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SEC Nominees Face Pressure From Senate Democrats to Back Political Spending Disclosure Rule

A day after the White House nominated Lisa Fairfax and Hester Peirce to become SEC commissioners, Democratic senators urged the nominees to support a rule that would require public companies to disclose spending on political activities. More than 1.2 million people have submitted comments in support of the rule, but the SEC quietly dropped the issue from its regulatory agenda without publicly debating it.

Democratic Senators on the Banking Committee called on the two nominees for SEC commissioner, Lisa Fairfax and Hester Peirce, to support a rule requiring public companies to disclose spending on political activities.

“One issue will be front and center when we consider the qualifications of these nominees,” said Senator Charles Schumer of New York during a telephone press call on October 21, 2015. The political spending rule “will be one of the most effective, achievable ways to shed a light on the dark money that is swallowing up our politics, that is really moving America further away from one-person, one-vote democracy.”

The nominees have to be confirmed by the Senate.

Senators Jeff Merkley of Oregon and Robert Menendez of New Jersey and former Republican SEC Chairman William Donaldson joined Schumer in the press call.

The White House on October 20 nominated Fairfax, a professor at George Washington University Law School, since 2009, to fill the seat currently occupied by Democrat Luis Aguilar.Peirce, the director of the Financial Markets Working Group at the Mercatus Center at George Mason University since 2012, was nominated to fill the vacancy created by the recent departure of Republican Daniel Gallagher.

The senators’ call came as the 2016 presidential election is heating up, and a record number of supporters have asked the SEC to implement the rule.

More than 1.2 million people endorsed a petition filed by a group of legal academics 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.

At the end of August, 44 senators sent a letter to SEC Chair Mary Jo White to consider writing the rule. They emphasized that only about 2.2 percent of all public companies make such disclosures.

The SEC’s staff under then-Chairman Mary Schapiro began working on a rule proposal, but after White replaced Schapiro in April 2013, the issue 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. She has also said that specialized disclosure rules are not part of the SEC’s core mission to protect investors and promote efficient securities markets. and

Supporters of the rule believe that shareholders who own the companies should be informed about how their money is spent, reasoning that when Justice Anthony Kennedy voted with the Citizens United majority, he expected companies to disclose their political spending.Kennedy was the swing vote in the 5-4 decision.

“A campaign finance system that pairs corporate independent expenditures with effective disclosure has not existed before today,” Kennedy wrote for the majority. “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.”

The rule faces long odds despite the pressure by ethics groups and Democratic senators.The SEC will have to contend with strong opposition by business groups and the Republican-led Congress if it tries to complete the rule.

Opponents 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 real issue should be whether shareholders would benefit if corporations were required to make public disclosures of these expenses,” Steven Lofchie, a partner with Cadwalader, Wickersham & Taft LLP, said in a blog in September. “If the senators’ true objective is to benefit shareholders, then they might suggest that the SEC simply require companies to put the issue to a vote by their shareholders and allow the intended beneficiaries of the senators’ letter to decide what is best for themselves.”

Schumer criticized the Republicans for blocking bills that would require the SEC to write the rule.

Republicans “are for secrecy, they are for unlimited donations all for very crass reasons,” Schumer said. “At the moment, it benefits them.They have many more of these contributions and super PACs.But it’s bad for the country.Sooner or later, it’s going to boomerang on everybody.”

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.