Monday, February 20, 2012

In letter to SEC, Bill Gates Emphasizes Need for Strong Regulations on Dodd-Frank Resource Extraction Provisions

It is critical to ensure that the final regulations implementing the Dodd-Frank provisions on the disclosure of payments by resource extraction issuers are strong and robust and in keeping with Congressional intent, said Bill Gates in a letter to the SEC. Mr. Gates is particularly interested in these regulations in light of the report on financing for development that he presented to G20 leaders last year in which he referred to the U.S. government's important lead role in enacting legislation requiring exchange-listed mining and oil companies to disclose payments to governments and recommended that other G20 countries follow the U.S. government's lead and endorse legally binding transparency requirements. In his view, transparency of financial flows is critical to ensuring that valuable natural resources in Africa and elsewhere are transformed into public benefits.

Section 1504 requires companies to report the type and total amount of payments made for each project as well as the type and total amount of such payments made to each government.

The legislative intent of Section 1504 is clear, posited Mr. Gates, to make publicly available and easily accessible the detailed information on the payments companies engaged in the commercial extraction of oil, gas, and mining resources made to governments around the world, country by country, project by project, and payment type by payment type.

These provisions are consistent with and should reinforce the U.S government's long-standing policy against corruption, such as the Foreign Corrupt Practices Act, which details the obligations of corporations doing business in the U.S. to refrain from the bribery and corruption of overseas officials.

According to Mr. Gates, a primary goal for the disclosure of payments by resource extraction issuers is to make this information available to citizens when their own government denies them access. It is in the most secretive jurisdictions that corruption, poverty, and instability flourish, he noted, and the risk to investors is greatest. He stressed that any exemption from reporting payments to governments that object to such disclosure would defeat a primary purpose of the Dodd-Frank provision.

It is also important to seek disclosure below the country level. In his view, project level reporting will give both citizens and investors valuable information. Defining the term "project" in the regulations as activities in a particular geologic basin or province would be of limited use to both citizens and investors. This concept also has no relation to how companies actually make payments to governments. Royalty rates, tax payments, cost recovery, tax holidays, and the like are defined in laws, leases, and licenses, not by geologic basin. Defining projects in an artificial manner would increase compliance costs while greatly reducing the benefits to users, he noted, and would require companies to create new databases
unrelated to how they currently pay most taxes.

Finally, and more broadly, Mr. Gates said that the SEC has a mandate to implement final regulations reflecting the intent and reporting requirements established by. Congress, adding that such regulations would be consistent with emerging international practice, and reinforce a competitive and level playing field for U.S. corporations and foreign companies.