The Securities and Exchange Commission (SEC) risks undermining Congress, the global transparency movement, and the agency’s own legacy with a last-minute vote on a critical oil and mining anticorruption provision warned Oxfam.
The SEC is scheduled to vote tomorrow, Wednesday, December 16 on a final rule implementing Section 1504, a provision in the 2010 Dodd-Frank Act. Section 1504 mandates regulations requiring all oil, gas, and mining companies listed on US stock exchanges to disclose the payments they make to governments around the world by project and by company. The SEC issued a strong rule in 2016 that Oxfam welcomed, but this rule was gutted in 2017 by a Republican-controlled Congress and signed by President Trump.
“While we do not know the text of the final rule, if it’s anything like the proposed version we have seen, it will be a handout to kleptocrats and industry insiders who prefer to keep the public in the dark,” said Daniel Mulé, senior policy advisor for tax and extractive industries at Oxfam. “This rulemaking process has stalled but is now being rushed as part of a broader effort by the Trump administration to burn good governance measures on their way out of town.”
In December 2019, Oxfam warned that the proposed rule for Section 1504 was too favorable to industry interests, out of line with other markets and global transparency standards, and ran counter to congressional intent. SEC Commissioners Jackson and Lee voted against the proposal at that time, arguing that a range of weaknesses needed to be fixed. Oxfam, the Publish What You Pay coalition, and investor groups, among others, submitted extensive comments on the draft rule this year.
“The SEC must put partisan political agendas aside and prioritize the informed, technical advice from investors, industry leaders, and natural resource experts who provided overwhelmingly evidence in favor of a strong rule consistent with regulations in other markets,” continued Mulé. “Secret deals and clandestine payments in the oil and mining sector demand serious, thoughtful action. The US must play a leading role in the global fight against corruption, not lag further behind.”
The vote at the SEC this week on Section 1504 follows the passing of the Corporate Transparency Act last week by veto-proof majorities in both the House and Senate. The act bans the use of anonymous shell companies and follows years of bipartisan campaigning by anticorruption groups. The incoming Biden administration has also committed to making the fight against corruption a foreign policy priority.
“With this vote, in his final days in office, SEC Chair Clayton will cement his legacy as either a fighter or enabler of corruption,” said Mulé. “There is still time for this SEC to take transparency seriously, and resist pressure from the Trump administration and industry insiders demanding one more midnight giveaway. The SEC should not vote on a rule at odds with the global standard, congressional intent, and the overwhelming weight of evidence in the record. "
Oxfam has championed a strong rule for over a decade to help counter the corruption and government waste and abuse that catalyzes conflict and instability around the world. A strong rule would also protect American investors by giving them information they can use to assess investment risks in global markets. Investors worth over $10 trillion in assets under management support project-level payment disclosures and alignment of the draft rule with the international standard on transparency.