SEC chair: We won't go after other media firms with depositary receipts

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Metro Manila (CNN Philippines, January 19) — The Rappler ruling will not prompt the Securities and Exchange Commission (SEC) to investigate other media companies that also issued Philippine Depository Receipts (PDRs).

"The Rappler case is unique. The PDRs of ABS-CBN and GMA are different from Rappler," SEC Chair Teresita Herbosa told reporters on Thursday.

She explained that since the two networks offered their PDRs to the public, they had to submit details of the securities for SEC approval beforehand.

Rappler, on the other hand, issued their PDRs to select investors — particularly, Omidyar Network, the offshore fund set up by eBay founder Pierre Omidyar.

According to SEC rules, securities issued to less than 19 investors need not be registered with and approved by the regulator.

"In this case, they did not have to submit the PDR to us at the time because what they filed for was a Notice of Exemption," Herbosa said. "That's because they were not going to offer it publicly. They were just going to offer it to that person, to Omidyar."

In a January 11 decision, the SEC found that Rappler — through its PDRs — had circumvented foreign ownership restrictions under the Constitution.

While its corporate documents show that Rappler Holdings Corp. — a domestic company — owns 98.84 percent of the news outlet, the SEC noted that the provisions of the PDRs effectively granted control to Omidyar.

The Omidyar PDRs — unlike Rappler's other PDRs — have a unique provision that requires the news outlet to hold a "prior good faith discussion" with Omidyar and secure the approval of two-thirds of PDR holders on all matters that will "alter, modify or otherwise change the company articles of incorporation or by-laws."

The SEC said this scheme grants Omidyar "influence over corporate policy, actions and structure."

Rappler, however, maintains that the provisions are standard and Omidyar exercises no control over the news company and its operations.

"The questioned provision in the Philippine Depositary Receipt issued by Rappler Holdings, Inc. to Omidyar Network does not give it ownership or management which is what is prohibited by the Constitution for media," Rappler lawyer Francis Lim said in a statement to CNN Philippines on Friday.

Rappler said it will appeal the SEC decision. It has until January 27 to do so.