WASHINGTON – U.S. Senator Ben Cardin (D-Md.), Ranking Member of the Senate Foreign Relations Committee, led 11 of his colleagues in a letter to the U.S. Securities and Exchange Commission (SEC) Tuesday, following up on the February repeal by Congressional Republicans of a SEC rule to increase transparency and accountability in extractive industries.
The SEC was instructed by Congress to issue its rule by Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, a provision written by Senator Cardin and former Republican Senator Dick Lugar. The ‘Cardin-Lugar’ provision instructed the SEC to create a rule requiring domestic and foreign oil, gas and mineral companies traded on U.S. stock exchanges to publish the payments they make to foreign governments as the price to operate in those countries.
In their letter, the Senators urge the SEC leadership to, “promptly re-issue a new anti-corruption rule implementing Section 1504…that is consistent with both Congressional intent and the extractive industry transparency laws in effect in thirty other countries.”
Joining Senator Cardin on the letter to the SEC are U.S. Senators Patrick Leahy (D-Vt.), Sherrod Brown (D-Ohio), Ed Markey (D-Mass.), Sheldon Whitehouse (D-R.I.), Tim Kaine (D-Va.), Jeanne Shaheen (D-N.H.), Bob Menendez (D-N.J.), Chris Coons (D-Del.), Elizabeth Warren (D-Mass.), Chris Murphy (D-Conn.) and Jeff Merkley (D-Ore.).
The Senators also added that, “this anti-corruption transparency rule is necessary, particularly in times of conflict and market volatility. In such an environment, transparency provides investors with essential clarity on the operations of company projects and their exposure to material reputational, expropriation, sanctions and other risks, which may be critical to their decision-making. Likewise, transparency is a critical tool to ensure that citizens in resource-rich countries can monitor the economic performance of oil, gas and mining projects and ensure that such revenues are used responsibly.”
The text of the letter follows and is available at this link:
The Honorable Michael Piwowar The Honorable Kara M. Stein
Acting Chair Commissioner
U.S. Securities and Exchange Commission U.S. Securities and Exchange Commission
100 F Street NE 100 F Street NE
Washington, D.C. 20549 Washington, D.C. 20549
Dear Acting Chair Piwowar and Commissioner Stein:
We write to urge the Securities and Exchange Commission (SEC) to promptly re-issue a new anti-corruption rule implementing Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) that is consistent with both Congressional intent and the extractive industry transparency laws in effect in thirty other countries. The recent enactment of H.J. Res 41 does not change the Commission’s legal obligation under the Dodd-Frank Act to promulgate a rule that is fully compliant with the text of Section 1504 and the investor protection and international transparency goals Congress intended.
We commend the Commission for the work undertaken during the rulemaking process that led to issuance of the final rule in June 2016. The voluminous record of this process, which involved extensive participation by covered issuers, investors, government agencies, civil society actors, and others, is reflected in the SEC’s balanced approach, which took into account the concerns of industry, investors and civil society actors. This record must be considered by the Commission in the new rulemaking.
We understand that several of our Senate colleagues recently wrote of their support for a rule that is consistent with the international standard and the transparency laws adopted in Europe in their letter of February 2, 2017. We agree on this point; aligning the rule with the transparency laws of the EU and Canada is critical to maintaining US leadership on transparency and fulfilling Congress’s statutory directive.
In their letter, our colleagues expressed their concern that some countries might prohibit disclosures, however there is no evidence in the record that Section 1504 or similar disclosures would conflict with foreign law. We know of no country that bans such disclosures. The experience of companies reporting under the rules in the EU, Canada and Norway, which provide for no exemptions, confirms there are no conflicting laws that would justify the Commission’s adoption of any rule-based exemptions, or the inclusion of hypothetical “fire sales” of assets in the cost-benefit analysis.
We note that the Commission nevertheless inserted safeguards in the 2016 rule, which allowed companies to apply for relief from disclosure on a case-by-case basis if a legitimate problem arises. While we reiterate that substantial evidence proves no such laws exist, a case-by-case approach capable of providing narrowly tailored relief, if necessary, is more appropriate than providing blanket exemptions that would conflict with the EU, Canadian and EITI reporting schemes and would undermine the statutory goal of promoting international transparency efforts.
This anti-corruption transparency rule is necessary, particularly in times of conflict and market volatility. In such an environment, transparency provides investors with essential clarity on the operations of company projects and their exposure to material reputational, expropriation, sanctions and other risks, which may be critical to their decision-making. Likewise, transparency is a critical tool to ensure that citizens in resource-rich countries can monitor the economic performance of oil, gas and mining projects and ensure that such revenues are used responsibly.
We applaud the Commission for its commitment to restore American leadership in promoting extractive sector transparency and encourage the Commission to produce a strong new rule in a timely way.