Providing For Congressional Disapproval Of A Rule Submitted By The Securities And Exchange Commission
I thank Ranking Member Waters for yielding. Mr. Speaker, I rise in opposition to H.J. Res. 41 and in support of the SEC rule requiring resource extraction companies to disclose payments to governments. Historically, payment for resources…
I thank Ranking Member Waters for yielding.
Mr. Speaker, I rise in opposition to H.J. Res. 41 and in support of the SEC rule requiring resource extraction companies to disclose payments to governments.
Historically, payment for resources is a huge source of corruption in developing countries, which, for most of us, is morally abhorrent; but what I want to talk about is the competitive advantage that we gain when we embrace the principles of the democratic rule of law, transparency, and morality that our financial system depends upon. We passed Dodd-Frank to strengthen our financial system in a time of crisis but also to make it more transparent and effective for American consumers and investors.
Section 1504 of Dodd-Frank directed the SEC to publish a rule requiring issuers to disclose the types and amounts of payments for each project and to each government annually. The provision improved disclosures made to financial regulators and to investors.
Private and public institutional investors--representing trillions of dollars invested on behalf of American families--voiced support to the SEC in favor of the rule. There are two main reasons for this support from institutional investors:
First, all investors want to be able to review payments to all governments, to assess the exposure the issuer may have to corruption risk. The SEC has jurisdiction over compliance with the Foreign Corrupt Practices Act, and investors need to know whether fines for potentially corrupt payments could be levied against firms in which they are considering investing.
Investors should always have the right to know material information about the firms, and systemic noncompliance with the law is always material. It should not take an event of noncompliance that has been uncovered by the regulators to inform investors when simple transparency requirements, like the annual reporting of payments, can alert them to the risk.
Secondly, some investors may simply want to stay away from investments in firms that make payments to certain governments. Many resource-rich nations in the developing world lack a democratic rule of law and are often governed by oppressive regimes that exploit their land and environment, extracting resources for their rulers' financial gain at the expense of their citizens. Investors have the right to know this information because they own the company and may feel a moral responsibility for its action.
For these two reasons, extractive payments are information crucial to an investor's analysis of an issuer's securities.
The United States equity markets are the most efficient in the world because we have strong disclosure laws and strong enforcement at the SEC. The disclosure of payments made to foreign governments is a relevant factor in valuing securities and is crucial to avoiding asymmetries in information, which can and will be exploited. These disclosures actually enable the market to police an issuer by punishing excessive payments to questionable governments with a devaluation of its equities.
In short, there are three market-based reasons to disclose payments to foreign governments:
First, these disclosures promote market integrity; second, they provide investors with crucial information for valuing securities; third, they enable investors to make ethical values-based decisions on where they allocate their resources--a right that we should be enhancing rather than eroding.
I urge my colleagues to vote ``no'' on H.J. Res. 41.