July 3, 2013

Federal Court Vacates SEC’s Resource Extraction Rule: Ball in SEC’s Court Now

The SEC’s loooong losing streak in major cases continues. Yesterday, Judge John Bates of the US District Court for DC vacated the SEC’s resource extraction rules and remanded the case back to the SEC (just before he leaves for another job). This case was brought jointly by the Chamber and the American Petroleum Institute. Oxfam America had joined the SEC as a defendant to defend the rule.

Either the SEC will appeal or it will conduct new rulemaking which takes into account the Judge’s twin concerns of public disclosure of individual payments to foreign governments and lack of an exemption for countries that have laws that bar disclosure of payment information. If the agency goes the rulemaking route, it may simply revise its existing rules or go through an entirely new rulemaking process (bear in mind the SEC has a new Chair and two new Commissioners coming in). Either way, the deadline of reporting payments starting October 1st is bound to be substantially delayed. The SEC can’t simply drop the rulemaking since adopting a rule is mandated by Dodd-Frank.

This does not bode well for the future of the conflict minerals rules, since a similar case is pending before the same court with a decision expected soon (oral argument took place two days ago in that case, as noted in this article). Nor does it bode well for federal agencies in general trying to promulgate rules, even though the Chamber lost one of these “cost-benefit analysis” cases against the CFTC last week…

Here is a Davis Polk blog; Cooley news brief; Reuters article and WSJ article. As the flood of memos comes in, I will post them in our “Resource Extraction” Practice Area.

SEC Announces Three New Enforcement Initiatives

Yesterday, the SEC issued a press release to announce these three new initiatives:

– “Financial Reporting and Audit Task Force” dedicated to detecting fraudulent or improper financial reporting.

– “Microcap Fraud Task Force” targeting abusive trading and fraudulent conduct in securities issued by microcap companies, including social media & website use.

– “Center for Risk and Quantitative Analytics” employing quantitative data and analysis to profile high-risk behaviors and transactions and support initiatives to detect misconduct.

Happy 4th! Stay Hydrated My Friends…

Looking forward to the “most interesting woman in the world” campaign! My favorite fact: “He once had an awkward moment, just to see how it feels.”

most int man.jpg

– Broc Romanek