The SEC adopted rules yesterday that require oil, gas and mining companies to disclose the payments they make to foreign governments. These rules implement Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which mandates such disclosures.
For too long, oil companies have made payments to foreign governments in secret. This has made it easy for foreign officials to misuse or outright steal their people’s money, and exceedingly difficult for NGOs, journalists and civil society to track government revenues and root out fraud, waste and corruption. In short, secrecy is a major contributor to the resource curse, which is the paradox that many resource-rich countries that should be well-off actually experience lower growth and far greater poverty than resource-poor countries. Section 1504 is designed to combat the resource curse, as well as to protect investors by ensuring that they have sufficient information to assess political risk.
Industry lobbyists had asked the SEC to create a series of exemptions and other loop holes that were at odds with Congress’ intent to create a real reporting requirement. Those efforts are described in Maia’s post from last week. While we are still in the process of reviewing the full 232 pages of rule text released late yesterday afternoon, based on the description of the rules offered by SEC staffers at yesterday’s hearing and a preliminary reading, the SEC at least appears to have rejected most of the extractive industry’s attempts to gut the statute. If so, that would be a big victory for those who have long labored to end secret payments and the resource curse, and for millions of people in resource rich nations.
We also note that the fact that the SEC adopted any rules at all is itself a victory for ERI and our client Oxfam America in its suit against the SEC. Yesterday’s rules were adopted 16 months after the statutory deadline imposed by Section 1504. Because the rules were so late, we sued the SEC seeking a court order that the SEC issue the rules that Congress required. We are gratified that the SEC has finally acted.