SEC Adopts Transparency Rules for Landmark Extractives Industry Law
WASHINGTON, DC – More than two years after the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the U.S. Securities and Exchange Commission (SEC) today voted to adopt implementing rules for Section 1504 of the legislation, which requires companies operating in the oil, gas, and mining sectors to publicly report on the payments they make to foreign governments. The release of the rules enables Section 1504 to finally take effect, and the effected companies will shortly need to begin reporting as required by law.
While Global Financial Integrity (GFI), a Washington-based research and advocacy organization which supports the transparency law, cannot yet definitively comment on the content of the implementing rules—the organization is currently in the process of thoroughly reviewing the regulations—GFI welcomed the scheduling of today’s vote and noted both some heartening and discouraging language from the SEC meeting.
“We are happy to see the SEC move forward with issuing rules today for Section 1504,” said Heather Lowe, Legal Counsel and Director of Government Affairs at GFI. “After all, we’re more than a year past the April 2011 deadline for releasing the rules required by law.”
“We are very heartened by statements made by SEC staff at the meeting suggesting that the implementing rules will not provide exemptions on reporting information for countries that may forbid such disclosure,” added Lowe. “Still, there were some comments made by SEC staff about provisions of the rules that were concerning to us. Until we review the rules carefully, we cannot verify the accuracy or strength of any of those comments.”
Section 1504, also known as the Cardin-Lugar provision, has garnered praise from civil society groups around the world as an historic measure to bring increased stability, accountability, and transparency to a multi-billion dollar, global industry.
“As legislated, Cardin-Lugar will help combat everything from undisclosed investor risk to tax evasion to corruption,” noted Ms. Lowe. “It is a game changer, put simply, for good corporate governance efforts worldwide as well as for governance efforts in the countries in which extractive companies operate.”
GFI estimates that developing countries lose roughly $1 trillion per year to crime, corruption and tax evasion, much of which is facilitated by opacity in the global financial system. The organization explained that the transparency measures included in Sec. 1504 could help significantly curtail these illicit outflows.
For example, Libya—the tenth biggest oil exporter worldwide—lost $43.32 billion in illicit outflows from 2000-2009, according to GFI’s research. Over the weekend, Najwa al-Beshti, the former head of contracts at Libya’s state-owned oil company, wrote in The New York Times that he witnessed “systemic underpricing of oil and the discounting of prices for select foreign companies.” Mr. al-Beshti goes on to argue that Section 1504 “can help prevent such corruption from happening again,” thereby helping to “prevent future tyrants from emerging.”
“If the SEC’s implementing rules issued today are strong, they will help curtail corruption, money laundering, and corporate tax evasion in Libya, Angola, Nigeria and elsewhere,” added Lowe. “It would be a significant advancement for the developing world and for investors.”
Global Financial Integrity is a member of the Publish What You Pay Coalition, which is sponsoring a conference call press briefing to discuss the final rules at 10am EDT on Thursday, August 23, 2012—the morning after the rules are to be released. The panel—made up of experts from Publish What You Pay US, Oxfam America, ONE, Revenue Watch Institute, and Global Witness—will provide an in-depth analysis of the rules, explaining specific rule requirements and their implications for investors, civil society groups, citizens in resource-rich countries and the United States, as well as forthcoming European Union rules. Scroll down for more information on the event.
Notes to Editors:
· Click here (.DOC) to read the SEC’s “Fact Sheet” on the implementing rules.
· Click here to read GFI Director Raymond Baker and Global Witness’s Corinna Gilfillan’s CNN op-ed, “More reform for oil industry needed,” August 7, 2012.
· Click here to read Najwa al-Beshti’s New York Times Op-Ed, “A Libyan’s Plea to the S.E.C.,” from August 18, 2012.
· Click here to see a slide-show on the costs of corruption for the top ten oil exporting countries in the world compiled by GFI for the Huffington Post.
Tele-Press Briefing Analyzing Final Rules for Oil and Mining Transparency Provision of Dodd-Frank Act
Analysis follows SEC’s Long-delayed Vote on Regulations
WHAT: Members of the Publish What You Pay US coalition, will brief journalists August 23 at 10 am on the final rules of Section 1504 or “Cardin-Lugar” provision to be released by the Securities and Exchange Commission on August 22. The panel, made up of experts from Oxfam America, ONE, Revenue Watch Institute and Global Witness, will provide an in-depth analysis of the rules, explaining specific rule requirements and their implications for investors, civil society groups, citizens in resource-rich countries and the United States, as well as forthcoming European Union rules.
WHY: After missing the statutory deadline of April 11, 2011, the SEC will vote August 22 on Section 1504 of the Dodd-Frank Consumer and Protection Act. The law will require 90 percent of the largest internationally operating oil companies and many of the top international mining companies to publicly disclose payments for oil, gas and minerals, for each country and for each project, as part of annual financial statements required by the SEC. The historic measure could help address the “resource curse” in countries suffering from corruption and mismanagement of oil revenues.
· Isabel Munilla – Director, Publish What You Pay US
· Karin Lissakers – President, Revenue Watch Institute
· Ian Gary – Senior Policy Manager, Oxfam America
· Jamie Drummond – Co-Founder and Executive Director, ONE
· Simon Taylor – Co-Founder and Director, Global Witness
WHEN: August 23, 2012, 10am EDT