Corporate Political Spending Disclosure Rule Can Proceed, Despite Omnibus Rider
- Scott Swenson, Dale Eisman
Congressional Leaders, Coalition Members Call on SEC to Continue Working on Rule
WASHINGTON, D.C. – The U.S. Securities and Exchange Commission (SEC) can work on a rule requiring corporate disclosure of political spending despite a policy rider contained in the omnibus budget approved last week, the Corporate Reform Coalition and congressional leaders said today.
Twenty-eight senators and 66 House members sent a letter today to the SEC accompanied by a legal opinion explaining that the agency is free to work on a rule to require disclosure of corporate political spending – despite a provision in the omnibus spending package prohibiting the SEC from using fiscal year 2016 funds to finalize the rule. The provision does not prohibit the SEC from discussing, planning, revising, investigating or developing plans or draft proposals for such a rule, the letter and legal opinion state.
Leading signers included Sens. Charles Schumer (D-NY), Robert Menendez (D-NJ), Jeff Merkley (D-OR) and Elizabeth Warren (D-MA), and Reps. Michael Capuano (D-MA) and Chris Van Hollen (D-MD). The legal opinion, written at the request of the Corporate Reform Coalition, was authored by John C. Coates IV, professor of law and economics at Harvard Law School.
“Had the Act been intended to restrict the SEC from using funds made available by the Act to engage in rule proposals or steps preliminary to rule proposals, it would not have used the phrase ‘finalize, issue or implement,’ but would have used the phrase ‘plan, propose, finalize, issue or implement’ or similarly broad language,” the opinion reads.
“We believe that disclosure of corporate political spending has immense value for investors and should be a top priority for the Commission,” the letter from lawmakers reads. “The ability of corporate executives to spend company resources for political purposes without shareholders’ knowledge raises significant investor protection and corporate governance concerns. Without transparency or disclosure, executives are free to spend funds invested by shareholders without accountability or monitoring.
The lawmakers concluded with the expectation that the agency will respect the urgency and need for the rulemaking and use its resources within the parameters of Section 707 to prepare for a final rule after fiscal year 2016. Lawmakers said they will ask for periodic updates from the agency to that end.
The Corporate Reform Coalition maintains that the SEC must protect investors and heed this request for action. Common Cause is a Corporate Reform Coalition member.
“For the sake of a functioning and accountable democracy, SEC Chair Mary Jo White should acknowledge the strong demand for a rule requiring disclosure of corporate political spending, and her agency should continue to work on the issue as allowed by the omnibus budget deal,” said Lisa Gilbert, director of Public Citizen’s Congress Watch division and co-chair of the Corporate Reform Coalition.
“While Congress – unwisely – has ruled out final SEC action on a disclosure rule in 2016, nothing in the omnibus spending bill prohibits continued work on the rule-making process that stops short of final issuance. The agency may continue to evaluate, plan and propose a rule that will help educate corporate leaders and stockholders on the importance of disclosure and encourage voluntary disclosure in the upcoming election,” said Common Cause President Miles Rapoport. “Members of Congress may be educated as well, and be persuaded to support continuing and completing the rule-making process after the 2016 election.”
The SEC has received more than 1.2 million public comments in favor of political spending disclosure, including from leading academics in securities law, investment managers and advisers, 70 major endowed foundations, Vanguard founder Jack Bogle and a number of state treasurers. Additionally, a group of former SEC commissioners, including former SEC Chairs Arthur Levitt (a Democrat) and Donaldson (a Republican), and former SEC Commissioner Bevis Longstreth (a Democrat), have commented in support.