Case Digest: Securities and Exchange Commission v. 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 G.R. No. 246027, June 21, 2022 Supreme Court, En Banc Ponente: Justice Ricardo R. Rosario

 

FACTS

The Securities and Exchange Commission (SEC) sought review of the Decision and Order of the Regional Trial Court (RTC) of Davao City declaring Rule 68, paragraph 3 of the Amended Implementing Rules and Regulations (IRR) of Republic Act No. 8799 (Securities Regulation Code) and SEC Memorandum Circular No. 13, Series of 2009 null and void. The assailed regulations required Certified Public Accountants (CPAs) to obtain SEC accreditation before they could act as external auditors of corporations issuing registered securities and corporations with secondary licenses.

Respondents, composed of 1Accountants Party-List, Inc. and several CPAs, filed a petition for declaratory relief before the RTC. They argued that Republic Act No. 9298 (Philippine Accountancy Act of 2004) vested the authority to regulate the practice of accountancy exclusively in the Professional Regulatory Board of Accountancy (BOA) under the Professional Regulation Commission (PRC). According to them, the SEC exceeded its statutory authority by imposing an additional accreditation requirement on CPAs.

The RTC agreed with the respondents and declared the SEC regulations unconstitutional and ultra vires, ruling that the SEC had no authority to regulate the practice of accountancy because such power belongs exclusively to the BOA under R.A. No. 9298. The RTC also held that the accreditation requirement unlawfully restricted the right of CPAs to practice their profession. Aggrieved, the SEC elevated the case to the Supreme Court through a Petition for Review on Certiorari under Rule 45.

ISSUE

Whether or not the Securities and Exchange Commission has the authority under Republic Act No. 8799 (Securities Regulation Code) to require the accreditation of CPAs who act as external auditors of corporations issuing registered securities and corporations with secondary licenses.

Whether or not Rule 68, paragraph 3 of the SRC IRR and SEC Memorandum Circular No. 13, Series of 2009 are contrary to Republic Act No. 9298 (Philippine Accountancy Act of 2004) and therefore unconstitutional or ultra vires.

Whether or not the SEC's accreditation requirement constitutes an unauthorized regulation of the practice of accountancy, a function allegedly reserved exclusively to the Professional Regulatory Board of Accountancy.

HELD

The Supreme Court DENIED the petition and AFFIRMED the RTC Decision. The Court held that the SEC has no authority to require the accreditation of CPAs as a prerequisite to their practice as external auditors of corporations covered by the Securities Regulation Code. The Court ruled that Republic Act No. 9298 (Philippine Accountancy Act of 2004) expressly grants the Professional Regulatory Board of Accountancy, under the supervision of the PRC, the exclusive authority to regulate and supervise the practice of accountancy in the Philippines. Since Congress specifically vested this regulatory power in the BOA, the SEC could not create an additional licensing or accreditation requirement absent statutory authority.

The Court explained that while the Securities Regulation Code (Republic Act No. 8799) authorizes the SEC to regulate corporations and the securities market, such authority does not extend to regulating the accounting profession itself. Administrative agencies possess only those powers expressly granted by law or those necessarily implied from such grant. The SEC's accreditation requirement effectively imposed another qualification before a CPA could practice as an external auditor of covered corporations, thereby encroaching upon the authority of the BOA. Consequently, Rule 68, paragraph 3 of the SRC IRR and SEC Memorandum Circular No. 13, Series of 2009 were declared invalid for being contrary to R.A. No. 9298 and for being issued beyond the SEC's delegated authority (ultra vires).

The Court further emphasized that although the SEC may prescribe rules governing the submission and contents of audited financial statements to protect investors and ensure compliance with the Securities Regulation Code, it cannot regulate who may practice accountancy unless Congress expressly grants such authority. The power to regulate a profession belongs to the agency designated by statute. Accordingly, the accreditation requirement could not be justified as an incidental power of the SEC because it directly regulated the professional practice of CPAs rather than merely the corporations under its supervision.

Accordingly, the Supreme Court affirmed the RTC's declaration that Rule 68, paragraph 3 of the Implementing Rules and Regulations of the Securities Regulation Code and SEC Memorandum Circular No. 13, Series of 2009 were null and void insofar as they required SEC accreditation of CPAs acting as external auditors of covered corporations. The Court held that the SEC exceeded its rule-making authority, and the regulation of the accountancy profession remains vested in the Professional Regulatory Board of Accountancy pursuant to Republic Act No. 9298.