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November 10, 2012

SEC Refuses to Delay Extractives Transparency Rule
    by Robert Kropp

The Commission tells industry trade association that rule governing disclosure of payments to governments will be implemented as scheduled, despite pending lawsuit challenging its validity.

SocialFunds.com -- In August, the Securities and Exchange Commission (SEC) adopted rules mandated by Dodd-Frank, requiring that companies in extractive industries such as oil, gas, and mining disclose their payments to governments.

"The information that is going to be disclosed by this Dodd-Frank requirement will be extremely important," Ian Gary of
Oxfam America said when the rules were adopted. "It will help empower local communities and districts to track the money and make sure it is going to help in education, rather than into the pockets of local elites."

"ESG (environmental, social, and corporate governance) risks are material for high-risk industries," Paul Bugala of
Calvert Investments told SocialFunds.com in 2011. "Investors are attracted to companies that are open to disclosure. As this information is utilized by the market, investors will shift their assets away from companies that do not manage risk adequately and toward projects that avoid externalizing costs."

Emboldened by a number of successful challenges to Dodd-Frank regulations, trade associations including the US Chamber of Commerce and the American Petroleum Institute (API) filed lawsuits seeking to overturn the rule governing disclosure of payments to governments, arguing that its implementation will put US-based companies at a competitive disadvantage.

The courts have yet to decide on the merits of the industry lawsuits, but the trade associations submitted a motion to the SEC requesting that it delay the implementation of the rule until the lawsuits are heard. In advance of the decision, four Senatorsóincluding Senators Cardin and Lugar, sponsors of the legislationówrote to the Commission, stating, "Any delay in implementing the rule will further frustrate the intent of the statute, and cause harm to investors and citizens in the United States and abroad, who anxiously await these disclosures to analyze and manage risk and hold their governments to account."

Yesterday, the Commission
ruled on the matter, refusing the trade associations' request for a stay. The trade associations failed to adequately demonstrate that implementation of the rule would cause "irreparable harm" due to the cost of compliance, and their argument that it would result in competitive disadvantage for US companies was, the Commission stated, "speculative and unsupported by evidence."

"We commend the SEC for refusing to give in to the demands of Big Oil and not caving under industry pressure," Gary of Oxfam said. "Protection of the final SEC rule is essential to shedding light on the murky world of financial flows between oil and mining companies and governments."

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