G.R. No. 246027 , January 28, 2025
SECURITIES AND EXCHANGE COMMISSION, PETITIONER, VS. 1ACCOUNTANTS PARTY-LIST, INC., REPRESENTED BY ITS PRESIDENT, CHRISTIAN JAY D. LIM, CHRISTIAN JAY D. LIM IN HIS PERSONAL CAPACITY AS CPA, FROILAN G. AMPIL, ALLAN M. BASARTE, VIRGILIO F. AGUNOD, AND JONAS P. MASCARIÑAS, RESPONDENTS.

FACTS

This case involves a second Motion for Reconsideration filed by the Securities and Exchange Commission (SEC). The ponencia reconsidered its earlier Decision dated June 21, 2022, and now declares as valid Rule 68, paragraph 3 of the Implementing Rules and Regulations (IRR) of Republic Act (R.A.) No. 8799 (the Securities Regulation Code), as amended, and SEC Memorandum Circular No. 13, s. 2009. These rules authorize the SEC to require the accreditation of Certified Public Accountants (CPAs) acting as external auditors for corporations issuing registered securities and possessing secondary licenses (covered entities). The dissenting opinion disagrees with this reversal, maintaining that the said rules are null and void.

ISSUE

Whether Rule 68, paragraph 3 of the IRR of R.A. No. 8799 , as amended, and SEC Memorandum Circular No. 13, s. 2009, which require SEC accreditation of CPAs acting as external auditors for covered entities, are valid.

RULING

The dissenting opinion argues that the SEC accreditation requirement is invalid. The ponencia justifies the SEC’s power based on Section 5(n) of the SRC (granting implied powers necessary to carry out express powers) and Section 72 (granting rule-making power), read together with Section 5(d) (power to regulate and ensure compliance). It also cites Section 179(p) of the Revised Corporation Code (RCC) (granting necessary or incidental powers) and Section 179(d) (power to issue rules for corporate governance).
The dissent counters that the doctrine of necessary implication requires a gap or omission in the law to operate. Here, there is no gap because the power to accredit individual CPAs, including external auditors, is expressly vested by R.A. No. 9298 (the Philippine Accountancy Act of 2004) in the Professional Regulatory Board of Accountancy (BOA) and the Professional Regulation Commission (PRC). The SEC cannot claim an implied power to accredit when that power resides in another agency. The case of Gatchalian v. Urrutia is cited by analogy, stating that the power to appoint implies the power to remove, except when the power to remove is expressly vested by law in another authority.
Regarding Section 177 of the RCC, which governs reportorial requirements, the ponencia interprets the phrase “[e]xcept as otherwise provided in this Code or in the rules issued by the Commission” as allowing the SEC to create exceptions to the general rule that an auditor need only be an independent CPA, such as requiring SEC accreditation. The dissent disagrees, stating this phrase modifies the submission requirement for corporations, not the qualification of the auditor. It simply means the SEC may exempt a corporation from the submission requirement itself.
The dissent further notes the legislative history of Section 177 RCC. Precursor bills (House Bills Nos. 528 and 877, and Senate Bill No. 1280) initially included language requiring auditor accreditation by the SEC or the BOA with possible additional SEC requirements. However, this accreditation requirement was deliberately omitted from the final version of the RCC (House Bill No. 8374). The only requirement retained was that the auditor be an independent CPA. The logical conclusion is that the Legislature did not intend to require independent CPAs to be SEC-accredited.
Therefore, the dissenting opinion concludes that the SEC’s accreditation requirement for CPAs auditing covered entities is an invalid exercise of power, as it encroaches upon the accreditation authority expressly granted by law to the BOA and PRC, and contravenes the deliberate legislative intent reflected in the final text of the Revised Corporation Code.