The Philippine Securities and Exchange Commission (SEC) revoked Rappler’s certificate of incorporation. Rappler is a Philippine media organization that, in the Philippines, is required to be 100% Filipino-owned and controlled. However, it needs money to continue as a going concern and most of the money are in the hands of foreigners. How now?

It seems that other media organizations found the answer: Philippine Depository Receipts (PDR). I am no expert on this and what I know about them comes from reading two articles, both from the Inquirer. In simple terms, it is a participation in profits. The shareholder allows third parties to purchase a share in the profits earned by his stocks in the media organization. In this manner, the legal requirement on Filipino ownership is not breached because the stocks remain in the name of the shareholder. The investor only gets a part of the earnings (dividends) earned by the stock; so, they could not even participate in the management of the media organization. That’s the theory at least.

What Rappler offered its investors to their PDRs was a bit more than the regular PDR. They actually allowed the PDR investors to have a say if Rappler was ever inclined to amend its Articles of Incorporation or undertake some manner of reorganization. Under the Rappler PDR, you can’t do that unless the PDR investors says its okay to do so. Boom. They’re dead.

According to the SEC, that provision effectively gives the PDR investor a measure of control over the media organization, and if the investor is a foreigner — anyone other than a Filipino — you just violated the legal requirement of 100% Filipino ownership and control. The SEC, therefore, cancelled the PDRs. Makes sense to me.

Here’s where it doesn’t make sense: not happy with just cancelling the PDRs, the SEC went to the max and cancelled Rappler’s certificate of incorporation because it violated the legal requirement to be 100% Filipino. Why did they impose so extreme a penalty as cancelation of its certificate of incorporation? Many suspect the hand of the Government of which Rappler has been critical of. To be fair, Rappler was also critical of the previous administration but the current one, with its controversial war on drugs and cozy relationship with China, has been a far more frequent subject much to their discomfort. People, therefore, see this as payback.

As I noted before, PDRs are not unique to Rappler. Other media organizations like ABS-CBN and GMA have also issued PDRs, and some have been bought by foreign investors. However, the SEC points out that these PDRs do not have the controversial provisions that the Rappler PDRs have. Nevertheless, it was pointed out that PLDT, a telecom company also required by Philippine law to be 100% owned and controlled by Filipinos, also violated the 100% Filipino requirement when it issued its PDRs but they were allowed to rectify their mistake and PLDT still exists today. Why was the SEC then so harsh with Rappler?

The Commissioners of the SEC were appointed by the previous Administration; so, there are those who do not see this as payback. How could it be when these people are Aquino appointees but, in the Philippines, everything is possible and political butterflies thrive in great numbers. Perhaps they do not want to share in the fate of other heads of commissions and government agencies and instrumentalities who were unceremoniously kicked out for one reason or another. In this administration, a “single whiff” of corruption is supposed to be enough to have your head roll (but it also depends on who is doing the sniffing and who is being sniffed at as it appears that friends of the administration usually gets a free pass and just gets shuffled around the vast governmental bureaucracy). Are there skeletons in the SEC closet that could cause them their heads?

Or did the SEC just make an honest mistake when it imposed the ultimate penalty? It said that Rappler can still operate and it does have the right to ask the SEC to reconsider its decision and, failing that, appeal the same all the way to the Supreme Court, which, unfortunately for them, are majority pro-government. This Government in particular; so, good luck with that but at least there’s a chance no matter how slim, and with litigation cases moving at a snail’s pace in Philippine courts, they may even survive this Administration and get a reprieve in the next.

The Inquirer articles on the PDR says in Rappler’s defense that the controversial provision is just a measure of investor protection; however, if that protection also grants them some control over the company, and the investors are foreigners, then that still violates the legal requirement to be 100% Filipino-owned and controlled. The Rappler’s lawyers should have carved that out; and investors are left with the choice of take it or leave it. It should be noted that other Rappler PDRs were not cancelled because there was no control granted to holders of those PDRs.

For now though, some people suspect that there is an attack on the free press with the Government setting its eyes next on the Inquirer. For sure, the Administration has not been happy about the coverage it has been getting from these two but, usually, governments just let it slide. It is after all the hallmark of a healthy democracy to have a free press. With populism so very in these days, however, democracy seems so last century.