By Benjamin Goad - 12/02/13 12:59 PM EST
The Securities and Exchange Commission has dropped from its rulemaking agenda a contentious proposal to require publicly traded firms to disclose campaign spending to their shareholders.
The decision, heralded by First Amendment defenders, reflects a major setback for a campaign launched in 2011 to counter the influx of corporate political spending in recent election cycles.
The SEC announced it was considering imposing the regulations late last year, when it included the measure on its 2013 regulatory agenda. The action came in response to a petition submitted by a group of law professors contending that shareholders have a right to know how companies involve themselves in politics.
The agency was flooded with 640,000 comments, the vast majority backing the plan. But the agency has remained largely silent on the issue this year, and a 38-item regulatory agenda unveiled just before Thanksgiving contains no mention of the proposal.
An SEC spokesman, however, did not rule out future action.
"The list represents our best estimate as to what would be ready for Commission consideration by fall of 2014,” John Nester said in an email.
Still, critics of the proposal lauded the SEC for dropping the item, calling it an unnecessary distraction for an agency unsuited to delve into campaign finance, traditionally the jurisdiction of the Federal Election Commission.
“This proposal would have involved the SEC in the difficult business of regulating political speech, a job for which it is poorly equipped, and which would have proved a distraction from its important work in the economic sphere,” said Allen Dickerson, legal director for the nonprofit Center for Competitive Politics, which promotes First Amendment protections.
Congressional Republicans had pressed SEC Chairwoman Mary Jo White and the commission’s other members against pursuing the regulations, pointing to unfinished agency business they said was more central to the agency's primary responsibilities. Key rules being drafted under the 2010 Dodd-Frank Wall Street reform law and the 2012 Jumpstart Our Business Startups, or JOBS, Act remain incomplete, they noted.
Business groups including the U.S. Chamber of Commerce also opposed new corporate giving regulations, calling the proposal a thinly veiled effort to drive the business community out of politics and public policy issues.
"We are pleased that the SEC saw this proposal for what it was," Chmber spokeswoman Blair Latoff Holmes said Monday. "Campaign finance reform is not, has never been, and should never be a function of the SEC."
The dispute springs directly from the Supreme Court’s Citizen’s United decision, which allowed corporations to spend freely on politics from their general treasuries. Much of the spending has flowed to tax-exempt organizations that are not required to reveal their donors.
Under current rules, companies regulated by the SEC must file quarterly reports apprising shareholders of “material information” about their finances. Expenditures are generally not considered material unless they reflect at least 3 percent of a company’s value, according to SEC guidance.
There is no requirement that companies inform shareholders about political activity.
Proponents of increased disclosure say there is overwhelming demand for that to change, pointing to the record number of comments submitted in support of the proposal.
“Investors have a right to know the choices that are being made,” Gilbert said.
This story was updated at 4:22 p.m.