Tuesday, October 06, 2015

SEC Plans to Vote on Final Resource Extraction Disclosure Rule by June 2016

By John Filar Atwood

The SEC has complied with a court order to file an expedited schedule for promulgating final rules regarding disclosure of payments by resource extraction issuers, saying that it will vote on the rule on or before June 27, 2016. The Commission advised the court that this is an extremely demanding timeframe given the agency’s current workload and the divisive nature of the resource extraction disclosure issue (Oxfam America, Inc. v. SEC, October 2, 2015).

Background. The Dodd-Frank Act requires the SEC to issue rules requiring resource extraction issuers to include in an annual report information relating to any payment made by the issuer, a subsidiary of the issuer, or an entity under the control of the issuer, to a foreign government or the U.S. government for the purpose of the commercial development of oil, natural gas, or minerals. Under Exchange Act Section 13(q), a resource extraction issuer must provide, in an interactive date format, information about the type and total amount of the payments made for each project related to the commercial development of oil, natural gas, or minerals, and the type and total amount of payments made to each government.

The Commission adopted final rules in August 2012, but those rules were later vacated by the U.S. District Court for the District of Columbia. The D.C. district court remanded the issue to the SEC to fix any defective sections of the rules. The Commission did not propose any revisions, so Oxfam America, Inc. filed a lawsuit seeking to compel the SEC to take action on the rules.

Court order. In early September, the U.S. District Court for the District of Massachusetts ordered the SEC to file an expedited schedule for promulgating final rules regarding disclosure of payments by resource extraction issuers. The Commission was given 30 days in which to file the expedited schedule.

In the notice of proposed expedited rulemaking, the SEC advised the court that it proposes to hold a vote on the adoption of a final rule within 270 days of the notice. In order to meet that schedule, the Commission expects to hold a vote on a proposed rule before the end of 2015, and to afford members of the public a comment period of at least 45 days.

Challenging timetable. The Commission informed the court that 270 days would be a demanding rulemaking schedule under any circumstances, but is particularly challenging now because of the unprecedented volume of enforcement, rulemaking, and other regulatory work in which the agency is engaged. The SEC also cautioned that the rulemaking raises a number of policy issues that have caused sharp disagreement among members of the public, which further complicates the task of expediting the rulemaking.

A further complicating factor, according to the SEC, is that the Commission’s composition will likely change to a significant degree before the proposed June 2016 vote. Finally, the SEC advised the court that it may be delayed by unforeseen events such as a government shut-down, relevant international developments, or unexpected legal developments. If any of these occur, the Commission will promptly notify the court and seek an extension of time to complete the rulemaking.

The case is No. 1:14-cv-13648-DJC.

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