SEC Adopts
Transparency Rules for Landmark Extractives Industry Law
Source:
GFI ; http://www.gfintegrity.org/content/view/573/70/http://www.gfintegrity.org/content/view/573/70/
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 she witnessed “systemic
underpricing of oil and the discounting of prices for select foreign
companies.” Ms. 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.”
Keep the
conversation going
Follow
us on Twitter: https://twitter.com/TaxJusticeAfric
Like our
Facebook page: http://www.facebook.com/TaxJusticeNetworkAfrica
