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From Securities Regulation Daily, September 18, 2014

Oxfam America again seeks to compel SEC resource extraction transparency rules

By Amy Leisinger, J.D.

In an action filed today requesting relief under the Administrative Procedure Act (APA), international relief and development organization Oxfam America, Inc. (Oxfam) seeks to compel the SEC to finalize a rule to govern disclosure of payments made for the extraction of natural resources. According to Oxfam, the Commission has “unlawfully withheld or unreasonably delayed” a final rule implementing the requirements of Section 1504 of the Dodd-Frank Act, which amended the Exchange Act to require that “resource extraction issuers” annually disclose in reports to the SEC payments made to a government for the purpose of the commercial development of oil, natural gas, or minerals (Oxfam America, Inc. v. SEC, September 18, 2014).

“With transactions worth billions of dollars in oil, gas and mining projects taking place in some of the poorest, most corrupt and highest-risk countries in the world, citizens and investors simply cannot wait any longer. We continue to hope that [the SEC] will act to issue strong rules, and then we will gladly drop this lawsuit,” said Ian Gary, senior policy manager of Oxfam’s extractive industries program.

Background. When Congress enacted Section 1504 on July 21, 2010, it gave the Commission a 270-day deadline to promulgate rules. The Commission failed to enact a final rule for more than two years, and Oxfam, seeking to advance extractive resource revenue accountability worldwide in order to prevent profits to corrupt governments at the expense of poverty reduction and economic development, sued for undue delay. The Commission then promulgated a final rule implementing Section 1504, but, over Oxfam’s intervention, a federal court vacated and remanded the SEC regulations implementing the Dodd-Frank Act’s resource extraction payment disclosure provisions because the Commission’s decision to deny any exemption was, given the limited explanation provided, arbitrary and capricious. The SEC chose not to appeal, and, now, more than a year has passed, and the SEC has not initiated a new rulemaking process.

Allegations. In its complaint, Oxfam notes that the APA provides a remedy to “compel agency action unlawfully withheld or unreasonably delayed.” According to Oxfam, with the rule vacated, the SEC is once again in violation of its duty to issue a final rule implementing Section 1504 “no later than April 17, 2011.” The SEC’s continued failure to comply with Section 1504’s statutory deadline reflects a pattern of unlawful delay and postponement, the complaint alleges. In addition, Oxfam is also concerned because the SEC did not add Section 1504 to its rulemaking agenda until this May, and according to an SEC rule list, the Commission is not contemplating the proposal of a new rule until at least March 2015. Legislators, investors, and industry groups have all repeatedly requested swift implementation of Section 1504, Oxfam notes, but the SEC has not yet made any firm rulemaking commitment.

Oxfam America alleges that it is directly injured by the SEC’s failure to issue final rules, as the information that would be disclosed under them would be of direct value to Oxfam America, both as an organization striving to advance accountability in resource revenue management and as a shareholder. So long as these disclosures are not mandatory, Oxfam notes, the organization must use its resources to pursue alternative sources of information concerning government payments by oil, gas, and mining companies, as opposed to devoting them to other aspects of its mission. In addition, Oxfam states that it owns securities of numerous resource extraction issuers that would be subject to disclosure obligations, and a final disclosure rule would allow it to better assess investment risks and to participate in the governance of these issuers.

“Without these disclosures, Oxfam America’s work to promote accountable stewardship of extractive resource revenues in developing countries is vastly more difficult than it would be had the SEC complied with Section 1504’s statutory deadline.”

“[This] injury can only be redressed by an Order from this Court compelling the SEC’s prompt performance of its obligation to issue a Final Rule pursuant to Section 1504,” Oxfam explains. Oxfam requests that the court declare the SEC in violation of the APA and the Mandamus Act and issue an order or writ of mandamus to compel the SEC to act promptly to issue a rule.

The case is No. 14-cv-13648.

Attorneys: Derek B. Domian (Goulston & Storrs PC) for Oxfam America, Inc.

Companies: Oxfam America, Inc.

MainStory: TopStory DoddFrankAct MassachusettsNews PublicCompanyReportingDisclosure

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