbak said the company is willing to comply with any new government order concerning PDRs.

"Our sentiment is that we acted in good faith by going to the SEC to secure approval before offering it to the public and at the time the SEC agreed that the instrument was legal," Katigbak said.

"[But] if the SEC, a court of law, or even Congress wishes to disqualify the use of PDRs equally across the entire media industry then ABS-CBN will be willing to modify alter or comply with the order if so directed," he added.

GMA Network, in a separate statement, said the issuance of PDRs on its part was legal and compliant with the rules of the SEC and PSE. It committed to provide related documents as requested by the House committee on legislative franchises.