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VERA FILES FACT SHEET: SEC revocation of Rappler’s registration explained

The Securities and Exchange Commission in a Jan. 11 decision voided Rappler’s certificate of incorporation, saying the social media news network engaged in a “deceptive scheme” to skirt foreign equity restrictions in mass media.

Rappler called the decision “a blow to press freedom in the Philippines.”

Here are three things you need to know.

1. The SEC decision repeatedly mentions PDRs. What are those?

“PDRs” stand for Philippine Depositary Receipts, defined by the Philippine Stock Exchange as:

“a security which grants the holder the right to the delivery of sale of the underlying share. PDRs are not evidences or statements nor certificates of ownership of a corporation.”

Source: Philippine Stock Exchange Glossary

Holders of PDRs are not entitled to the bundle of rights owners have, lawyer Romel Bagares told VERA Files in an earlier interview.

“In other words, walang control, walang say ‘yong owners ng PDRs sa (PDR owners have no control in the) day-to-day operations. They don’t have representation in the board, they don’t vote, they cannot decide on policy,” he said. (See VERA FILES FACT CHECK: Three things Duterte got wrong about Rappler)

PDRs are “investment tools” devised to factor in foreign investors without violating the Constitution, he added.

The 1987 Constitution restricts the ownership and management of mass media to Filipino citizens and Filipino-owned corporations.

Rappler Holdings Corp., which owns 98.77 percent of Rappler Inc., issued PDRs to get funds from the philanthropic investment firm Omidyar Network and international investment firm North Base Media.

Omidyar Network was founded by eBay founder Pierre Omidyar.

North Base Media invests in media and media technology in the UK, Israel, USA, Bulgaria, Latin America, India, Hong Kong, Taiwan, Germany and Dubai. (See Media Ownership Monitor Philippines: Rappler Holdings Corporation)

Rappler is not the only Philippine media firm to use PDRs; others include GMA Network, Inc. through GMA Holdings, Inc., and ABS-CBN through Lopez Holdings, Corp.

2. So what’s the problem, according to the SEC?

The SEC in its decision zeroed in on the Omidyar Network PDR, and said it “contains a repugnant provision:”

“The (Omidyar Network) PDRs contain a provision wherein (Rappler) is required to seek approval of the (Omidyar Network) PDR Holders on corporate matters.”

Source: SEC decision on Rappler Inc. and Rappler Holdings Corp.

This violates the foreign equity restriction, the SEC added:

“Anything less than One Hundred Percent (100%) Filipino control is a violation. Conversely, anything more than exactly Zero Percent (0%) foreign control is a violation.”

A Rappler statement said the SEC “focused on one clause in one of our contracts which we submitted to – and was accepted by – the SEC in 2015.”

It said:

“Every year since we incorporated in 2012, we have dutifully complied with all SEC regulations and submitted all requirements even at the risk of exposing our corporate data to irresponsible hands with an agenda.”

Source: Rappler, Stand with Rappler, defend press freedom

3. What does this mean for press freedom?

It is very hard not to see the SEC decision revoking Rappler’s registration against the backdrop of the present administration’s attacks against the media. (See VERA FILES FACT CHECK: Duterte not the only president to attack Inquirer, ABS-CBN)

Based on the text of the decision itself, it was the Office of the Solicitor General that requested an investigation into Rappler in December 2016.

President Rodrigo Duterte, in various instances and in his own words, has been “savage” against the media. (See VERA FILES FACT CHECK: Duterte seesaws with media)

In a June 2, 2016 press conference in Davao City, before his inauguration, Duterte called for a media boycott and infamously said “kill journalism”:

“I’m challenging you, guys. Kill journalism, stop journalism in the country. If you are worth your salt, you should accept the challenge.”

Source: Press Conference, Davao City, June 2, 2016. Watch from 27:34-31:30

In an Aug. 24 speech, he bragged about “savaging” the Philippine Daily Inquirer and ABS-CBN:

Kaya ako lang ang Presidente na bumibira ng Inquirer pati ABS-CBN. Binababoy ko talaga. Kasi alam nila basura eh (That’s why I’m the only president who attacks the Inquirer and ABS-CBN. I really savage them, because they’re trash).”

Source: Speech of President Rodrigo Roa Duterte during his Visit to Marawi City,watch from 7:19 to 7:27

The National Union of Journalists of the Philippines said it was outraged by the SEC decision, calling it:

“…but one of many threats Duterte has made against media critical of him and his governance, such as the Philippine Daily Inquirer and broadcast network ABS-CBN, whose franchise renewal he threatened to block.”

Source: NUJP statement

The Foreign Correspondents Association of the Philippines said the decision “is tantamount to killing the online news site, sends a chilling effect to media organizations in the country.”

Rappler in a report said it “will continue to operate as it files the necessary motions for reconsideration with the courts.”


Securities and Exchange Commission, In Re: Rappler Inc. and Rappler Holdings Corporation

Media Ownership Monitor Philippines, Rappler Holdings Corporation

Philippine Stock Exchange, Glossary

Speech of President Rodrigo Roa Duterte during the PDP-Laban Christmas Benefit Dinner for Marawi, Dec. 13, 2017, watch from 1:36:26 to 1:37:06

Speech of Pres. Rodrigo Duterte at the Southern Philippines Medical Center (SPMC) Children’s Cancer Institute (CCI) Thanksgiving and Open House, Davao City, Aug. 11, 2017, watch from 15:57 to 16:16

Speech of President Rodrigo Roa Duterte during the 19th Founding Anniversary of the Volunteers against Crime and Corruption, watch from 38:53 to 39:44

Speech of President Rodrigo Roa Duterte during his Visit to Marawi City, watch from 7:19 to 7:27