November 12, 2012

SEC Denies Motion to Stay Resource Extraction Rules

Here’s news from Davis Polk’s Ning Chiu from this blog:

In early October, the American Petroleum Institute, Chamber of Commerce, Independent Petroleum Association of America and National Foreign Trade Counsel had filed a complaint and a petition for review in the D.C. Circuit Court of Section 13(q) of the Exchange Act, which under Dodd-Frank required the Commission to issue rules mandating reports by resource extraction issuers relating to payments made to a foreign government or the U.S. federal government in order to further the commercial development of oil, natural gas or minerals. The plaintiffs later submitted a motion requesting that the Commission stay the effective date of the final rules.

The SEC has now issued an order denying the motion to stay the implementation of the rules. The SEC adopting rules require issuers to comply for fiscal years ending after September 30, 2013, with each annual report due no later than 150 days after the end of the most recent fiscal year, such that the first reports would be due on February 28, 2014, at the earliest. This timing largely drove the Commission’s decision on this motion.

In denying the stay, the Commission indicates that they do not believe the plaintiffs have demonstrated imminent, irreparable harm, given that the court’s expedited briefing and argument schedule may determine the validity of the rules as soon as spring 2013. The Commission was also unpersuaded by the plaintiff’s claims of harm with respect to: (a) initial compliance costs to document the payment information required under the rule; (b) competitive disadvantage for new contracts; (c) detrimental effects on existing contracts where disclosure is prohibited; and (d) competitive harms resulting from competitors’ use of the disclosed information. In addition, the Commission found that the plaintiffs have not demonstrated a likelihood of success on the merits of their petition, based on the Commission’s view of the strength of the explanations set forth in the rule’s adopting release.

Corp Fin May Recommend Proposal Mandating Disclosure About Political Spending

Cooley’s Cydney Posner writes in this news brief:

The WSJ reports that Corp Fin is considering recommending a proposal that would mandate disclosure of corporate political spending and lobbying activities. According to the article, the idea for the proposal was triggered by a rulemaking petition submitted to the SEC last year by a group of academicians. The SEC has received over 300,000 comment letters on the petition. Currently, some companies voluntarily make disclosure about the uses of corporate resources for political activities, but there is no SEC requirement to do so, and most companies “are hesitant to disclose the donations, saying it is part of ordinary business operations.” The petitioners argued that the information is necessary to allow investors to hold corporations accountable, especially since the decision in Citizens United. In addition to the petition, there is also pressure on Corp Fin from the Coalition for Accountability in Political Spending, and one of the SEC commissioners has given a speech advocating rulemaking. According to the article, there have also been a record number of shareholder proposals related to corporate political spending and lobbying activities submitted in the 2012 proxy season.

PCAOB Makes Progress on Chinese Audit Access

I’ve blogged several times about the PCAOB’s challenges in gaining access to audits of Chinese companies listed on US exchanges (as well as blogged about the questionable audits of this companies). This Reuters article notes that there has been progress made in this area recently…

– Broc Romanek