The way I see it, the cancellation of Rappler’s web site brings to fore three crucial issues—violation of the constitutional provision on mass media, press freedom, and the wisdom of restricting foreigners from involvement in mass media.
Under the 1987 Constitution and several Philippine laws, a media company must be owned and controlled 100 percent by Filipinos. If a media company gave foreigners any control at all, then that is a violation of the restrictions. The Securities and Exchange Commission said Rappler violated the Constitution; hence, it must be closed.
Rappler insists that its board of directors and shareholders are 100-percent Filipinos.
In 2013 and 2014, Rappler got commitments from foreign investors. It needed to legalize the receipt of foreign money. But it could not issue shares of stock or seats in the board. Thus, it spun off a new corporation called Rappler Holdings for the purpose of issuing what is called Philippine Depositary Receipts.
A PDR is defined as a security that grants the holder the right to the delivery or sale of the underlying share, but not ownership.
The PDRs are instruments that derive their value from equity and are used to raise funds. They are also used by other Philippine companies who are likewise affected by the restriction on foreign investments.
Rappler Holdings then bought the share of Rappler in 2015 and then issued PDRs to North Base Media and Omidyar Network.
But in 2015, the PDRs issued by Rappler to Omidyar was approved by the SEC itself.
Former Press Secretary Francisco Tatad, in his column for another newspaper, asked whether the SEC’s understanding of PDRs changed just because the President ordered Rappler’s true ownership investigated?
Assuming the SEC had erred, would it not be fairer and simpler to just cancel the PDRs?
If indeed it was an honest mistake on the part of the SEC, why punish Rappler?
The ON PDRs had provisions that granted a measure of control over both Rappler Holdings and Rappler Inc. The provisions included a condition that Rappler Holdings cannot alter, modify or change their Articles of Incorporation and Corporate By-Laws without discussion with the ON PDR holders and obtaining the approval of at least two thirds of all issued PDRs.
, this constitutes a veto power contrary to restrictions in the Constitution!
As stated by the SEC, Rappler is neither 100-percent owned by Filipinos, and neither is it 0-percent controlled by foreign PDR holders.
Rappler defended itself by saying that the PDRs should not be considered as control. They argue that control is defined as ownership of shares and not simply management control.
Another Rappler defense is that it is not a media company, nor a part of mass media. The SEC threw this argument out the window.
Control of Rappler is the issue, not press freedom.
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Now we see a near-universal condemnation of the SEC’s decision. It is a threat to press freedom, they say. Was the President behind it?
I don’t think so. The President may have been talking harsh against his critics, but he will not become a dictator. He should know better.
Ultimately, he will just let the media be.
The other issue is that given technology, restrictions on foreign control of the mass media should be lifted. They do not make sense anymore.
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My wife and I would like to condole with the family of Pitoy Moreno, acknowledged as the fashion czar of the Philippines and Asia.
Pitoy and my wife went to school together. He used to give us fruit salad for Christmas.
Rest in peace, my friend.