Financial Transparency Coalition

U.S. President Applauds New SEC Reporting Requirement, Vows to Campaign for Adoption of Similar Global Regulation

The Securities and Exchange Commission (headquarters pictured above) is set to enforce a new reporting requirement in the extractive industries sector. | Photo by AgnosticPreachersKid

Last Wednesday, as President Obama’s signature graced the Dodd-Frank Wall Street Reform and Consumer Protection Act, the long-awaited overhaul of the financial regulatory system finally became the law of the land.  This included a small but important provision, the Energy Security Through Transparency (ESTT) amendment, which is designed to increase transparency in extractive industries by requiring oil, gas, and mining companies registered with the Securities and Exchange Commission (SEC) to disclose material payments made to governments on a country-by-country basis.  Now, with the White House recently applauding the ESTT amendment and expressing its commitment to establish similar reporting standards on a global scale, this small provision has ballooned into a tremendous opportunity to transform international transparency principles.

Since the passage of the Dodd-Frank bill by the Senate two weeks ago, numerous groups have praised the ESTT amendment’s passage.  Radhika Sarin, the International Coordinator for Publish What You Pay, heralded it as “a reliable tool to ensure the wealth created by natural resource extraction is used for essential social services such as health and education, and economic development opportunities.”  Oxfam described the provision as an important tool to aid the fight against corruption.  Ann Hollingshead, in a previous Task Force blog post, called the provision an important step to “increase predictability and investors’ ability to calculate risks associated with investing in certain companies.”  Even some major news outlets like the Washington Times reported on the ESTT amendment’s passage.

On July 23, the White House joined the pack by applauding the ESTT amendment for setting “a new standard for corporate transparency.”  It then took a step further and made it a White House priority to extend ESTT-type disclosure globally.  “The challenge for us now is to make this a global standard.  The United States is committed to working with other countries to ensure the implementation of similar disclosure requirements in other financial markets and will make this a priority in the year ahead.”

This new commitment shows that the White House recognizes the ESTT amendment as an extension of a global movement in favor of similar disclosure requirements within extractive industries worldwide.  The Extractive Industries Transparency Initiative (EITI), an international coalition of governments, companies and civil society organizations, has been working since 2002 towards an international standard requiring extractive industry companies to disclose payments made to host-governments of resource-rich countries.   Last month, the Hong Kong Stock Exchange implemented country-by-country disclosure requirements for new applicants operating in the oil, gas and mining sectors.  The International Accounting Standards Board is also currently considering a rule change that would integrate country-by-country disclosure into its accounting standards.

These international initiatives prove that the White House is realistic when it calls for a global standard on country-by-country reporting in extractive industries.  Far from creating an unequal playing field, the passage of the ESTT amendment sends a powerful message to the rest of the world: that country-by-country reporting is vitally important both to resource-rich countries in the developing world and to industrialized nations in the developed world.  The White House recognizes this and has wisely decided to act on it.  It is now up to President Obama to turn these words into action.