Campaign contribution disclosure, the perfect storm at the SEC

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Mary Jo White, Securities and Exchange Commission (SEC). (AP Photo/Carolyn Kaster)

Ten well-recognized academics, several advocacy organizations, some Congress members, and hundreds of thousands of petitioners have patiently been waiting for the new Securities and Exchange Commission (SEC) Commissioner Mary Jo White to rule on a petition for disclosure of all political campaign contributions to shareholders.

The petition was filed in August of 2011, and followed by the support of many advocacy organizations and over 380,000 private citizens that supported the petition directly to the SEC. The number has since climbed to about 500,000 supporters, calling the attention of the agency.

But the petition has also been opposed by other academics who claim similar expertise in corporate governance, campaign finance or constitutional law. Trade organizations, Republican Congress members—including legislation introduced to the House of Representatives—and advocacy organizations such as Americans for Prosperity have created counter pressure to the petitioned regulation—a clear warning that a perfect storm might be coming.

The petition undersigned by members of the Committee on Disclosure of Corporate Political Spending include co-chairs Harvard Law School Professor Lucien Bebchuk and Columbia Law Professor Robert J. Jackson, Jr. It was also supported by several advocacy organizations and individuals among which are the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO); Public Citizens; Corporate Reform Coalition; and some Congress members including Senator Robert Menendez of New Jersey and Representative Chris Van Hollen of Maryland.

“We are just asking the SEC to do its job which is to protect shareholders and even executives at corporations that unknowingly might be making donations that are used in ways that damage their reputation in front of their customers,” Robert E Mc Garrah, Jr., Counsel for the AFC-CLO Office of Investment told VOXXI.

McGarrah referred to the stampede of corporations that left membership at the American Legislative Exchange Council (ALEC) in 2012 due to the expose of the organization’s involvement together with the National Rifle Association’s (NRA) in the Stand Your Ground legislation, believed to be an important factor in increasing gun violence in the United States.

The AFC-CLIO Counsel believes the SEC has the authority to approve and enforce such legislation and level the playing field with mandated disclosure to other organizations such as unions, required to include all significant political spending on public reports.

Although the petition asks for a financial disclosure, the political impact this legislation might have is significant. “Organizations qualified as 501 (c4) receive funds without disclosure. It is hard to estimate but we believe the range of undisclosed contributions is as high as $500M to $1B,” said McGarrah.

The SEC had scheduled the topic in its agenda by April 2013 but no resolution came through.

All eyes are on Mary Jo White, the new SEC Commissioner

Just over a month in her post, Commissioner White has to decide if she will respond to the trust of those the SEC represents and protects or the political interests of corporations which used to be her clients in the private sector.

She was selected by President Obama based on her experience as a U.S. attorney in the Southern District of New York, but she has also spent a decade representing white-collar cases at the global law firm Debevoise & Plimpton with clients namely being the who’s who on Wall Street. Commissioner White’s last clients include three of the 13 corporations whose employees reversed their political giving to Republicans in 2008—Bank of America Corp., JPMorgan Chase & Co. (JPM) and UBS AG (UBSN).

Lisa Gilbert of the Public Citizens Congress Watch division told VOXXI they trust that Commissioner White will make the right move. “Analyzing and implementing such regulation takes a long time. However, the SEC has given signs of moving it forward. We support Mary Jo White because of her background as a good litigator and head of the enforcement agency,” she said.

The Commissioners standing by her side have already made up their minds regarding the topic, and they are divided along party lines, Gilbert said.

Two Latino Commissioners having their saying

Commissioner Troy Paredes declared at an SEC conference in February of 2013 that “Disclosure is powerful, but that does not mean that more disclosure is always better than less… My concern is ‘information overload,’ a risk of mandatory disclosure that has been present for some time and that is exacerbated as disclosures become more complex,” he said.

Even when investors are provided with useful information, Commissioner Paredes believes investors might be influenced by biases and quick interpretation of complex information instead of exhaustive research, which, in time, allows more “heavy-handed government control of private sector conduct and capital flows,” he said.

“The test is not whether investors are perfect decision makers; rather, the test is whether it is preferable to leave certain decisions to market participants instead of relying more on government officials, who also err, to dictate results through regulation.”

Commissioner Luis Aguilar has stated his views. “Investors have also been clamoring for information on how corporations use corporate resources for political purposes,” said Commissioner Luis Aguilar in a public statement that addressed several regulatory issues regarding corporate disclosure including corporate accountability, executive compensation, leadership structure and risk oversight.

“I agree that this is information that would enhance the ability of shareholders to make informed voting and investment decisions. It is reported that over 100 major companies have already begun to provide corporate political transparency through voluntary reporting. I commend these companies for listening to investors,” Commissioner Aguilar stated.

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Source: VOXXI News

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