A federal judge Tuesday threw out the SEC’s extractive industry disclosure requirements enacted as part of 2010’s Dodd-Frank reform legislation.
The SEC adopted the rule in August last year. It requires oil, gas, and mining companies to disclose all payments they make of $100,000 or more to foreign governments.
The rule was opposed in court by industry groups and the U.S. Chamber of Commerce.
U.S. District Judge John Bates (left) said the SEC ‘misread the [Dodd Frank] statute to mandate public disclosure of the reports, and its decision to deny any exemption was, given the limited explanation provided, arbitrary and capricious.’
Those opposing the extractive industry rule said the ‘SEC should have allowed the companies to privately disclose the data to regulators, and that any public disclosures should be made through a more general compilation of the payments, to protect their commercial interests,’ according to a Reuters report.
Judge Bates was appointed to the federal court for the District of Columbia by President George W. Bush in December 2001. His court bio is here.
Those favoring disclosure argued that it was needed to hold rulers accountable, particularly those in poor, energy-rich countries.
(In July 2012, the FCPA Blog editors debated the pros and cons of the extractive industry rule here.)
Acting at the same time under another provision of the Dodd Frank Act, the SEC also adopted requirements for disclosing the use of conflict minerals.
That rule is under legal challenge on grounds similar to those argued in the extractive industry disclosure litigation.
The SEC’s 356-page conflict minerals rule requires reporting companies to disclose their use of tantalum, tin, gold, or tungsten mined in the Democratic Republic of the Congo or a contiguous country.
Industry groups have said the rules require disclosure that’s intrusive, unreasonably difficult and expensive to produce, and shouldn’t be part of public reports.