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USA: SEC's latest draft of payment disclosure rules for oil and mining companies draws criticism from anticorruption groups

On 18 December 2019, the US Securities and Exchange Commission (SEC) released the latest draft of the Dodd-Frank Section 1504 rule, which requires companies operating in the extractive industries and listed on US stock exchanges to disclose payments to governments. The draft rules - the SEC's third attempt at implementing Section 1504 - have received criticism from civil society for failing to adequately deter companies from engaging in corrupt practices. The proposal will undergo a 60-day comment period before the SEC votes on a final version. This story includes statements from Oxfam and Global Witness.

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Article
20 December 2019

Draft SEC oil and mining rule would facilitate corruption

Author: Oxfam

18 December 2019.

The SEC voted today to release the proposed rule for Section 1504, a provision in the 2010 Dodd-Frank Act...Section 1504 mandates regulations requiring all oil, gas, and mining companies listed on US stock exchanges to disclose the payments they make to government by project and by company. The SEC issued a strong rule in 2016 that Oxfam welcomed, but this rule was removed in 2017 by a Republican-controlled Congress and signed by President Trump. “This rule looks like a product of insider Beltway wheeling and dealing that prioritizes shady deals and irresponsible corporate actors over real American security,” said Isabel Munilla, Policy Lead for Extractive Industries Transparency at Oxfam America...Today’s proposal is followed by a 60-day comment period, after which the SEC will vote on a final rule. Commissioners Jackson and Lee voted against the proposal, arguing that a range of weaknesses needed to be fixed...

...Section 1504 inspired an international standard for oil and mining transparency. Sister laws soon followed in 30 countries, including in the European Union, Canada, and Norway. Today, Companies like BP, Shell, Total, Rio Tinto, and BHP Billiton, the world’s largest miner, as well as Russian and Chinese state-owned companies are publishing what they pay. “Companies are disclosing all over the world, at little to no cost,” said Munilla...The American oil industry has historically challenged mandated disclosure reforms...

If implemented properly, Section 1504 should counter the corruption and government abuse that catalyzes conflict, instability, and violent extremism around the world. It would also help protect American investors by giving them information they can use to assess investment risks in global markets. in fact, investors worth over $10 trillion in assets under management support project-level payment disclosures and alignment of the draft rule with the international standard on transparency...

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Article
20 December 2019

Proposed US oil anti-corruption rule would fail to deter corruption

Author: Global Witness

19 December 2019.

The US Securities and Exchange Commission (SEC) voted yesterday to release a proposal for an oil and mining payment transparency rule which falls far below the global standard...Also known as the Cardin-Lugar provision, it was once a beacon of US leadership in the global fight against oil and mining corruption. The SEC’s new draft implementation rule, however, would utterly fail to safeguard against corruption in the extractives sector and appears instead to be a massive handout to the oil and gas industry...

“Our grade for this proposed SEC rule: 'F'. Big Oil interests including the American Petroleum Institute have applied intense pressure to allow oil and gas companies to operate in opacity, and they’ve clearly made their mark. This proposal is riddled with loopholes, and eliminates meaningful reporting at the level of individual projects. In 25 years of investigating this sector, Global Witness has found time and again how transparency at the deal-making level is instrumental in deterring corrupt transactions...[says Zorka Milin, Senior Policy Advisor at Global Witness.]...

The SEC’s previous attempt to implement the Cardin-Lugar provision was overturned by Congress and President Trump in 2017. But Congress did not repeal the underlying statute that still requires SEC implementation, and Congressional disapproval of the previous rule does not justify such a complete gutting of the law, which is not defensible as a legal matter because it fails to meet the anti-corruption intent of the original law...

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Article
20 December 2019

SEC revives resource extraction disclosure rules

Author: Jaclyn Jaeger, Compliance Week

18 December 2019.

...The proposed rules would implement Section 13(q) of the Exchange Act, mandated by Section 1504 of the Dodd-Frank Act. The SEC first adopted rules in this area in 2012, but they were vacated by the U.S. District Court for the District of Columbia. The Commission adopted new rules in 2016, which were disapproved by a joint resolution of Congress pursuant to the Congressional Review Act...The latest version of proposed rules would require a domestic or foreign issuer to annually file a Form SD disclosing payments made to a foreign government or the U.S. federal government...

The proposed rules, for example, revise the definition of the term “project” to require disclosure at the national and major subnational political jurisdiction, as opposed to the contract level. It also revises the definition of “not de minimis” to include both a project threshold and an individual payment threshold, so that disclosure with respect to payments to governments that equal or exceed $150,000 would be required when the total of the individual payments related to a project equal or exceed $750,000...

The proposed rules add two new conditional exemptions for situations in which a foreign law or a pre-existing contract prohibits the required disclosure. Also exempted would be “smaller reporting companies” and “emerging growth companies.”...

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Article
20 December 2019

SEC's Latest Extractive Industry Rule Seeks to Lighten Compliance Burden

Author: Dylan Tokar, The Wall Street Journal

19 December 2019.

The U.S. Securities and Exchange Commission proposed a new version of a rule mandating the disclosure of payments by oil, gas and mining companies to foreign governments—one that seeks to lessen the compliance burden on those companies...By carving out exceptions to the disclosure rule and softening key definitions...the SEC now faces stiff opposition from the nongovernmental organizations and anticorruption groups that lobbied to have the requirement added to Dodd-Frank. “This proposal completely guts the law and fails to meet the original anticorruption purpose of the law,” said Zorka Milin, a senior legal adviser for Global Witness...

Dodd Frank was a financial regulation reform bill approved by Congress in the wake of the 2008 financial crisis. The section of the bill at issue requires oil, gas and mining companies to disclose annually their payments to foreign governments related to natural resource extraction...The SEC’s latest proposal, unveiled Wednesday, would still require public disclosure of reports regarding payments by oil, gas and mining companies. But information on payments in most cases would be aggregated at a national level, instead of on a contract-by-contract basis. That would be of no use to watchdog groups looking to hold companies accountable for potentially corrupt payments, said Kathleen Brophy, the director of Publish What You Pay US...

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