SEC nears decision on requiring businesses to disclose donations

The Securities and Exchange Commission under new chief Mary Jo White is approaching a crucial decision on whether to require publicly traded corporations to disclose their campaign spending to shareholders.

If pursued, new disclosure rules could have major ramifications for both political spending on elections and the increasingly influential regulator. 

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Roughly half a million public comments about the proposal have poured into the agency, the overwhelming majority of which argue that shareholders have a right to know how companies involve themselves in politics. 

Opponents dismiss the outcry as the handiwork of a few partisan groups, and they contend the Securities and Exchange Commission (SEC) is ill equipped to wade into the campaign finance issues, which are usually the jurisdiction of the Federal Election Commission (FEC).

Enter White, a former federal prosecutor who took the helm of the SEC at a time when the agency already faces a daunting set of responsibilities. 

During her confirmation hearings, White vowed “bold and unrelenting” enforcement of the financial sector. But she has offered few clues about where she stands on the corporate campaign disclosure proposal and declined to be interviewed for this story.

How White proceeds will be seen as an indicator of the SEC’s direction under her leadership.

“If Mary Jo White wants her tenure to be one of leadership and results, she needs to demonstrate her commitment to put shareholder protection above politics and immediately enact a rule mandating full disclosure of corporate political spending,” said Bill de Blasio, founder of the Coalition for Accountability in Political Spending. 

The coalition has helped corral comments in favor of the proposal in the name of transparency and protection for shareholders. Roughly 500,000 comments were submitted, the most ever for an SEC proposal.

Business groups and an assortment of congressional Republicans are urging the SEC to drop the idea. 

“This rule-making petition is being pushed by groups who do not have the best interests of investors in mind,” U.S. Chamber of Commerce spokeswoman Blair Latoff Holmes said. “Instead, they are pushing for a rule because they ultimately want to drive the business community out of the political and public policy arena.”

The debate is rooted in the Supreme Court’s Citizen’s United decision, which allowed corporations to spend freely on politics from their general treasuries. Much of that spending has flowed to tax-exempt organizations that are not required to reveal their donors.

Currently, companies regulated by the SEC must file quarterly reports apprising shareholders of “material information” about their finances. Under SEC guidance, expenditures are generally not considered material unless they reflect at least 3 percent of a company’s value. There is no requirement that companies inform investors about political activity. 

“As shareholders, we have a right to know how companies are spending our money — especially when our investments are being used to bankroll a political campaign,” said de Blasio, a Democrat running for mayor in New York.  “The SEC has a core responsibility to protect shareholders and ensure adequate disclosure so that investors can make educated decisions and safeguard against risk.”

Corporate-disclosure advocates have pressed the SEC since August 2011 to consider the new requirements. In December, the agency revealed it was looking into the idea and said a decision was expected by May. 

Meanwhile, the agency is under pressure to finalize a slate of dozens of rules required by the 2010 Dodd-Frank Wall Street reform law and the year-old JOBS Act, which calls for regulations intended to aid small businesses. 

On Monday, SEC spokesman John Nester said the timing of any recommendation on the corporate spending proposal, “will be influenced by the ongoing workload of Dodd-Frank and JOBS Act rulemaking.”

Those responsibilities should trump consideration of a rule outside of the SEC’s traditional purview, a group of House Republicans argued in a letter to the agency last month. 

“The Commission appears to be allocating its limited resources on a discretionary project wholly unrelated to its mandate,” wrote Reps. Darrell Issa (R-Calif.), Jeb Hensarling (R-Texas), Jim Jordan (R-Ohio) and Patrick McHenry (R-N.C.). “In the meantime, mandatory reforms critical to our economic recovery are languishing.”

The lawmakers demanded that the agency supply information about the resources and time spent considering the disclosure rule. The SEC is in the process of producing the materials, Issa spokesman Ali Ahmad said. 

Opponents of the new requirements argue that the SEC does not have the expertise necessary to properly craft disclosure requirements. 

“Campaign finance reform is not, has never been, and should never be a function of the SEC,” Chamber spokeswoman Latoff Holmes said.

The Chamber, along with 30 other trade associations and other business groups, submitted extensive comments in opposition to the proposed regulations. Along with two other business heavyweights — the National Association of Manufacturers and the Business Roundtable — the Chamber also issued a joint letter calling on Fortune 200 companies to unite against the proposal. 


Opponents warn that additional disclosure rules would have a chilling effect on free speech, an argument likely to get more attention following the recent revelations that the Internal Revenue Service singled out conservative groups for added scrutiny of their tax-exempt status. 

Further, some contend that shareholders themselves are opposed to the rules. In several publicized votes, investors have rejected the plan, noted Allen Dickerson, legal director for the nonprofit Center for Competitive Politics, which promotes First Amendment protections. 

Dickerson said it is not the SEC’s place to promulgate rules that many investors don’t want. 

“It seems paternalistic, to put it lightly,” he said.

Unlike the FEC, which is composed of an even number of commissioners and can easily deadlock on decisions, the SEC has five commissioners: two Republicans and three Democrats, including White. 

Already two of the other four commissioners have spoken out on the disclosure rule. 

Luis Aguilar, a Democratic commissioner, voiced support for the measure during a February speech. A month earlier, Republican Commissioner Daniel Gallagher called the proposed rule a Democratic “political wish list item” that should not be a priority.

Most observers believe the decision will hinge on White. Though she has not made her views public, she has defended the SEC’s budget proposal, which contains a request for added funding to boost the agency’s rule-making operation and hire additional staffers.

Given the commission’s pressing duties, the ultimate decision is certain to attract fierce criticism from one side or the other. 

“Taking this up will say something about the agency’s priorities,” Dickerson said.