by Cydney Posner
As if we needed more evidence of dysfunction in our legislative branch, both the Senate and House have floated appropriations bills that include little “love notes” to the SEC. Both address some of their respective hot buttons. The House bill (HR 5016) has been adopted, while the Senate version is just in draft form from the Senate Appropriations Committee.
The House bill provides, in Section 626, that “[n]one of the funds made available by this Act shall be used by the Securities and Exchange Commission to finalize, issue, or implement any rule, regulation, or order regarding the disclosure of political contributions, contributions to tax exempt organizations, or dues paid to trade associations.” This provision is clearly intended to address the various rule-making petitions submitted to the SEC as well as SEC indications that it intended to propose new rules regarding disclosure of political contributions. (See my news briefs of 4/25/13, 2/26/13, 11/8/12, 6/7/12, 7/20/11 and 7/14/11) Nothing regarding political contributions disclosure was on the SEC’s 2014 fall agenda, however, and there was some speculation that Chair Mary Jo White was pressured to avoid raising the issue. (See my news brief of 12/2/13.)
The message from the report related to the draft Senate Appropriations Committee bill sends quite a different message. First, the Committee voiced its concern that “a company’s association with sponsors of terrorism and human rights abuses, no matter how large or small, can have a materially adverse result on a public company’s operations, financial condition, earnings, and stock prices, all of which can negatively affect the value of an investment. Investors and consumers also have a reasonable right to know what activities their investments or purchases may be directly or indirectly supporting…. The Committee is concerned that current SEC regulations leave broad discretion to companies to decide if disclosure of their activities is required with respect to business interests in or with a state sponsor of terrorism. The Committee urges the SEC to institute mechanisms to facilitate greater access to companies’ disclosures concerning their business activities in or with state sponsors of terrorism.”
Second, the Committee took note that, under Dodd-Frank, the SEC was “mandated to issue a rule that requires mandatory public disclosures for listed companies in the extractive industries in order to protect investors. Therefore, the Committee directs the Commission to propose and finalize a rule, not later than 120 days after the date of the enactment of this act, that requires each listed company to make disaggregated, project-level payment information publicly available, with no exceptions for activities in countries attempting to bar such disclosures, to enable investors to make decisions with sufficient understanding of the risks and opportunities associated with investing in a specific extractive company.” Of course, the SEC did adopt resource extraction rules, but they were struck down by the D.C. Circuit in 2013. (See my news briefs of 10/11/12, 7/2/13 and 9/3/13.) In that case, the Court concluded that the SEC should have allowed companies to publicly disclose only a compilation of reports (not project-level data) and should have exempted public disclosure of payments to countries that prohibit disclosure of payment information. There was also some skepticism during oral argument as to whether any public disclosure of payment data was required at all and whether the data could instead have been provided the SEC privately. The SEC has not yet attempted to rewrite those rules. Obviously, the Committee would like to tell the SEC that it’s time to promulgate those rules again and, in the likely event of future challenges to the rules the SEC eventually adopts, to advise the courts as to its intent in adopting that provision of Dodd-Frank.
What are the chances of any these provisions or expressions of intent being included in any final appropriations bill or final report? Probably zero. The most likely result is a clean bill or continuing resolution, unless, of course, we have another government shutdown.