A policy rider in the omnibus budget approved last week by Congress, instructed the Securities and Exchange Commission to not spend any of its annual budget to issue a rule that requires corporate disclosures of political spending. That, however, may not be the final word on the controversial rulemaking petition, which, although supported by more than 1.2 million comment letters, has been largely ignored by the Commission.
On Tuesday, dozens of senators and members of Congress sent a letter to the SEC, expressing their view that the agency is still free to work on such a rule, despite a provision in the Consolidated Appropriations Act that prohibiting the SEC from using fiscal year 2016 funds to finalize the rule. Among those signing the letter were U.S. Sens. Charles Schumer (D-N.Y.), Robert Menendez (D-N.J.), Jeff Merkley (D-Ore.) and Elizabeth Warren (D-Mass.), and U.S. Reps. Michael Capuano (D-Mass.) and Chris Van Hollen (D-Md.).
“We believe that disclosure of corporate political spending has immense value for investors and should be a top priority for the Commission,” the letter reads. “The ability of corporate executives to spend company resources for political purposes without shareholders’ knowledge raises significant investor protection and corporate governance concerns. Without transparency or disclosure, executives are free to spend funds invested by shareholders without accountability or monitoring.”
The lawmakers concluded their letter by expressing an expectation that the SEC will use its resources within the parameters of the budget legislation to prepare for a final rule after fiscal year 2016. In the meantime, they will ask for periodic updates.
Also on Tuesday, supporters of the rule, calling themselves the Corporate Reform Coalition shared a legal opinion written by John Coates, professor of law and economics at Harvard Law School. In it, he says the SEC may continue discussing, planning, revising, investigating and developing plans or draft proposals for a corporate political spending disclosure rule.
“Prior to proposal, agencies and their staffs engage in preparatory tasks, including internal discussion, planning, investigation, analysis, evaluation, development of plans and possible proposals,” Coates wrote. “Agencies also sometimes publish concept releases inviting public comment on a general conceptual framework for future regulation. Had the Act been intended to restrict the SEC from using funds made available by the Act to engage in rule proposals or steps preliminary to rule proposals, it would not have used the phrase ‘finalize, issue or implement,’ but would have used the phrase ‘plan, propose, finalize, issue or implement’ or similarly broad language.”