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Former Chairs Levitt, Donaldson Join 1.2 Million Backers of Political Spending Disclosure Rule

Former SEC Chairmen Arthur Levitt and William Donaldson and former commissioner Bevis Longstreth criticized the SEC for not writing a rule supported by 1.2 million people who have submitted comments in support of a 2011 petition to the market regulator. Investors want the SEC to issue a rule that would have public companies disclose the spending they do on political activities.

Former SEC Chairmen Arthur Levitt and William Donaldson strongly criticized the agency they led for failing to write a rule that would require public companies to disclose their spending on political activities.

“The petition has received a record-breaking 1.2 million supportive comments, illustrating the widespread importance of and need for action by the commission,” Levitt and Donaldson wrote to SEC Chair Mary Jo White on May 27, 2015. “The commission’s inaction is inexplicable. Its failure to act offends not only us, who are alumni of this agency struggling to retain our deep pride of association, but investors and the professionals who serve them.”

They said the agency’s failure to write the rule goes against its primary mission, which has been the protection of investors since 1934.

“To use a metaphor, [it] should be a ‘slam dunk’ for the commission,” they wrote. Bevis Longstreth, who served as a commissioner from 1981 to 1984, also signed the letter. Levitt headed the agency from 1993 to 2001 under President Bill Clinton. Donaldson, a Republican, was appointed by President George W. Bush in 2003 and ran the market regulator until 2005.

A group of legal academics first filed the petition with the SEC in August 2011, in response to the Supreme Court’s 2010 decision in Citizens United v. Federal Election Commission that removed most restrictions on corporate spending on political activities.

The former regulators said that with five years elapsing since the Supreme Court decision, it is time for the agency to act. Shareholders, the actual owners of the companies, should be informed about decisions to spend their money on politics.

Levitt and Donaldson said Justice Anthony Kennedy voted with the majority because he expected shareholders to be informed about corporate spending decisions.

“A campaign finance system that pairs corporate independent expenditures with effective disclosure has not existed before today,” Kennedy wrote for the Supreme Court. “With the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions.”

Shareholder and ethics groups are pressuring the SEC to write the rule, but it is unclear the record number of supporters for the petition will compel the agency to take action because of strong opposition by business groups and the Republican-led Congress.

The rule’s opponents, who include Commissioner Daniel Gallagher, say disclosure rules about political spending go well beyond the SEC’s legal authority for the financial markets. They also call the rule an arbitrary attempt to curtail businesses’ First Amendment rights.

The SEC’s staff under then-Chairman Mary Schapiro began working on a rule proposal, but after White replaced Schapiro in April 2013, the rule was quietly dropped from the agency’s regulatory agenda. Ethics groups criticized White, citing an oversight hearing in May 2013 when Republican lawmakers strongly criticized the agency and asked for the rule’s removal from the agenda.

White has repeatedly said her priority is to complete the rules from the Dodd-Frank Act and the JOBS Act. and

In the meantime, a newly formed watchdog group, Campaign for Accountability, sued the agency because of its failure to write a rule.

The May 13 complaint in U.S. District Court for the District of Columbia called the SEC’s inaction “arbitrary, capricious, and contrary” to the Administrative Procedure Act. The group wants the court to order the SEC to begin writing a rule.

The lawsuit said that without greater transparency, shareholders are “harmed” in fulfilling their duties because they can’t determine whether the contributions are in the best interests of the companies.

The complaint said the courts recognize the SEC’s “powers to promulgate‚Ķ rules requiring disclosure of information beyond that specifically required by statute.” Relying on this authority, it noted that the SEC over the years has considered additional disclosure requirements.

The ethics group said that even before the Supreme Court decision, shareholders increasingly demanded greater disclosure of corporate political spending.

According to the Center for Responsive Politics, total spending was nearly $6.3 billion in the 2012 presidential election cycle, the first since Citizens United , up from the nearly $5.3 billion spent in 2008.

The spending included dark money. During the 2012 campaign, groups that do not disclose their donors spent $310.8 million, more than four times the $69 million the groups spent in 2008.

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