Editors

Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Shruti J. Shah
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
Contributing Editor

Eric Carlson
Contributing Editor

Bill Steinman
Contributing Editor

SEC Adopts Extractive Issuers Disclosure Rule

The Securities and Exchange Commission on Wednesday adopted a controversial rule that requires issuers in the extractive industries to disclose all payments they make to foreign governments of $100,000 or more.

The rule covers all public mining and oil and gas companies.

It implements Section 1504 of the Dodd-Frank Act.

The SEC also adopted a ‘conflict minerals’ rule under Section 1502 of Dodd-Frank. It requires disclosure about the use of tantalum, tin, gold, or tungsten, among others, mined in the Democratic Republic of Congo or contiguous countries, or used to finance groups engaged in violent conflict in the region. 

The SEC commissioners adotped the conflict minerals rule on a 3-2 vote. 

The extractive industries disclosure rule, after recusals, passed on a 2-1 vote.

Commissioner Daniel M. Gallagher voted against both rules. He said they went beyond the SEC’s scope and expertise.

In his dissenting statement about the extractive industries rule, Commissioner Gallagher sounded the alarm about investment competition from the so-called Black Knights — countries that don’t require corporate transparency or enforce long-arm anti-corruption laws (a theme Andy Spalding has been talking about for a couple of years).

Commissioner Gallagher said,

And let’s be clear; we’re talking about real competition. Although it would be natural to assume that our large and familiar domestic oil and gas companies fill the list of the world’s top ten, that isn’t the case. State-owned oil companies, some of them truly huge even by reference to our largest domestic publicly held oil and gas companies, are major competitors. I am talking about national oil companies in Russia, China, Iran, and Venezuela among others. These companies do not operate in the highly transparent, intensely regulated world of U.S. issuers. And, they will reap competitive advantage through today’s rules.

The extractive industries disclosure rule applies to any one payment or series of payments of $100,000 or more made during the course of a fiscal year to the U.S. or foreign governments in exchange for extracting resources.

Initial costs for companies across the extractive industries to comply with the rule ranged from $44 million to $1 billion, with annual costs thereafter ranging from $200 million to $400 million.

The SEC’s August 22 release and fact sheet on the extractive industries rule are here.

In July, the FCPA Blog’s editors debated passage of the extractive industries rule here.

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