A fiscal 2022 appropriations deal announced on March 9, 2022, would maintain a ban on the SEC issuing corporate political spending disclosure rules, to the dismay of transparency advocates who had hoped Democratic lawmakers would be able to scrap the long-standing prohibition. The omnibus appropriations package, set to be voted on this week, would fund the commission at $1.99 billion, a $74 million increase over last year’s enacted level.
Democrats in both the House and Senate last year had put forth Financial Services and General Government (FSGG) budgets funding the SEC that would have eliminated the Republican rider, which has appeared in federal budget legislation every year since 2015. But faced with the pressure to finish the appropriations process as a third consecutive continuing resolution threatened to run out by March 11, budget negotiators agreed to keep the ban in place, while giving the commission a funding boost. The budget would apply to the current federal fiscal year, which began in October 2021.
Lisa Gilbert, executive vice president of Public Citizen, which has taken the lead on the political spending disclosure issue among financial reform groups, praised the crafting of an omnibus package “increasing funding to important projects and programs.”
“That said, it is extremely unfortunate that a number of legacy poison pill policy riders were inserted back into the final deal, this includes the rider that halts the SEC from finalizing a rule requiring political spending disclosure,” she said in a statement. “While the agency can in fact do work on the policy in the interim, the inability to finish a rule that would bring secret political spending, information long hotly-demanded by investors, into the sunlight is a keenly-felt missed opportunity. As companies from banks to crypto to oil companies spend ever increasing amounts to influence our elections, investors have a right to know how their funds are being used in politics.”
The agreement means SEC Chair Gary Gensler – who is moving forward with an aggressive rulemaking agenda on other environmental, social, and governance (ESG) disclosures such as climate risk – will remain barred from implementing political spending transparency rules. He told lawmakers last year he supports putting those proposed disclosures out for notice and comment. (See SEC Chair Gensler Sharpens Support for Political Spending Disclosure Proposal in the September 17, 2021, edition of Accounting & Compliance Alert.)
Political spending transparency advocates have called for the reforms since the Supreme Court’s 2010 ruling in Citizens United v. Federal Election Commission, which lifted restrictions on independent political expenditures by corporations and unions. In 2011, a group of 10 academics – including now-former SEC commissioner Robert Jackson – petitioned the SEC to issue the rules. That petition has garnered more than 1.2 million comments.
Public Citizen has previously indicated it wants a disclosure rule that includes a company’s general policies around disclosing political activity, board oversight over political spending decisions, and details on the expenditures themselves that go beyond current lobbying disclosures and Federal Election Commission filings, including dues paid to trade associations and 501(c)(4) “social welfare” groups – two major sources of dark money subject to inadequate donor disclose requirements.
Republican lawmakers and the business lobby have argued political spending is well outside the scope of the SEC’s market regulation responsibilities. Sen. Richard Shelby of Alabama, the top Republican on the Senate Appropriations Committee, in a statement said he had insisted on both the “preservation of long-standing legacy riders” and the “exclusion of partisan poison pills.”
“The Omnibus rejects liberal policies and effectively addresses Republican priorities,” Shelby said. “The House and Senate should act quickly and send it to the President.”
In terms of funding, the $1.99 billion in the budget agreement roughly matches what the SEC had requested last year, and would go toward supporting a staff that Gensler has cast as “stretched thin” after years of shrinking headcount.
The commission, in its budget justification document last year, mapped out plans for 65 new positions, a dozen of which would be added to the Division of Corporation Finance (CorpFin). CorpFin, which has seen only small staff increases in prior budget requests, would add the new positions “to cover this increased workload and advance key rulemaking priorities” from a “once-in-a-generation wave” of traditional initial public offerings, as well as a rush of filings by special purpose acquisition companies (SPACs), according to the justification document.
This article originally appeared in the March 10, 2022 edition of Accounting & Compliance Alert, available on Checkpoint.
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