Case Summary (G.R. No. 213860)
Key Dates
– RR 1-2014 issued December 17, 2013
– RMC 5-2014 issued January 29, 2014
– SEC MC 10-2014 issued May 22, 2014
– TRO entered September 9, 2014
– En Banc decision promulgated July 5, 2022
Applicable Law
1987 Philippine Constitution; National Internal Revenue Code (Tax Code); Securities Regulation Code; Administrative Code of 1987; Data Privacy Act of 2012; Bank Secrecy Act; related BIR and SEC rules.
Factual Antecedents
– RR 2-1998 and its 2008 amendment allowed manual or optional digital “alphalists” listing payees of withholding taxes.
– RR 1-2014 mandated digital alphalists for all withholding agents (no exceptions), forbade lumped entries (“PCD Nominee,” etc.), and imposed penalties.
– RMC 5-2014 required specific data fields (TIN, full name, income, tax withheld).
– SEC MC 10-2014 directed PDTC and broker-dealers to furnish listed companies or their transfer agents with detailed alphalists of depository account holders and shareholdings.
Issues Presented
- Do petitioners have standing?
- Were notice, hearing and publication required?
- Did the issuances violate investor privacy and the Data Privacy Act?
- Did SEC exceed its authority in MC 10-2014? Do DOF/BIR exceed authority by regulating securities intermediaries?
- Is the prohibition on lumped entries clear and enforceable?
- Are banking secrecy laws breached?
- Any impairment of contracts?
Standing
Court finds petitioners suffer “injury-in-fact” (exposure to sanctions; business impacts), maintain close relation to affected investors, and investors face hindrances in litigating. Third-party standing exists.
Nature of the Issuances
The rules substantially altered long-standing scripless trading practices, imposed new obligations and penalties, and affected individual investors’ rights. They function as legislative (subordinate legislation) rather than mere interpretative rules.
Procedural Due Process Violation
As legislative rules, they required prior notice, hearing and publication under the Administrative Code. No such procedures were followed; issuances are void.
Right to Privacy and Data Privacy Act
Mandatory disclosure of sensitive personal data (TIN, names, addresses) intrudes on investors’ reasonable expectation of privacy. Old system sufficed for tax collection; new data gathering was not “necessary” for BIR’s functions. No safeguards were provided. Issuances violate the Constitution’s privacy guarantees and the Data Privacy Act.
Ultra Vires Exercise of Authority
– SEC MC 10-2014: SEC has no power to enforce tax regulations; issuance exceeds SRC-based authority.
– RR 1-2014 and RMC 5-2014: DOF/BIR lack jurisdiction to regulate securities intermediaries or prohibit PCD Nominee use; Securities Regulation Code governs uncertificated shares.
Vagueness and Compliance
Prohibition on lumped entries is clear: beneficial owners’ identit
...continue readingCase Syllabus (G.R. No. 213860)
Factual Antecedents
- On December 17, 2013, the Department of Finance (DOF), upon recommendation of the Commissioner of Internal Revenue (CIR), issued RR 1-2014 amending RR 2-1998 (as amended by RR 10-2008) on the submission of alphabetical payee lists.
- Under RR 1-2014 all withholding agents, regardless of employee/payee count, must submit digital alphalists via (1) eFPS attachment, (2) electronic submission to esubmission@bir.gov.ph, or (3) email in prescribed CSV format; manual lists—even for fewer than ten payees—were discontinued.
- On January 29, 2014, RMC 5-2014 clarified RR 1-2014 in Q&A form, mandating valid TINs, complete names, income amounts, and withholding figures in the alphalist; lumped entries such as “PCD nominees” were prohibited.
- On May 22, 2014, SEC MC 10-2014 directed PDTC and broker-dealers to furnish listed companies or authorized transfer agents an alphalist of all depository account holders with corresponding shareholdings within three days of record date.
- Failure to comply with any of the above regulations exposed withholding agents, PDTC, and broker-dealers to administrative and penal sanctions.
- Petitioners (PSE, BAP, PASBDI, FMAP, TOAP, MHI) filed a Petition for Certiorari and Prohibition (G.R. No. 213860) challenging the constitutionality of the three issuances for grave abuse of discretion, lack/excess of jurisdiction, due process and privacy violations, and ultra vires rule-making.
- On September 9, 2014, the Court issued a temporary restraining order (TRO) enjoining enforcement pending resolution.
Issues
- Do petitioners have legal and/or third-party standing to raise due process and privacy objections on behalf of their investor-clients?
- Are RR 1-2014, RMC 5-2014, and SEC MC 10-2014 valid legislative or mere interpretative rules under the Administrative Code (Book VII, Ch. 2, Secs. 3, 4, 9)?
- Did respondents violate procedural due process by issuing new regulatory burdens without prior notice, hearing, publication, or registration?
- Do the questioned regulations violate the fundamental right to privacy and the Data Privacy Act of 2012 by mandating disclosure of sensitive personal information without necessity or safeguards?
- Did the SEC Chairperson and DOF/CIR act ultra vires in enforcing tax regulation