Brokers, bankers, fund managers want SC to stop BIR, SEC disclosure memos on stock trading

Stock brokers, bankers and fund managers are asking the Supreme Court to stop the Bureau of Internal Revenue and the Securities and Exchange Commission from requiring the disclosure of stock payments, dividends and other "sensitive personal information" about investors.

Aside from a temporary restraining order or a writ of preliminary injunction, the high tribunal should eventually declare as unconstitutional then void and nullify BIR Revenue Regulations (RR) 01-14 and Revenue Memorandum Circular (RMC) 05-14 and SEC Memorandum Circular (SEC MC) 10-14, the group noted.

The petitioners are the Philippine Stock Exchange Inc, Bankers Association of the Philippines, Philippine Association of Securities and Brokers and Dealers Inc, Fund Managers Association of the Philippines, Trust Officers Association of the Philippines, and Marmon Holdings Inc.

Scripless trading

They criticized the new regulations that go against scripless trading, in which shares of stock of listed companies are kept by the Philippine Depository and Trust Corp and registered under the name of PCD Nominee Corp.

PCD Nominee is considered by listed companies as the registered shareholder for the shares of stock lodged by the broker dealers with Philippine Depository and Trust on behalf of the investors. PCD Nominee is the shareholder of record of the shares in the book of listed firms and their respective agents, but without any certificate,

PCD Nominee is also the designated payee of the dividend payments made by listed companies.

A scripless trading structure is an arrangement recognized under Section 43.1 of Republic Act No. 8799 otherwise known as the Securities Regulations Code (SRC).

RR 01-14, issued December 17, 2014, was supposed to ensure that information on all income payments made by employers and payors are monitored and captured in the taxpayer database of the BIR, "with the end in view of establishing simulation model, formulating analytical framework for policy analysis and institutionalizing appropriate enforcement activities."

RMC 05-14, issued on January 29, 2014, requires tax identification number or TIN of the of the payees on the alpha list and the specification of the complete name of the payees with the corresponding amount of income and withholding be submitted to the BIR.

SEC MC 10-14, issued May 22, 2014, required the Philippine Depository and Trust to provide the listed company or its transfer agent an alphalist of all depository account holders and the total shareholdings in each of the accounts and sub-accounts.

Likewise, the SEC memo required broker-dealers to provide the listed company and transfer agent an alphalist showing the names of their clients, their total shareholdings, TIN, address, status, and birthdates or registration number.

Market stability jeopardized?

"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 plea read.

"The requirement under the questioned regulations for listed companies and broker-dealers to disclose the payee of dividend payments is vague, and therefore void, due to the prohibition on the identification of the PCD Nominee as the payee," the petitioners claimed.

Listed companies are not capable of accurately providing the required information, they noted, saying the Finance Department and the BIR failed to comply with the required notice and hearing before issuing the regulations.

The BIR and the SEC violated their right to privacy by requiring the disclosure of "sensitive personal information regarding an investor to a third party, not a government or public authority, according to the petitioners."

Supposedly, they have been placed in a "conundrum" because complying with the new regulations places them at risk of criminal prosecution under the Data Privacy Act and existing bank laws and regulations. If they do not comply, they risk criminal prosecution and administrative penalties under the National Internal Revenue Code of 1997 and the SRC.

The new policies do not provide a mechanism for protecting sensitive personal information of investors, the petitioners added. – VS, GMA News