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Release No. 34-67717 Update Coming Next Year

Planned for a spring 2015 release, the U.S. Securities and Exchange Commission (“SEC”) will propose modifying Release No. 34-67717, Disclosure of Payments by Resource Extraction Issuers. The original rule, which was rejected last year by the U.S. District Court for the District of Columbia (“the Court”), requires the disclosure of payments oil, gas and mining companies make to governments. Opting not to file an appeal, the SEC is addressing the Court’s complaints over the rule. Among the complaints is the requirement of companies to file reports to the SEC specifying payments of $100,000 or more, which the Court considered “a different and more limited requirement for what must be publicly available than for what must be annually reported.”

Despite being months away from seeking public comment on its proposal, the SEC continues receiving letters from numerous groups that filed suit and want the revision to meet their interests. For instance, the American Petroleum Institute (“API”) stated Release No. 34-67717 was a violation of the First Amendment and disclosures would hurt U.S. companies when competing against foreign state-owned companies. The API also believes companies and their shareholders would be negatively affected if the updated rule requires payments to be disclosed.

Singling out Section 1504 of Release No. 34-67717, the API further stated that portion of the provision is unhelpful, does more harm than good for investors and satisfies a political agenda. Conversely, UCLA professor Michael Ross deemed some of the API’s accusations were incorrect. Ross, who has researched the challenges confronting oil, gas and mineral-exporting countries, believes Section 1504 protects U.S.-based investors. Ross remarked, “The more corrupt that these governments are, the lower the returns that U.S. firms will gain on their investments. Section 1504 mandates project-level reporting, and making that disclosure publicly available will likely have an important corruption-reducing effect in these countries, which should help protect the interests of a large number of U.S.-based investors.”

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