The Senate Appropriations Committee on October 18, 2021, released a current-year budget for financial regulators that would fund the SEC at $1.99 billion and eliminate a Republican rider blocking the commission from issuing corporate political spending disclosure rules. Removing the rider, which has appeared in federal budget legislation every year since 2015, would allow the SEC to move forward on a rule proposal backed by Chair Gary Gensler.
The SEC funding is part of the Financial Services and General Government (FSGG) budget, which Senate Democrats rolled out alongside eight other unfinished appropriations measures. The House in late July advanced an FSGG budget as part of a larger minibus package that funds the commission at the same level and also removes the SEC rulemaking block, over the objections of the U.S. Chamber of Commerce. (See SEC Budget Clears House in the July 30, 2021, edition of Accounting & Compliance Alert.)
“It’s long overdue for the SEC to take an active role in bringing more sunlight on the torrent of secret corporate spending to influence the outcome of our democratic elections,” said Sen. Chris Van Hollen, a Maryland Democrat who chairs the Senate Appropriations Committee’s FSGG subcommittee, in a statement to Thomson Reuters. “That’s why – despite Republicans attempts to block these efforts the past – I made it a priority to empower the SEC with the ability to provide both shareholders and the public with information of how corporate CEOs are seeking to shape election results.”
As chair of the panel, Van Hollen said he would “continue working to provide transparency about the money that pervades our politics.”
Corporate political spending disclosure would likely be among the most contentious environmental, social, and governance (ESG) rulemaking endeavors of Gensler’s tenure. The SEC has yet to add the rules to its near-term rulemaking agenda, although Gensler has told lawmakers he supports putting proposed amendments out for notice and comment. (See SEC Chair Gensler Sharpens Support for Political Spending Disclosure Proposal in the September 17, 2021, edition of ACA.)
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.
Those transparency advocates were quick to cheer the rider’s removal in the FSGG bill. In a statement, Lisa Gilbert, Public Citizen’s executive vice president, pointed to the rider as one of several “poison pill” provisions removed by Democrats that had “fueled secret money corruption.” She urged lawmakers to keep the rider out of the final budget.
Public Citizen, which has taken the lead on the political spending disclosure issue among financial reform groups, 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. (See After Years of Congressional Block, SEC Political Spending Rules Finally in Sight in the August 17, 2021, edition of ACA.)
Republicans also employed the term “poison pill,” in this case to describe the absence of the rider in the Democratic appropriations bill. Sen. Richard Shelby of Alabama, the top Republican on the Senate Appropriations Committee, blasted the committee for “removing the well-established provision prohibiting the Securities and Exchange Commission from issuing rules to regulate companies’ political activities.”
The appropriations bills, he warned “seek to implement partisan ‘reforms’ that will weaponize government agencies against Democrats’ political opponents.”
This article originally appeared in the October 20, 2021 edition of Accounting & Compliance Alert, available on Checkpoint.
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