A lawyer on Monday asked the Supreme Court to nullify a memorandum circular order issued by the Securities and Exchange Commission (SEC) that the regulator had applied in declaring that Philippine Long Distance Telephone Co. (PLDT) was compliant with the constitutional rule on foreign ownership.
Lawyer Jose Roy III alleged that the said SEC order was unconstitutional and has sought a re-investigation of PLDT’s possible violation of the constitutional provision on foreign ownership.
“Petitioner prays that this court ensure correct and proper implementation of the ruling in GR No. 176579 and for the SEC to abide by the directive of this honorable (court) to conduct a proper investigation of PLDT,” he said, referring to the 2007 case filed by late lawyer Wilson Gamboa, who had questioned the sale of the government’s 111,415 shares of Philippine Telecommunications Investment Corp. (beneficial owner of PLDT stocks) to First Pacific, a foreign corporation.
Reacting to the new court suit, Ramon Isberto, head of public affairs of PLDT and Smart Communications said: “PLDT is fully compliant with the Gamboa decision of the Supreme Court and the SEC rule with respect to foreign ownership. We will study the petition and respond in due course.”
Isberto was referring to the Gamboa cases and the SEC’s recent declaration that PLDT was compliant with the Constitution.
The SEC was directed by the high court on June 28, 2011, to investigate whether PLDT violated Section 11, Article XII of the Constitution or the foreign ownership rule. The high court had directed the SEC to apply the definition of the term “capital” in that particular provision in determining the extent of allowable foreign ownership in PLDT. This was after the high court had defined “capital” as referring only to “shares of stock entitled to vote in the election of directors, and thus in the present case only to common shares, and not the total outstanding capital stock (common and nonvoting preferred shares).”
In his 26-page petition, Roy said the SEC memo circular order did not conform to the “letter and spirit” of the high court decision on the Gamboa cases. He stressed that the high court had ruled that the 60-40 Filipino-foreign ownership requirement “must apply separately to each class of shares.”
“The language of [the SEC memo], however, fails to make a distinction between different classes of shares and, instead, offers only a general distinction between voting and all the other shares, [that is], outstanding shares of stock entitled to vote in the election of directors and outstanding shares whether or not entitled to vote in the election of directors,” said Roy, adding: “Oddly, the SEC avoided applying the 60-40 ownership requirement separately to each class of shares, whether common, preferred nonvoting, preferred voting or any other class of shares.”
Roy contended that the SEC memo encouraged the circumvention of the 60-40 ownership rule “by impliedly allowing the creation of several classes of voting shares with different degrees of beneficial ownership over the same, but at the same time, not imposing a 40-percent limit on foreign ownership of the higher yielding stocks.”
”..(I)f we allow [the SEC memo] to stand, foreigners, acting with their Filipino ‘enablers’, will simply take advantage of the situation by making it appear that they are compliant with the 60-40 rule by giving Filipinos voting rights to elect the directors of a corporation while retaining a substantial amount of more than 60 percent of the profit earned by the corporation,” Roy said, adding that the beneficial ownership of a corporation then was not with Filipino owners.
Roy also claimed that the SEC gravely abused its discretion when it ruled that PLDT was compliant with the constitutional rule on foreign ownership, pinpointing the 2012 General Information Sheet filed by PLDT which showed that 89.88 million outstanding common shares were owned by Filipinos and 126.17 million outstanding common shares or 58.4 percent of 216.06 million total outstanding common shares were owned by non-Filipinos.
Roy also claimed that PLDT violated the foreign ownership rule when it created Beneficial Trust Fund Holdings Corp. and Mediaquest Holdings Inc. from its own funds, the PLDT Beneficial Trust Fund, so it could participate and invest in a nationalized industry.
He asked the high court to declare PLDT Beneficial Trust Fund as a non-Filipino entity and that any corporation where it owned more than 60 percent of its outstanding capital stock be declared a foreign company.