MANILA, Philippines (UPDATE)- The Philippine Stock Exchange (PSE), Bankers Association of the Philippines (BAP) and several other petitioners urged the Supreme Court (SC) on Thursday to declare unconstitutional government's move to compel listed companies in the PSE to declare all their stockholders, including information about these stockholders.
The petition assailed Department of Finance (DOF) Revenue Regulation No. 01-14 (RR 01-140); Memorandum Circular No. 05-14 (RMC 05-14), issued by the Commissioner of Internal Revenue (CIR); and Securities and Exchange Commission (SEC) Memorandum Circular No. 10, Series of 2014 (SEC MC 10-14) issued by the Chairman of the SEC.
These regulations require listed companies to declare as payees of dividend payments the entities and individual investors, instead of the PCD nominee which is considered as the registered shareholder for the shares of stocks on behalf of the investors.
Under the country's scripless trading system, the PCD nominee is the securities intermediary and also the payee of the dividend payments; the system also disallows access to information beyond the PCD nominee.
This system ensures the efficient transfer of shares and preserves the integrity of the market as it protects investors from unathorized third parties, petitioners stressed.
Petitioners said the challenged regulations will jeopardize the privacy of individual investors, and, market stability, in general.
"Respondents, in the guise of tax administration, have jeopardized not only the stability of the Philippine capital market but also the liberty, properties, privacy and security of the market participants, which includes the petitioners," the petition read.
Compliance with the regulations will also open petitioners to criminal suits since this violates the right of investors to privacy under Republic Act (RA) No. 10173, also known as the Data Privacy Act, petitioners argued.
"The issuance of the questioned regulations have placed the petitioners in a conundrum. If the petitioners comply with the said regulations, they risk criminal prosecution under the Data Privacy Act (which carries a penalty of imprisonment of one to six years) and existing banking laws and regulations (which includes suspension or revocation of license to act as a custodian and imprisonment of two to ten years, among others)."
"On the other hand, if they do not comply, they risk criminal prosecution and administrative penalties under the National Internal Revenue Code (NIRC) of 1997 and the Securities Regulations Code (which carry a penalty of imprisonment of one to ten years)," the petition read.
The petitioners urged the high court to immediately issue a temporary restraining order (TRO) and/or writ of preliminary injunction to halt the enforcement of the regulations.
The PSE and BAP were joined by the Philippine Association of Securities Brokers and Dealers, Inc., Fund Managers Association of the Philippines, Trust Officers Association of the Philippines, and Marmon Holdings, Inc.
Named as respondents in the petition are the Secretary of Finance, CIR, and Chairman of the SEC.