Providing for Congressional Disapproval of a Rule Submitted by the Securities and Exchange Commission

Floor Speech

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Mr. Speaker, section 1504 of the Dodd-Frank Act requires the Securities and Exchange Commission--an agency not charged with the responsibility of carrying out American foreign policy--to promulgate a resource extraction issuer disclosure rule. That regulation, which is the subject of today's resolution, requires publicly traded U.S. firms to disclose payments that they make to governments for the commercial development of oil, natural gas, or mineral resources.

The intent of the rule, as my colleagues on the other side of the aisle point out, is to allow local populations to see how much revenue is generated by their natural resources; but, in practice, if fully implemented, this rule will have a very negative impact on Americans and on the people it is purported to help.

First, the rule puts American firms at a severe competitive disadvantage, and we have talked about this before. Because section 1504 applies only to companies that are listed on U.S. exchanges, it forces them to disclose payments in detail in a way that would put them at a competitive disadvantage to non-U.S. companies, like those located in China. The SEC estimates that the initial cost of compliance for U.S. firms could be as high as $700 million and that the ongoing costs could be as large as $591 million annually. That is $591 million that American businesses could be putting to better and more productive use, like in creating jobs and investing in their workers. The SEC, itself, admitted that compliance costs would result in diverting capital away from other productive opportunities.

In addition, these disclosures will include sensitive commercial proprietary information and trade secrets that foreign state-owned competitors can use against American firms, and 50 percent of the firms that are likely to be obligated to comply with this rule are smaller reporting companies. While larger firms can more easily adjust their financial reporting systems in order to collect the required data or can even alter their business models to make the rule less burdensome, the smaller firms that will be forced to comply with this rule will have a very difficult time. This will lead to a consolidation in the industry, to a reduction in competition, and to higher prices for American consumers.

These projects are often carried out in countries with underdeveloped economies. As a result, they provide much-desired work for local populations, and they help improve the standard of living in the area, lifting many people out of poverty. This rule will stifle economic development in areas that need it most, potentially limiting the ability of these regions to thrive.

In conclusion, Mr. Speaker, this is not about investor protection.

Instead, it is going to undermine capital formation, and it is going to hurt smaller firms, and it is going to hurt jobs in this country. The Securities and Exchange Commission, as it admits itself, is not in a position to conduct American foreign policy. Let's leave this to the State Department, and let's focus on SEC rules that are core to its mission: investor protection and capital formation.

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