SC stops BIR, SEC disclosure memos on stock trading

The Supreme Court has stopped the government from requiring stock brokers, bankers and fund managers from disclosing stock payments, dividends and other "sensitive personal information" about investors and their trading accounts.

 

The high tribunal sitting in full court granted a petition for a temporary restraining order against new regulations issued by the Bureau of Internal Revenue and the Securities and Exchange Commission, namely: 

 

 

"The court issued a temporary restraining order, effective immediately and until further orders, stopping respondents from further enforcing or implementing RR 01-14 and RMC 05-14 where these prohibit the naming of the PCD nominee (or any other securities intermediary designated and allowed under Section 43.1 of the Securities Regulation Code) as the payee for the dividend payments made by listed companies and SEC MC 10-14 in its entirety," according to the SC Public Information Office.

 

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

 

The new regulations 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., the petitioners claimed.

 

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

 

As such, PCD Nominee is the designated recipient of cash and stock dividends declared by listed companies whose shares are traded on the PSE.

 

A scripless trading 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, 2013, was supposed to ensure that information on all income payments made by employers and or other entities making payments 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."

 

On the other hand, RMC 05-14, issued on January 29, 2014, requires the tax identification number or TIN – as well as their complete names and the corresponding amount of income and withholding tax – to appear on the alpha.

 

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.

 

The SEC memo also require broker-dealers to provide the listed company and transfer agent an alphalist with 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 the right to privacy by requiring the disclosure of "sensitive personal information regarding an investor to a third party, not a government or public authority," the petitioners claimed. – VS, GMA News