SINGAPORE — Rappler reports against the Securities and Exchange Commission (SEC) are misleading and slanted.
I was the first to defend Rappler when the president publicly denounced its sale of Philippine depositary receipts (PDRs) to Omidyar Network (ON) in 2015. PDRs are financial instruments used to comply with our Constitution’s ban on foreign control of media.
Last week, I explained why the SEC had basis to sanction Rappler. Beyond this, we must fact-check how Rappler publicly argues its case.
First, Rappler misleadingly implies the SEC approved its PDRs.
It restated: “PDRs were disclosed to the SEC in 2015 in compliance with the SEC’s regulations” (“FAQs: Rappler’s SEC case,” 1/22/18).
This is deceptive if you understand securities law’s central rule: offers and sales of securities must be registered unless exempt from registration.
ABS-CBN and GMA register their PDRs before offering them to thousands of investors.
In contrast, the SEC does not approve offers to less than 20 persons, such as a startup founder selling shares to relatives. Here, one merely files a notice that there were less than 20 investors.
Thus, all Rappler sent was a notice it only had one investor. Per page 3 of the SEC order, the ON contract was only provided after the SEC summoned Rappler in February 2017.
The 20-person exemption is so basic that even a nonlawyer who used it in a $1-million investment should know it.
But even after both the SEC and I publicly clarified this, Rappler still implies the SEC approved its PDRs.
Second, a Rappler blurb misleadingly read: “many speculated that the regulator will go after the two broadcast giants next” (“SEC: No review of ABS-CBN, GMA PDRs after Rappler,” 1/19/18).
Inquirer’s Doris Dumlao-Abadilla wrote the exact opposite: the SEC questioned “veto rights” in the ON PDRs not found in ABS-CBN and GMA PDRs. The SEC did not void all PDRs; it even upheld a second set of Rappler PDRs that had no vetoes.
Unlike Dumlao-Abadilla, misinformed pundits feared the SEC order hit other media companies. But Rappler could not have misunderstood — it was the recipient.
So why did it fuel fear for other media companies?
Third, Rappler repeatedly implied its PDRs are like ABS-CBN and GMA’s valid PDRs, citing my 2017 columns.
PDRs’ defining characteristic is they separate PDR holders from the company, unlike shares of stock. But the ON PDRs gave veto rights over any change in Rappler’s articles of incorporation. PDR holders and the company suddenly had a link they cannot have.
This veto’s validity can be hotly debated.
But no credible securities lawyer would claim a PDR with this veto is the same as ABS-CBN’s and GMA’s. This is like saying White Walkers are human except they are dead.
The change is so fundamental that BDO Capital president Eduardo Francisco opined the ON PDRs are not “true” PDRs.
But Rappler kept implying the ON PDRs are the same, even after the SEC summoned Rappler in February 2017, even in its report on the SEC order on Jan. 15, 2018. Thus, sympathizers such as “Pinoy Ako Blog” did not cite the veto in defending Rappler after the SEC order.
I certainly felt misled when Rappler published my July 2017 column defending PDRs without informing me of the veto rights and that the SEC was investigating these.
The list goes on.
Rappler argues ON waived the veto. But page 15 of the SEC order correctly noted a waiver does not erase the veto from the PDRs.
Rappler reported Agnes Callamard and two other United Nations Special Rapporteurs “slammed moves to shut down Rappler.” Unlike Inquirer’s report, Rappler’s omitted they argued “philanthropic contributions do not amount to foreign ownership”—crucial context they are ridiculously misinformed.
PDRs are commercial investments. If ON purchased the equivalent of 5 percent of Rappler for $1 million, this made Rappler worth P1 billion on paper.
Any one of these “resibo” is shocking. I listed five.
Free speech cannot justify Rappler’s misleading coverage of Rappler, or set aside the SEC’s P1-billion corporate law question.
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