The Securities and Exchange Commission voted Wednesday to propose another version of its rule to require resource extraction issuers to disclose payments to foreign governments for the commercial development of oil, natural gas, or minerals.
The SEC adopted the first version of its extractive industries disclosure rule in 2012, as required by the Dodd-Frank Act of 2010.
But in 2013 a federal court in Washington, DC struck down the rule. Judge John Bates said the SEC’s refusal to allow any exemptions from disclosure was “arbitrary and capricious.”
In response, the SEC rewrote the rule. The second version allowed reporting companies to pursue case-by-case exemptions for commercially sensitive information or to comply with foreign laws against disclosing the payments.
The rewritten version also died. In 2017 Congress used its authority under the Congressional Review Act to override the SEC and repeal the rule.
Despite Congress’s override and the earlier court decision, the SEC remained obligated by Dodd Frank to adopt a disclosure rule for extractive industries. That led to Wednesday’s third attempt.
The latest version would require resource extraction issuers to file a Form SD every year disclosing payments to any foreign government or to the U.S. federal government. Payments of $150,000 or more would be covered when total related payments are at least $750,000.
Payments from a subsidiary or controlled affiliate would also be included.
The SEC said the new version of the rule would exempt “smaller reporting companies and emerging growth companies.” There would also be relief for companies with recent IPOs.
Other new exemptions might apply if a foreign law or pre-existing contract prohibits the required disclosure.
Under the latest proposal, issuers would enjoy “limited liability” if they furnish the payment information to the SEC but don’t include it in securities filings available to the public.
The Foreign Corrupt Practices Act doesn’t prohibit payments to foreign governments. It only outlaws corrupt payments made directly or indirectly to foreign officials and political parties to obtain or retain business.
Governments typically control their country’s natural resources directly or through state-owned enterprises. Energy companies, for example, usually pay governments for the right to explore for oil and gas, and then pay royalties on the eventual production.
About a decade ago a coalition of NGOs first pushed for the disclosure rule. The NGOs included Christian Aid, Global Financial Integrity, Global Witness, and Transparency International. They said payments to foreign governments were often bribes in disguise and kept hidden from opposition politicians and local NGOs.
Business groups on the other side said forcing U.S. companies to disclose legal payments to governments could stigmatize the companies and impair their global competitiveness.
After it’s published in the Federal Register, the third version of the SEC’s extractive industries disclosure rule will have a 60-day public comment period before it becomes effective.