U.S. SEC chair chastises Congress over new disclosure rulesFordham Law School in Reuters, October 03, 2013
The top U.S. securities regulator took Congress to task on Thursday for directing the agency to write rules that force companies to disclose information about political or social issues, saying such rules fall outside the regulator's mission.
"Recent disclosure directives from Congress have been quite prescriptive, essentially leaving no room for the SEC to exercise its independent expertise and judgment in deciding whether or not to make the specified mandated disclosures," said Securities and Exchange Commission Chair Mary Jo White in a speech delivered at a seminar at Fordham Law School.
As an example, White obliquely referenced one controversial rule required by the 2010 Dodd-Frank Wall Street reform law that forces manufacturers to disclose whether their products contain "conflict minerals" produced in the war-torn Democratic Republic of Congo.
The SEC in July won a legal challenge to the conflict minerals rule filed by industry groups, including the U.S. Chamber of Commerce. The groups, who had argued the rule was too costly and violated companies' free speech rights, are appealing that decision.
While the goals of the conflict minerals rule are "laudable," White said, these types of mandates "seem more directed at exerting societal pressure on companies to change behavior, rather than to disclose financial information that primarily informs investment decisions."
"As the Chair of the SEC, I must question, as a policy matter, using the federal securities laws and the SEC's powers of mandatory disclosure to accomplish these goals," she added.
Thursday marked the first time White has offered an opinion about the contentious debate surrounding exactly how the SEC should use its powers to mandate disclosures.
The issue has often pitted Democratic and Republican SEC commissioners against one another over the past few years.
As head of the agency, White controls the agenda. She is also the sole independent on the five-member panel, making her a likely swing vote on many key issues.
Her comments could potentially influence how the SEC proceeds in re-writing a second Dodd-Frank rule that forces oil, natural gas and mining companies to disclose the payments they make to foreign governments.
This so-called "resource extraction rule" was overturned in a federal court in July following a successful challenge by business trade groups.
The SEC in September opted not to appeal the ruling, saying it would go back to the drawing board and try again.
Human rights organizations and some members of Congress have urged the SEC not to water down the disclosure requirements, but the SEC has not yet discussed how a new rule may look.
White said she respects the requirement that the SEC must follow mandates from Congress and the White House, noting the commission cannot "just say no" if it disagrees with a policy.
But, she said, when possible, the SEC should "write the rule in a way that best comports with our view of our mission and tries to mitigate the costs."
It is unclear exactly what her comments could mean for proponents of another rule, not mandated by Congress, to force companies to disclose their political spending.
As of May, the SEC had received over 600,000 comment letters on a petition submitted to the agency that called for rulemaking on political contributions by corporations.
Liberal-leaning groups have been hopeful the SEC would take it up, though some at the SEC such as Republican Commissioner Dan Gallagher have said they would not support it.
White did not mention the political disclosure rule in her speech.
In a congressional hearing in May, she told lawmakers that SEC staff were not actively drafting a rule.