Securities and Exchange Commission v. 1Accountants Party-List, Inc.
REITERATIONFacts
The Antecedents: The Securities and Exchange Commission (SEC) issued Rule 68, paragraph 3 of the Amended Implementing Rules and Regulations (IRR) of the Securities Regulation Code (SRC) and SEC Memorandum Circular (MC) No. 13-2009. These regulations required Certified Public Accountants (CPAs) acting as external auditors for corporations issuing registered securities or possessing secondary licenses to obtain additional accreditation from the SEC. The regulations also imposed filing fees and a scale of fines for non-compliance, effectively creating a secondary licensing tier for the practice of public accountancy. Procedural History: 1Accountants Party-List, Inc., along with several individual CPAs, filed a Petition for Declaratory Relief with a prayer for a Preliminary Injunction and Temporary Restraining Order before the Regional Trial Court (RTC) of Davao City, Branch 15. They argued that the SEC issuances were ultra vires and contravened Republic Act (RA) No. 9298, which lodges the power to regulate the accounting profession with the Professional Regulatory Board of Accountancy (PRBOA). On March 20, 2018, the RTC declared the assailed issuances null and void for being unconstitutional and issued without authority. The Petition: The SEC filed a Petition for Review on Certiorari under Rule 45, asserting that it is authorized by the SRC and the Corporation Code to impose accreditation requirements to ensure the quality of financial reporting for the protection of the investing public. The SEC argued that these issuances fall under the State's police power and do not restrict the right to practice accountancy. Conversely, the respondents maintained that the SEC's jurisdiction is limited to juridical entities and that the power to supervise the accounting profession is exclusively delegated to the PRBOA.
Issue(s)
Whether the SEC has the authority to require additional accreditation for CPAs acting as external auditors. Whether the assailed issuances contravene RA 9298 and the principle of delegata potestas non potest delegari.
Ruling
The Supreme Court DENIED the petition and AFFIRMED the RTC Decision. Paragraph 3, Rule 68 of the IRR of the SRC and SEC MC No. 13-2009 are declared NULL and VOID.
Ratio Decidendi
On Issue 1: The Court held that the SEC's jurisdiction under the Securities Regulation Code (SRC) and the Corporation Code is limited to juridical entities such as corporations, partnerships, and associations. Applying the plain meaning rule (quoties in verbis nulla est ambiguitas), the Court found that the cited statutes do not extend the SEC's authority to individual professionals like Certified Public Accountants (CPAs). The SEC's power to regulate the securities market and require annual reports does not include the authority to restrict or license the practice of accountancy. All powers granted to the SEC flow from its supervision over corporations and cannot be used to impose additional burdens on professionals regulated by other bodies. Consequently, the SEC's attempt to regulate individual CPAs was an unauthorized extension of its statutory mandate. On Issue 2: The Court ruled that Republic Act (RA) No. 9298, or the Philippine Accountancy Act of 2004, exclusively delegates the power to supervise the accounting profession to the Professional Regulatory Board of Accountancy (PRBOA). The SEC's accreditation requirement functions as a secondary license, which, according to the precedent in Airlift Asia Customs Brokerage, Inc. v. Court of Appeals, constitutes an additional burden that curtails the right to practice a profession. Furthermore, the Court invoked the principle of delegata potestas non potest delegari, stating that a power delegated by Congress to a specific body cannot be further delegated or shared. Therefore, the Memorandum of Agreement (MOA) between the SEC and the PRBOA was void as it attempted to transfer a power reposed by law exclusively in the PRBOA. The SEC's issuances were thus declared null and void for being ultra vires and in violation of the exclusive regulatory authority of the PRBOA.
Main Doctrine
The power to supervise the accounting profession and to impose regulations on Certified Public Accountants (CPAs) is exclusively delegated to the Professional Regulatory Board of Accountancy (PRBOA) under Republic Act No. 9298. Any administrative issuance by another agency, such as the Securities and Exchange Commission (SEC), that imposes additional accreditation requirements on CPAs is ultra vires if it lacks express statutory authority. Furthermore, the principle of 'delegata potestas non potest delegari' prohibits a delegate from further delegating or sharing its reposed powers with another entity, even through a Memorandum of Agreement.