New SEC rules require extraction companies to disclose payments

By Ken Tysiac

New SEC rules issued Wednesday will require certain resource extraction companies to disclose payments made to the U.S. federal government or foreign governments for the commercial development of oil, natural gas, or minerals.

The rules apply to resource extraction issuers that are required to file reports under Section 13 or 15(d) of the Securities Exchange Act of 1934. The rules implement a statute in the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 111-203.

The final rules:

  • Require public disclosure of company-specific, project-level payment information.
  • Define the term “project” to require disclosure at the national and major subnational political jurisdiction.
  • Add two new conditional exemptions for when a foreign law or preexisting contract prohibits the required disclosure.
  • Add a conditional exemption for smaller reporting companies and emerging growth companies.
  • Limit the liability for the required disclosure by deeming the payment information to be furnished to, but not filed with, the SEC.
  • Add relief for issuers that have recently completed their US initial public offerings.
  • Extend the deadline for furnishing the payment disclosures.

The rules will take effect 60 days after they are published in the Federal Register.

The SEC previously adopted rules to implement the Dodd-Frank statute in 2016, but those rules were disapproved by a joint resolution of Congress. Wednesday’s issuance completes the rulemaking process, but the project remains controversial.

SEC Chairman Jay Clayton said that the rules “are landing in the best reasonable place” but acknowledged that they are likely to be unsatisfactory to many parties, including some who are passionate about combating corruption in the extractive resources industry. He said the Dodd-Frank statute requiring the rules is laudable but that the SEC is not well suited to pursue that purpose because it is outside the commission’s area of expertise and jurisdictional authority.

“We are promulgating a disclosure rule that we are counting on others — others not at the table, others who have demonstrated little effectiveness in pursuing anti-corruption efforts — to use as an information tool,” Clayton said.

In a dissenting opinion, Commissioner Allison Herren Lee said the new rule does not effectuate Congress’s intent; ensure disclosure that will help citizens combat corruption; provide investors with the information they need; heed calls from issuers who asked the SEC to harmonize its rules with international rules; or help the SEC and the United States lead in the global fight against corruption.

“In the end,” she said, “it’s hard to understand who we are serving with this final rule.”

Ken Tysiac ( is the JofA’s editorial director.


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