Dissenting Statement at Open Meeting on Resource Extraction

Commissioner Michael S. Piwowar

Washington D.C.

Thank you, Chair White.

Look, if you had, one shot, or one opportunity
to seize everything you ever wanted, in one moment
would you capture it, or just let it slip?

That pretty much sums up the efforts of the special interest groups behind this proposal. There is a reason that the resource extraction provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”)[2] was inserted at the last minute into Title XV, which was awkwardly labeled as “Miscellaneous Provisions,” along with disclosure provisions for mine safety and conflict minerals. Disclosure of resource extraction payments neither reforms Wall Street nor provides consumer protection and it is wholly unrelated, and largely contrary, to the Commission’s core mission.

During the drafting and adoption of Dodd-Frank, I had a front row view of the proceedings as a staffer for the Senate Banking Committee. Despite the early efforts of several Senators and Representatives to craft a bipartisan financial reform bill — as has been the case for every constructive piece of legislation affecting the federal securities laws — this time, the leadership of the then-majority in Congress decided to implement financial reform on a purely partisan basis.

That fateful decision turned Dodd-Frank into a so-called Christmas tree bill, with gifts aplenty for Democratic members and their special-interest supporters in exchange for their votes and nothing more than a Scrooge-like “Bah! Humbug!” for American investors. In contrast, had a bipartisan financial reform bill been adopted, many of these irrelevant provisions could have been excluded. Instead, legislation on resource extraction that had been previously introduced and stood little chance of being passed on its own merits finally had the opportunity to become law. This was their one shot to change the Commission from an agency concerned with investors into an agency concerned with social justice. It should come as no surprise that the resource extraction provision was excluded from Title IX of Dodd-Frank, which covered “Investor Protections and Improvements to the Regulations of Securities,” and placed into the last minute addition of Title XV.

Nonetheless, the law is what the law is, and it is my solemn duty to uphold the law to the best of my abilities. But even within the confines of the law, the circumstances matter. In the haphazard approach to drafting Dodd-Frank, no regard was given to the total number of mandates assigned to the federal agencies or the timeframe for adopting such rules. According to a count maintained by our Office of the General Counsel, the Commission had six tasks to complete within three months of Dodd-Frank, 13 more tasks to complete within six months, 14 tasks to complete within nine months or 270 days, and 59 tasks to complete within a year. Thus, the Commission had no less than 92 mandates to address within the first year after Dodd-Frank, not to mention many other tasks that had no implementation deadlines at all but were relevant to the causes of the 2008 financial crisis.

With all of this work required by the Commission, priorities have to be set. The approach most logical and faithful to the Commission’s mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation would be to first focus on areas that, unlike resource extraction, actually contributed to the 2008 financial crisis. One of those areas is the lack of oversight and transparency in the over-the-counter derivatives market, which Congress addressed in Title VII of Dodd-Frank.[3] Today, seven years after the financial crisis and nearly five and one-half years after the enactment of Dodd-Frank, the Commission has many Title VII rules left to finalize, including those related to clearing and execution facilities, capital, margin, segregation, and recordkeeping. Although I have some reservations about the construct and purported benefits of Title VII, I strongly believe that the Commission must reprioritize its agenda and complete its work in this area. The Commodity Futures Trading Commission already completed its rules two years ago.

In September, a federal judge in Massachusetts issued a decision that, in effect, placed a higher priority on the resource extraction rulemaking than our work on preventing a possible repeat of the 2008 financial meltdown by finishing the security-based swaps rulemakings required by Title VII.[4] I disagree with her ruling and supported review by an appellate court. But given the Commission’s loss in a separate case before the First Circuit earlier this week, perhaps we would not have prevailed.[5]

In fairness to the judge, she left it to the Commission to propose a schedule for the resource extraction rulemaking. With zero input from me or former Commissioner Gallagher — I cannot speak for the other commissioners participating today — the Chair directed the staff to file an expedited schedule with the court, to which the Commission is now bound by judicial order. That deliberate choice to accelerate this rulemaking comes with tremendous opportunity costs. Considering this proposal, at this time, at the expense of other rulemaking projects intended to benefit investors, including the Title VII rulemakings, is tragic and regrettable.

Turning to the proposal itself, it would require that the disclosure of the “geographic location of the project” be sufficiently detailed to permit a “reasonable user of the information” to identify specific, subnational geographic locations. I am concerned that this “reasonable user” terminology will be viewed as a completely new legal standard and one far different from the traditional “reasonable investor” standard in the federal securities laws. Who is the “reasonable user” and how should the standard be applied to such user? For instance, if the citizens of a specific location do not use English, should this instruction be interpreted to require disclosure in the local language as well? If local citizens refer to a location by a different name than is commonly used in the United States, should the instruction be viewed as requiring disclosure of both names?[6] My preference would have been a simpler instruction to require only that the location be “sufficiently detailed to permit identification of a project’s specific” location. I hope commenters respond to the questions in the release on this issue. And please do not hesitate to tell the Commission about any number of other concerns with the proposal.

Our disclosure regime must serve investors, not special interests. Provisions such as Section 1504 have nothing to do with helping investors. This is yet another situation where politically-connected special interests are using shareholder resources to push their own agenda. There is no difference between a company executive who takes resources out of the corporate treasury for his or her own self-interest and a special interest group that does the same. As I have said previously, it is simply wrong to use other people’s money to achieve personal gains at the expense of the shareholders.[7]

Moreover, this provision singles out publicly-traded companies for compliance and disclosure. What makes it appropriate to penalize shareholders of publicly-traded companies? Most Americans, including me, are not so-called “accredited investors” and, therefore, do not have access to invest in the privately-held companies that will now have significant cost advantages. Hence, one of the primary beneficiaries of this proposal will be investors in privately-held resource extraction companies, whose equity holders tend to be the few and the privileged.

Further, as the proposing release’s economic analysis observes, resource extraction disclosure could put publicly-traded companies at a competitive disadvantage compared to private companies and foreign companies that are not subject to Commission reporting requirements and therefore would not have such an obligation. For example, such competitive disadvantage could result from preferencing by the government of the host country to avoid disclosure of covered payment information, or any ability of market participants to use the information disclosed by reporting issuers to derive contract terms, reserve data, or other confidential information. The fact that private and foreign companies would not be subject to the rule actually undercuts the transparency objectives of Section 1504.

In addition, the proposal would require disclosure of sensitive, project-level payment information. That information might be used by third-party actors, including non-profit and non-governmental organizations, as a means to extract their own payments in return for not opposing various projects throughout the world. I would appreciate any public comment as to whether this concern is warranted and, if so, whether our proposed disclosures would effectively facilitate the efforts of such third-parties.

To close, I am unable to support today’s proposal. I want to express my appreciation for the efforts and fine work by the staff, including those from the Division of Corporation Finance, the Division of Economic and Risk Analysis, and the Office of the General Counsel. You did not ask for this task or responsibility, but your hard work does not go unnoticed.

I have no questions.


[1] Eminem, Lose Yourself, Music from and Inspired by the Motion Picture 8 Mile (Shady Records, 2002).

[2] Pub. L. 111-203, § 410 (2010).

[3] See Luis A. Aguilar, Finishing the Work of Regulating Security-Based Derivatives (Sept. 15, 2015), available at; Daniel M. Gallagher and Michael S. Piwowar, Statement Regarding Security-Based Swap Rules (Sept. 25, 2015), available at

[4] See Oxfam America, Inc. v. Securities and Exchange Commission, Civil Action, No. 14-13648 (DJC), 2015 WL 5156554 (D. Mass. Sept. 2, 2015).

[5] See Flannery v. Securities and Exchange Commission, No. 15-1010 (1st Cir. Dec. 8, 2015), available at

[6] For example, local citizens in Germany, Spain, and Japan refer to their countries as Deutschland, España, and Nippon, respectively.

[7] Michael S. Piwowar, Remarks at the 34th Annual Current Financial Reporting Issues Conference (Nov. 16, 2015), available at

Last Reviewed or Updated: Dec. 11, 2015