The EITI has written to the U.S. Securities and Exchange Commission (SEC), to comment on its proposed rule implementing Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The EITI’s comments focus on two aspects of the proposed rule: the importance of alignment with international transparency efforts, and the definition of project-level reporting.
Mark Robinson, the EITI’s Executive Director, commented on the need for alignment between the SEC rule and EITI and other international reporting requirements. “An SEC rule that is well aligned with the EITI and other international reporting requirements in the extractives sector would send a strong signal to the 53 countries implementing the EITI to accelerate their work,” he said. “For this reason, it is important that the SEC’s rules share the ambition of the EITI community and others.”
On 18 December 2019, the SEC released the latest proposed rule to implement Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Section 1504 requires companies operating in the extractives sector and listed on US stock exchanges to disclose payments to governments.
Its enactment, in 2010, represented a substantial step by the US Congress to mandate the disclosure of payments by mining, oil and gas companies to foreign governments. Empowering citizens with detailed information about resource revenues can enable them to guard against corruption and successfully press governments for policy changes that improve government spending and outcomes.
The provisions of the EITI Standard are well aligned with reporting requirements in the EU, the UK, Norway and Canada. To date, EITI implementing countries have disclosed USD 2.62 trillion in company payments and government revenues through EITI reporting. This work has involved disclosures by tens of thousands oil, gas and mining companies operating under a wide array of legislative, regulatory and contractual arrangements.
The costs of transparency to industry are low and the benefits can be substantial. Transparency can foster greater trust in relations with stakeholders and local communities, better risk management, improved company reputation and the opportunity to demonstrate accountability and leadership. The investor community has been supportive of project-level reporting, noting how such reporting can contribute to a more stable investment climate and improve investors’ ability to manage risk.
The proposed SEC rules are, however, inconsistent with the EITI Standard, which requires implementing countries to introduce project-level disclosure in reporting covering fiscal years ending on, or after, 31 December 2018.
“We call on the SEC to adopt a definition of project-level reporting that is aligned with the EITI and other OECD countries, such as EU member states, Norway, the UK and Canada,” concluded Robinson. “Our experience is that the cost of providing such information is not onerous, and far exceeded by the benefits associated with greater transparency. Inconsistency between the SEC rule and other global reporting initiatives, such as the EITI, is more likely to increase compliance costs and the burden of reporting on companies.”