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Urges Securities and Exchange Commission to finish Section 1504 rules to follow Congress’ deadline
Washington, DC – International relief and development organization Oxfam America filed a lawsuit against the Securities and Exchange Commission (SEC) today for unlawfully withholding a final rule implementing Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The provision requires oil, gas and mining companies to disclose payments made to governments for the extraction of natural resources, and its full implementation will be a huge boost in the fight against corruption, mismanagement and poverty related to the sector. The information will also be important to investors as they evaluate the risks that securities issuers face when operating in often volatile environments.
“The SEC can finish strong and is required by Congress to act promptly,” said Ian Gary, senior policy manager of Oxfam America’s extractive industries program. “With transactions worth billions of dollars in oil, gas and mining projects taking place in some of the poorest, most corrupt and highest-risk countries in the world, citizens and investors simply cannot wait any longer. Other markets like the UK and France are implementing a European Union (EU) law modeled on the SEC’s original strong rules before the end of the year, making the Commission’s job easier to finish.”
When Congress enacted Section 1504 on July 21, 2010, it gave the SEC a 270-day deadline to promulgate rules. After Oxfam America sued for undue delay, the Commission issued a rule in August 2012, which was challenged in court by the American Petroleum Institute (API) and vacated on procedural grounds by the U.S. District Court on July 2, 2013. The SEC has yet to reissue a rule that complies with the District Court’s ruling. More than 1,500 days have passed since July 21, 2010, and more than a year since the Court’s ruling – putting the SEC in violation of its Congressional deadline. Yet the Commission has determined that it may not get started on the rulemaking until March 2015 and has indicated that it plans to take action on numerous other rulemakings that do not have a Congressional deadline before it turns to Section 1504.
Oxfam America is joined by Senators, Members of Congress, investors with more than $5.6 trillion in assets under management, and civil society groups asking the SEC to promptly issue a new rule. All of these groups have supported public, company-by-company, project-level disclosure without exemptions, reflecting the compelling interest citizens and investors have for this information. The API and member companies such as Exxon, Chevron, Shell and BP have fought to water down implementation of the provision, including seeking to keep disclosures anonymous. They have also sought exemptions for reporting in certain countries but the SEC has found evidence of the alleged legal impediments to reporting “unpersuasive.”
“The SEC should follow its Congressional mandate and allow the U.S. to resume its leadership on transparency by issuing public, company and project-level disclosure requirements with no exemptions,” said Gary. “In fact, the SEC can align its rules with those being implemented in Europe and still satisfy the requirements of the Court’s decision.”
In the past year, a global standard for payment transparency has emerged that makes the SEC’s job easier and shows government and investor interest in this data. The EU and Norway have adopted mandatory disclosure laws that mirror the SEC’s 2012 rules and Canada has committed to passing similar legislation by early next year. In August, the United Kingdom published draft regulations to implement EU disclosure laws modeled on Section 1504 by the end of this year, well in advance of the official EU deadline. By 2016, the EU requirements will be in effect in all 28 EU member states. Some companies already voluntarily disclose this information, providing a valuable source of information for governments and citizens to fight corruption, inefficiency and waste.
These laws have validated the SEC’s judgment as to the potential costs and benefits of public, company and project-level disclosures with no exemptions. Many SEC-listed extractive companies, such as Royal Dutch Shell, BP, BHP Billiton, Rio Tinto, Total, and Statoil are also covered by the European, Norwegian or Canadian regulations. They will therefore soon begin disclosing this information, increasing the incentives for the SEC to adopt rules that align with standards in these markets.
“The SEC can finish these rules promptly and satisfy Congress’ mandate – and we are eager to work with them to do so,” said Gary. “We continue to hope that they will act to issue strong rules, and then we will gladly drop this lawsuit.”
During the next few months, Oxfam America and its allies across the world will continue to provide the SEC with additional strong evidence of the usefulness of this data and the impacts similar disclosures are already having, the need for project-level disclosure rather than anonymous data, and the legal justification for issuing a robust rule.
Oxfam America is an international relief and development organization that creates lasting solutions to poverty, hunger, and injustice. Together with individuals and local groups in more than 90 countries, Oxfam saves lives, helps people overcome poverty, and fights for social justice. Oxfam America is an affiliate of Oxfam. To join our efforts or learn more, go to www.oxfamamerica.org
Note to editors:
- The UK draft regulations are available here: http://www.gov.uk/government/consultations/extractives-industries-reporting-implementing-the-eu-accounting-directive
- Oxfam America’s previous letter to the SEC, outlining the reasoning behind a potential lawsuit: http://www.sec.gov/comments/df-title-xv/resource-extraction-issuers/resourceextractionissuers-55.pdf
- The SEC’s order denying a stay request for implementation of the 2012 rule calling the evidence of host-country prohibitions on payment disclosures provided by the oil industry “unpersuasive.” http://www.sec.gov/rules/other/2012/34-68197.pdf
- A letter to the SEC from investors representing more than $5.6 trillion in assets under management: http://pwypusa.org/Investor_SECLetter_Re-Issue_1504Rules_Aug2013
- A letter from Senators calling on the SEC to reissue strong rules: http://pwypusa.org/Senate_SECLetter_Re-Issue_Rules_Aug2013
- A letter from 58 members of the House of Representatives calling on the SEC to complete the rules by the end of this year: http://democrats.financialservices.house.gov/FinancialSvcsDemMedia/file/001%20Maxine%20Waters%20letters/2014_06_11%20SEC%20Section%201504%20Letter.pdf