Once upon a time, the federal securities laws had the parochial goal of ensuring that companies provided investors with information material to investment decisions. These days those laws are spreading their wings to accommodate all sorts of goals. Earlier this year, Congress directed the SEC to require companies to disclose their ties to rogue states. Last month, New York Congressmen Anthony Weiner and Steve Israel introduced the Publish What You Pay Act of 2004, a bill that would require issuers to disclose in SEC reports payments made to foreign governments for the extraction of natural resources.
And what is it written in such bill you ask me?
The Securities and Exchange Commission shall revise its rules and regulations . . . to require each [reporting] issuer to disclose in the annual and quarterly reports of such issuer the aggregate payments by such issuer made in connection with the securing of exploration, development, exploitation, extraction, and production rights for natural resources to any foreign government or any other public entity of a foreign country. Such aggregate payments shall include taxes, royalties, fees, and other amounts paid in such connection.
Protection from the world
The Congressmen’s joint press release reports that these disclosures will protect U.S. companies and consumers from corrupt foreign governments:
“The added sunshine on these deals will level the playing field, and allow corporations to make reasoned judgments about the costs and returns associated with contracting with a particular foreign government,” said Rep. Weiner. “Corrupt regimes will be less able to shake down one corporation and move on to another because everyone will know what’s going on. Just as important, investors will know that their dollars are being spent wisely.”
Israel added, “With the release of today’s report, Americans find that the record high prices they’re paying at the pump are being spent to prop up dictators and pay off corrupt regimes. This legislation requires full disclosure so that we can finally open the books to consumers, investors and government officials and slam the door on corruption and human rights abuse.”
The oversight that is too large to not correct
Nothing in the law would require private companies, or foreign companies not obligated to report in the U.S., from making unreasoned judgments when contracting with corrupt foreign governments. I suppose that oversight could be fixed during the rulemaking process.
The federal securities laws: Is there any problem they can’t solve?
Update on the story
An alert reader points out that the Investor Network on Climate Risk is trying to get the SEC to require issuers to discuss global warming risks in their SEC reports. See “Thirteen Pension Leaders Call on SEC Chairman to Require Global Warming Risks in Corporate Disclosure” from the INCR website. The Cardin-Lugar provision in the Dodd-Frank Act was passed into law in 2010 so the companies had to start publishing the pieces of information regarding on what they pay in the countries in which they operate. In May 2016 launched a collaborative space focused on using extractive sector payment transparency data.