CORPORATE REFORM COALITION: Corporate Political Spending Disclosure Rule Can Proceed Despite Omnibus Rider

Dec. 22, 2015

CORPORATE REFORM COALITION: Corporate Political Spending Disclosure Rule Can Proceed Despite Omnibus Rider

Congressional Leaders and Coalition Members Call on SEC to Work on the 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 members of Congress today sent a letter to the SEC 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 letter was signed by U.S. Sens. Charles Schumer (D-N.Y.), Robert Menendez (D-N.J.), Jeff Merkley (D-Ore.) and Elizabeth Warren (D-Mass.), and U.S. Reps. Michael Capuano (D-Mass.) and Chris Van Hollen (D-Md.).

“We believe that disclosure of corporate political spending has immense value for investors and should be a top priority for the Commission,” the letter 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 stressed the urgency and need for a final rule after fiscal year 2016 and said they will request periodic updates from the SEC to that end.

Also today, the Corporate Reform Coalition shared a legal opinion (PDF) written by John Coates, professor of law and economics at Harvard Law School, advising that the SEC may continue discussing, planning, revising, investigating and developing plans or draft proposals for a corporate political spending disclosure rule.

“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. “Any other conclusion would render language in those sections surplusage, inconsistent with customary principles of statutory interpretation.”

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 William Donaldson (a Republican), and former SEC Commissioner Bevis Longstreth (a Democrat) have commented in support.

“SEC Chair Mary Jo White should acknowledge the strong demand for a rule requiring disclosure of corporate political spending and press forward,” said Lisa Gilbert, director of Public Citizen’s Congress Watch division and co-chair of the Corporate Reform Coalition. “The 2016 fiscal year ends in September, a mere nine months from now. When the fiscal year ends, so does the prohibition on finishing and implementing the rule. The clock is ticking, and the SEC needs to have the disclosure rule all but finalized by fall.”

Read the letter.

Read the legal opinion (PDF).

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