U.S. District Judge Vacates SEC Rule on Resource Extraction Issuer Payment Disclosures
Yesterday, the U.S. District Court for the District of Columbia vacated an SEC final rule1 that would have required resource extraction issuers2 to disclose certain payments. Holding that the SEC erred in its interpretation of the part of the Dodd-Frank Wall Street Reform and Consumer Protection Act that called for the rule, the court noted that the SEC “misread the statute to mandate public disclosure of the reports, and [that] its decision to deny any exemption was, given the limited explanation provided, arbitrary and capricious” (emphasis added).
The court's ruling eliminates the requirement for resource extraction issuers to disclose certain payments made to foreign governments, which would have been effective for issuers with fiscal years ending after September 30, 2013. The SEC may have certain remedies, including appealing the decision or redrafting the rule. It has not indicated how it plans to proceed at this time.
[1] SEC Final Rule No. 34-67717, Disclosure of Payments by Resource Extraction Issuers.
[2] The final rule defines resource extraction issuers (or “extractive issuers”) as issuers that are (1) “engaged in the commercial development of oil, natural gas, or minerals” and (2) “required to file an annual report with the [SEC].” Domestic issuers (including smaller reporting companies), foreign issuers, their subsidiaries, and other entities controlled by such extractive issuers would have been subject to the final rule’s disclosure requirements.
