WASHINGTON Jan 2 The U.S. Securities and
Exchange Commission defended its new rule requiring oil, mining
and gas companies to disclose payments they make to foreign
governments, saying it declined to "second-guess" policy
decisions made by Congress.
The agency on Wednesday responded to a lawsuit filed in
October by four business groups challenging the new rule, which
was mandated by the 2010 Dodd-Frank financial regulation
Groups including the U.S. Chamber of Commerce and the
American Petroleum Institute have argued the rule went beyond
the intent of Congress and puts U.S. firms at a competitive
In a brief filed in a Washington federal appeals court, the
SEC said the legislative history of the law made clear the
provision was crafted by Congress to address the "resource
curse," or the phenomenon of resource riches leading to
corruption in poor countries.
"Petitioners, ultimately unhappy with Congress's
determination to compel the public disclosure of the payment
information, now advance a series of meritless challenges," the
The lawsuit is one of a string of legal challenges against
regulators still struggling to finalize dozens of rules included
in Dodd-Frank and other recent financial regulatory reforms.
The SEC and the Commodity Futures Trading Commission have
lost a handful of such challenges, often over whether the
agencies adequately considered a rule's costs and benefits.
In December, a federal judge upheld a new CFTC rule
governing certain mutual funds, but that ruling is currently on
The SEC's transparency rule at issue was designed to build
on voluntary initiatives by mandating disclosure of payments to
foreign governments made by companies in so-called "extractive
industries" whose shares trade on U.S. exchanges.
Though controversial, the law's congressional sponsors said
it would help citizens hold resource-rich governments
accountable for their management of resource revenues.
The business groups that brought the lawsuit had asked the
SEC to confidentially collect the information and release it
only on an aggregate, by-country basis, to protect individual
In their lawsuit, they said such a model was consistent with
the statute. On Wednesday, the SEC said the law shows Congress
intended for public disclosure of each company's individual
The SEC also responded to the cost-benefit argument, and
said it was dependent on data provided by the industry to assess
the c o sts. It said it could not quantify the rule's potential
benefits of enhanced governmental accountability.
The groups had also argued that the rule violated the First
Amendment, which the SEC described as an "eleventh-hour shift in
strategy" because the groups' other arguments lacked merit.
That strategy ignores that regulated companies are subject
to many other public reporting requirements, and such a theory
could have "potentially devastating implications" for the other
programs, the SEC said.
The agency asked the court to schedule a hearing in the case
after mid-February due to scheduling conflicts.