New push for disclosures on corporate giving

Financial reform advocates are renewing their push for regulations forcing corporations to disclose their political spending.

The Securities and Exchange Commission signaled its intention to impose the requirements more than a year ago before shelving the plan amid fierce pressure from industry groups and congressional Republicans.

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Proponents of the regulation announced Thursday, however, that they had gathered more than a million public comments from individuals and groups demanding that the agency return the item to its formal rule-making agenda.

Under the proposal, publicly held companies would be required to report all political spending to their shareholders.

“Investors want to know how their money is being spent,” Tim Smith, director of shareholder engagement at the firm Walden Asset Management, said during a rally in support of the rule outside the SEC’s Washington headquarters.

The push was launched almost three years ago in response to the 2010 Supreme Court’s Citizen’s United decision, which allowed corporations to spend freely on politics from their general treasuries.

The ruling is seen as having led to an injection of vast new sums of money into U.S. politics, with much of the spending flowing through tax-exempt organizations that are not required to reveal their donors.

“In the wake of Citizens United, we’re all aware of the manipulative power of secret money and how it is corrupting the entire political process,” said Alan Butkovitz, Philadelphia’s city controller and a supporter of the proposed regulation.

Current rules require companies regulated by the SEC to 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.

The SEC does not require that companies inform shareholders about political activity.

Backers of the disclosure rule argue there is overwhelming demand for that to change, pointing to the record number of submissions in support of the proposal.

The tally of comments from individuals and groups in favor of the rule has nearly doubled since last spring, recently eclipsing the one million mark, advocates said.

“While opponents of this rule have succeeded in putting a great deal of political pressure on the chairman, they’ve failed to provide any compelling reason why the SEC shouldn’t take action,” said Columbia Law School Professor Robert Jackson, who was among a group of law professors who first petitioned the SEC to draft the regulation.

The agency signaled plans to move forward with the rule in late 2012, when it included the measure on its 2013 regulatory agenda.

The proposal drew fierce criticism from business groups and their allies in Congress who described the plan as an unnecessary distraction for the SEC, which was already bogged down with rule-making efforts stemming from the 2010 Dodd-Frank Wall Street reform law and the 2012 Jumpstart Our Business Startups (JOBS) Act.

They said that the measure would impinge on free speech and amounts to a thinly veiled effort to stop corporations from engaging in the political process.

Further, critics said, the SEC is unsuited to delve into campaign finance, traditionally the jurisdiction of the Federal Election Commission. 

A spokeswoman for the U.S. Chamber of Commerce voiced similar opposition Thursday.

“It is obvious that its proponents are seeking to infringe upon significant First Amendment interests by trying to convince the SEC to pursue the narrow, partisan political goal of singling out for special requirements the entities that they perceive as opponents in political and policy debates,” Blair Latoff Holmes said.

“We hope the SEC will continue to see this proposal for what it is,” she added. “Campaign finance reform is not, has never been, and should never be a function of the SEC.”

The SEC revealed that it the proposal was no longer on the agency’s front burner in December, when the proposal was not among roughly 40 items on its formal rule-making agenda.

Following a backlash from public interest groups, an SEC spokesman stressed that the agenda included just those regulations that would be ready for agency consideration over the next 12 months.

The agency declined comment Thursday on the renewed push.

Proponents of increased disclosure are pressing for the agency to re-list the proposal on its next regulatory agenda, due out some time this fall. They also suggest the SEC has an opportunity to revisit the issue as part of an ongoing review of disclosure rules facing companies.

Short of those steps, “the SEC has turned its back on this rule,” Jackson said. 

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