Statement on Proposed Disclosure of Payments by Resource Extraction Issuers

Commissioner Kara M. Stein

Washington D.C.

As my colleagues have already done, I would like to thank all the staff for their hard work on this rule. In particular, I would like to thank Barry Summer, Elizabeth Murphy, Jenny Riegel, Shaz Niazi and Elliott Staffin from the Division of Corporation Finance; Rich Levine, Brooks Shirey, Bryant Morris, Connor Raso, and Uzma Wahhab from the Office of the General Counsel; and Mark Flannery, Vanessa Countryman, Scott Bauguess, Simona Mola Yost, Vlad Ivanov and Igor Kozhanov from the Division of Economic Risk and Analysis.

Today, the Commission proposes a rule requiring resource extraction issuers to file an annual report. This report requires the disclosure of payments made by these issuers to governments[1] in connection with the commercial development of oil, natural gas, or minerals. This rule is required by Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Commission originally adopted a final rule in 2012, but, as you know, that rule was vacated in 2013.[2] Since then, there have been significant developments in this area of law, with several international bodies and countries adopting similar payment disclosure rules.[3] With this changing landscape, I am happy to see that we are moving forward to implement Congress’ mandate.

As proposed today, this resource extraction rule should improve the transparency of payments made by oil, natural gas, and minerals extractors to governments. This transparency offers many potential benefits, including improving accountability of governments in resource-rich countries. It also may provide interested investors with additional information.

However, in order to combat corruption and enhance accountability, the rule must provide sufficient transparency. Thus, the rule proposes issuer-specific, project-level, public disclosures of resource extraction payments. This approach is carefully tailored to fulfill Congress’ mandate. At the same time, the proposed rule provides companies with some flexibility. For example, in certain circumstances, the required annual report would allow resource extraction issuers to file a report with the Commission originally prepared for foreign regulatory bodies, thereby avoiding duplication and reducing issuer burden. Additionally, the proposal provides that resource extraction issuers could apply to the Commission for individualized exemptive relief from the specific filing requirements in certain circumstances.

I am pleased to support this proposed rule. Thank you again to the staff for all of your hard work. I look forward to completing the Dodd-Frank rules that remain pending.

[1] Government includes both foreign governments, as defined by the rule, as well as the Federal Government of the United States.

[2] See API v. SEC, 953 F. Supp. 2d 5 (D.D.C. 2013).

[3] See, e.g., Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings; Directive 2013/50/EU of the European Parliament and of the Council of 22 October 2013 amending Directive 2004/109/EC on transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market, Directive 2003/71/EC of the European Parliament and of the Council on the prospectus to be published when securities are offered to the public or admitted to trading and Commission Directive 2007/14/EC on the implementation of certain provisions of Directive 2004/109/EC; Extractive Sector Transparency Measures Act, 2014 S.C., Ch. 39, s. 376 (Can.), which came into force on June 1, 2015.

Last Reviewed or Updated: Dec. 11, 2015