December 15, 2020

Warren to Outgoing SEC Chair: Delay Rushed, Lame Duck Resource Extraction Rule Until Corruption and Transparency Concerns Can Be Addressed

Text of letter (PDF)

Washington, DC - United States Senator Elizabeth Warren (D-Mass.) today sent a letter to outgoing Securities and Exchange Commission (SEC) Chair Jay Clayton urging the SEC to delay the rushed, lame duck vote on its final Resource Extraction Rule, expected Wednesday, December 16th, until the rule can be strengthened. 

"The current SEC proposal would severely undermine the anti-corruption measures included in Dodd-Frank, and the Commission should conduct a full and complete analysis of the potential harm caused by implementing this rule before rushing to finalize it before you resign from the Commission at the end of the year," Senator Warren wrote to Chair Clayton.

Congress enacted Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), also known as the bipartisan Cardin-Lugar amendment, to address the "resource curse" of leaders of countries rich in fossil fuels siphoning off the wealth from resource sales to enrich themselves and their allies, rather than investing in the countries' economies. Strong rules under Section 1504 were meant to require governments to increase transparency and help root out the corruption that keeps entire nations in poverty and enables corrupt regimes to funnel money to terrorist groups.

The nation's largest public pension funds and other major institutional investors have supported strong disclosure and oversight into payments for resource extraction to foreign governments, calling them "essential to safeguarding the effective functioning of the financial markets." 

But the rule up for a vote on Wednesday is severely flawed, limiting the amount of information companies would need to share about their payments to foreign countries and strengthening companies' ability to shield payments from public scrutiny. It also places the United States requirements below international disclosure standards, setting precedent for those standards to be weakened around the globe.

"The obvious desire of the fossil fuel industry and its allies in Congress and the Trump administration for a weaker anti-corruption rule is not enough justification to push through these rules in the waning weeks before you and President Trump leave office and before you potentially rejoin an industry that you worked steadfastly to deregulate," Senator Warren wrote.

Earlier this year, Senator Warren joined Senator Cardin and eight of their colleagues in a letter calling on SEC Chair Clayton to express their concerns with the proposed resource extraction rule as it is "inconsistent with the transparency, accountability and investor protection goals Congress intended" and "does not appropriately consider or reflect the significant shift in industry practice and market realities."

In 2017, Senator Warren delivered a Senate floor speech warning against repeal of the SEC's second extraction rule, describing it as a massive giveaway to ExxonMobil and corrupt foreign regimes, making it easier to funnel funds to terrorists around the world. In today's letter she notes that ExxonMobil's CEO and future secretary of state Rex Tillerson once lobbied against Section 1504.