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SEC Looks to Adopt Oil, Gas Disclosures After Decade of Setbacks

Dec. 10, 2020, 8:13 PM

The SEC will vote on whether to adopt a Dodd-Frank Act anti-corruption disclosure rule for oil, gas, and mining companies after a federal court and Congress scuttled previous versions of the regulation.

Jay Clayton, chairman of the Securities and Exchange Commission, set the vote on the resource extraction rule for a Dec. 16 public meeting, the agency said in a notice Wednesday. The meeting also will include votes on whether to approve new rules for investment adviser marketing and direct listings on the New York Stock Exchange.

Dodd-Frank directed the SEC in 2010 to create a requirement for public companies to report payments made to governments for extracting oil, gas, and minerals. The third iteration of the resource extraction regulation is before the agency now.

The SEC first adopted the rule in 2012, but the U.S. District Court for the District of Columbia threw it out after a challenge from the American Petroleum Institute. The oil and gas industry group argued that the agency’s cost-benefit analysis of the regulation was insufficient and the commission violated companies’ First Amendment rights.

The commission tried again in 2016 at the end of the Obama administration, but the Republican-led Congress in 2017 rejected the regulation under the Congressional Review Act.

The oil and gas industry has fought against the rule, saying their foreign competitors don’t need to make resource extraction payment disclosures. But companies like the U.K.’s BP, China’s Sinopec, and Russia’s Gazprom already do this kind of reporting due to similar regulations in other countries.

The SEC is basing the latest version of the rule on a proposal it issued last December. The proposal, which adds exemptions and eases other requirements from the 2016 version, aims to address congressional concerns about compliance costs and potential competitive harm, Clayton said at the time. The plan received no Democratic support on the commission.

Other Business

Commissioners Allison Lee and Caroline Crenshaw, the agency’s two Democrats, likely will be more receptive to at least one of the other matters on the SEC’s meeting agenda next week.

The commission in November 2019 voted unanimously to propose new regulations that would let investment advisers use testimonials in their online marketing and would make other updates to SEC advertising and solicitation rules.

Members of the financial services and social media industries were generally supportive of the proposal, but state securities had concerns about harm to retail investors.

The SEC also will have to weigh investor protection when it considers whether to endorse new NYSE rules that would let companies sell stock to raise money through direct listings, instead of with traditional initial public offerings in which banks underwrite shares. The commission must sign off on the rules in order for them to take effect.

The Council of Institutional Investors, which represents pension funds, successfully petitioned the SEC’s commissioners to review an agency staff decision in August to approve the NYSE rules.

The proposed regulations fall “way short” on investor protection, the council said in its petition. But NYSE has disagreed, saying the rules don’t pose a heightened risk to investors.

The meeting could include the last public votes by Clayton. He intends to step down at the end of the month.

—With assistance from Andrea Vittorio.

To contact the reporter on this story: Andrew Ramonas in Washington at aramonas@bloomberglaw.com

To contact the editors responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com, Melissa B. Robinson at mrobinson@bloomberglaw.com

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