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.
- G.R. Number: G.R. No. 246027
- Promulgated: 2025-01-28
- Ponente: ROSARIO, J.
Doctrine
## Facts of the Case The Securities and Exchange Commission (SEC) filed a second Motion for Reconsideration (MR) of the Supreme Court's June 21, 2022 Decision and June 27, 2023 Resolution, which had affirmed a Regional Trial Court (RTC) Decision declaring null and void Rule 68, paragraph 3 of the Implementing Rules and Regulations (IRR) of Republic Act No. 8799 (Securities Regulation Code or SRC) and SEC Memorandum Circular No. 13, Series of 2009. These assailed regulations required the accreditation of Certified Public Accountants (CPAs) acting as external auditors for corporations issuing registered securities and possessing secondary licenses ("covered entities"). The RTC had found these regulations to be contrary to the Philippine Accountancy Act of 2004, unconstitutional, and ultra vires. The SEC argues that the accreditation requirement is necessary to promote capital market development, protect investors, ensure full disclosure, and prevent fraudulent practices, aligning with the State's policy. It contends that accreditation is voluntary for certain CPAs and ensures competent and reliable professionals for crucial functions, similar to other financial sector regulators like the Bangko Sentral ng Pilipinas (BSP), Insurance Commission (IC), and Philippine Deposit Insurance Corporation (PDIC), with whom the SEC has entered a Memorandum of Agreement (MOA). The SEC distinguishes licensure by the Professional Regulatory Board of Accountancy (BOA) as setting minimum standards, while accreditation focuses on continuous improvement and adherence to international best practices. It asserts that its power to regulate and supervise activities of persons under the SRC and promote corporate governance under the Revised Corporation Code (RCC) implicitly includes the power to accredit external auditors, especially given past instances of auditor complicity in fraud. It also notes that the regulations apply to less than 3% of registered corporations, discrediting claims of restricting the practice of accountancy. Respondents 1Accountants Party-List, Inc., et al., conversely, argue that the Philippine Accountancy Act exclusively delegates supervision, control, and regulation of the accountancy profession to the BOA, and the SEC's regulations act as unlawful co-regulation. They contend that neither the SRC nor the Corporation Code grants the SEC authority to impose additional licensing requirements on CPAs, which would encroach upon the BOA's authority. They also assert that the SEC's authority under the SRC does not extend to individual CPAs and, if accreditation were necessary, it should be imposed on those who prepare financial statements, not external auditors. ## Issues 1. Does the Securities and Exchange Commission (SEC) have the authority to require the accreditation of Certified Public Accountants (CPAs) acting as external auditors of corporations issuing registered securities and possessing secondary licenses (covered entities)? 2. Do the assailed regulations (Rule 68, paragraph 3 of the SRC IRR and SEC MC No. 13, s. 2009) amount to an unconstitutional curtailment of the right to practice the accountancy profession? 3. Does the Memorandum of Agreement (MOA) between the Professional Regulatory Board of Accountancy (BOA) and financial sector regulators constitute an undue delegation of legislative power? ## Decision / Rationale **Issue 1:** The Court ruled that the **SEC is authorized to require the accreditation of CPAs acting as external auditors of covered entities.** The Court found that the SEC's authority stems from both express and implied powers under the **Securities Regulation Code (SRC)** and the **Revised Corporation Code (RCC)**. Section 5(d) of the SRC empowers the SEC to "regulate, investigate or supervise the activities of persons" to ensure compliance, which includes natural persons like individual auditors. Section 72 of the SRC further authorizes the SEC to issue rules and regulations to effect the provisions…
Facts
The Securities and Exchange Commission (SEC) required Certified Public Accountants (CPAs) acting as external auditors for certain corporations to secure SEC accreditation, pursuant to its own regulations. 1Accountants Party-List, Inc. challenged this, arguing that only the Board of Accountancy (BOA) can regulate the profession. The Regional Trial Court and initially the Supreme Court sided with the accountants, declaring the SEC regulations void. The SEC filed a second motion for reconsideration, leading to this final resolution by the Supreme Court En Banc.
Issues
Whether the SEC has the authority to require accreditation for CPAs serving as external auditors of corporations issuing registered securities and possessing secondary licenses. Whether this accreditation requirement is unconstitutional and an ultra vires act that infringes upon the powers of the Board of Accountancy under the Philippine Accountancy Act of 2004.
Ruling
The Supreme Court granted the SEC's motion, reversing its previous rulings. It declared the SEC's accreditation requirement VALID and NOT UNCONSTITUTIONAL. The Court ruled that the power to accredit is implied in, necessary for, and incidental to the SEC's express mandate under the Securities Regulation Code and the Revised Corporation Code to protect investors, promote corporate governance, and ensure market integrity. The accreditation is not a regulation of the accountancy profession itself, but a quality control measure over the specific activity of auditing SEC-covered entities. This authority is further supported by the legislative intent in the Revised Corporation Code and is consistent with the powers of other financial regulators.
Keywords
Republic Act No. 8799 Securities Regulation Code (SRC), SEC Memorandum Circular No. 13, Series of 2009, Republic Act No. 9298 Philippine Accountancy Act of 2004, Section 5(d) SRC, Section 72 SRC, Rule 68 SRC IRR, Section 2 SRC, Section 31 Republic Act No. 9298, Revised Corporation Code Section 177, Delegata potestas non potest delegari, Principle of Lex Specialis Derogat Generali, Accreditation of External Auditors, Regulation of Professions, Securities Regulation, Practice of Accountancy, Corporate Governance, Ultra Vires, Certiorari, Ex-officio, Stare Decisis