SEC Delay Ignores Congress, Harms Investors, Abets Corruption
The law, which was passed by Congress almost five years ago, requires US-listed oil, gas, and mining companies to publish what they pay to governments for access to natural resources, which would provide important information about transactions worth billions of dollars every year. Since the countries where these companies operate are often plagued by weak institutions or instability, these payments can be lost to corruption, waste, or mismanagement. But despite calls from citizens, investors and even industry for the long-awaited regulations, the SEC has repeatedly delayed its timeline for finishing the rule to implement Section 1504.
“The SEC continues to ignore the deadline set by Congress and has repeatedly pushed back its own timeline, even though it can quickly issue another strong rule that aligns with the global transparency standard,” said Ian Gary, senior policy manager of Oxfam America’s extractive industries program. “The evidence continues to stack up in favor of transparency, so there is no excuse for additional delay. We hope the Court will recognize that the SEC is required by law to act promptly and compel them to do so.”
Oxfam America sued the SEC last fall in an effort to force it to halt the delays and to finish the rule. Congress required the SEC to issue a final rule by April 17, 2011. When the Commission did issue a rule, the oil industry sued to overturn it – and the Court sent the rule back to the SEC on procedural grounds. However, the SEC remains bound by the Congressional mandate to finish the rule in a timely manner. Given the narrow focus of the Court’s decision, the SEC could reissue the same rule with stronger and more complete justifications and finish the process promptly.
“The SEC remains bound by its statutory mandate, yet they have repeatedly delayed their timeline while focusing on rules without a Congressional mandate,” said Jonathan Kaufman, Legal Policy Coordinator at EarthRights International and co-counsel representing Oxfam America in the lawsuit. “Congress has the prerogative to set policy priorities but the SEC does not have the right to reorder them. The Court should require the SEC to issue a rule promptly.”
The SEC’s job on the rule has gotten easier since similar transparency laws are now in place in the European Union, Canada, and Norway. American Petroleum Institute members like Shell and BP are covered by other laws, and Norway’s Statoil and UK-based Tullow Oil have already begun disclosing this information with no competitive harm. These companies have been applauded by transparency advocates, while providing important information to their investors and citizens of countries where they operate. The SEC has a clear standard to follow and most of the work is complete.
“The SEC has repeatedly pushed back its timeline and now says it may not start until next year, despite the fact that most of the rulemaking work has already been done,” said Gary. “Congress, investors, civil society, and even the oil, gas, and mining industry – have all called on the SEC to finish the job on transparency in a timely manner.”
After Oxfam sued the SEC in September, the Commission delayed its timeline twice. While its official projections indicate that it “expects” to “consider” a “proposed” rule by October of this year, it has admitted in court that it may not act until spring 2016 – more than 5 years after the deadline set by Congress – because “the Commission’s attentions necessarily shift.” This timeline could easily be pushed back again, which is why Oxfam is seeking a Court-enforced deadline.
“The SEC has argued that the Court should trust it to determine its own priorities and timelines, but given that it has already twice pushed back its own timeline for proposing a rule just since this litigation began, the Court should compel the Commission to act,” said Kaufman.
The District Court will now consider the case and issue a ruling in the lawsuit in the next few months.
- More information about Oxfam America’s lawsuit against the SEC is available here:http://www.oxfamamerica.org/press/oxfam-america-sues-sec-over-delay-on-oil-gas-and-mining-transparency-rules/
- For information on how organizations are already using similar information in Angola, Sierra Leone, Indonesia, and Zimbabwe, visit:
- http://www.sec.gov/comments/df-title-xv/resource-extraction-issuers/resourceextractionissuers-60.pdf (Angola)
- http://www.sec.gov/comments/df-title-xv/resource-extraction-issuers/resourceextractionissuers-61.pdf (Sierra Leone)
- 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