Bipartisan Delegation of 58 Members of Congress Call on the SEC to Release Key Rules to Reverse the “Resource Curse” that Plagues the Developing World

WASHINGTON (June 22, 2012) -- A bipartisan contingent of 58 members of Congress today sent a letter to the Securities and Exchange Commission asking for the status of two key rules to combat the developing world’s so-called “resource curse”, where natural resources are squandered by ineffectual or corrupt governments or for other reasons. The scourge of many countries in Africa and Asia, this curse currently means that in many developing nations like the Congo, natural resources are used only to benefit a small, often corrupt, political elite.

The letter was led by Democratic Reps. Edward J. Markey of Massachusetts, Barney Frank of Massachusetts, Howard L. Berman of California, Jim McDermott of Washington, and Maxine Waters of California.

The full letter can be found HERE.

The lawmakers write in the letter, “This issue is too serious to allow further delay. Conflict minerals and non-transparent payments for natural resource extraction continue to be a weight on developing nations’ growth and are a risk to investors and the public. Worse, continued delay undermines efforts in the Democratic Republic of the Congo to make the mining industry more transparent and to diminish the link between minerals and the funding of the brutal violence carried out by warlords. If the rules are not released soon, some companies will not have to file their first reports until summer 2014, four years after Dodd-Frank was passed. “ 

When Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, it took two important steps to reverse this curse. Section 1504 of Dodd-Frank required the SEC to issue rules to address the problem of secrecy in payments made by companies involved in resource extraction. Section 1502 requires certain special disclosures relating to conflict minerals.

The SEC published proposed rules to implement these provisions of the new law back in December 2010. Unfortunately, the SEC has not yet finalized the process by releasing final, enforceable versions of either rule, both of which had a statutory deadline of April 17, 2011. 

The SEC has a history of unmet promises regarding the completion of these rules. In March, SEC Chair Mary Schapiro testified before the House Committee on Appropriations Subcommittee on Financial Services and General Government that the conflict minerals rule would not be ready for several months. Three months later, there is no sign that a final version of either rule will soon be published.

In the letter, the Members urge SEC Chairman Mary Schapiro to schedule a vote on the final rules to implement Sections 1502 and 1504 by July 1, 2012. If a vote cannot be scheduled by this date, the Members request that Chairman Schapiro respond to this letter with an explanation regarding the extended delay and provide a definitive date for a vote on these two rules.

Under the resource extraction rule, companies engaged in the commercial development of oil, natural gas, or minerals would have to disclose in their annual SEC reports all payments made to either the United States or a foreign government, at the project-level.

Under the conflict minerals rule, companies using minerals such as tin and gold would have to disclose what measure they are taking to avoid making payments to rebel groups or military units in the Congo or an adjoining country. This would help consumers and investors make more informed decisions about the products that they purchase and the companies in which they invest.

These two proposed rules take the issues of secret payments and the use of conflict minerals out of the shadows and into the open, making it possible to fight corruption, increase government accountability and help end the resource curse in developing countries. They would also provide material information for investors to reduce their risk and increase the choices of ethical investment and promote energy security for the United States.

Rep. Markey is the Ranking Member of the House Natural Resources Committee.  Rep. Frank is the Ranking Member of the House Financial Services Committee.  Rep. Berman is the Ranking Member of the House Foreign Affairs Committee.  Rep. McDermott is the Ranking Member on the House Ways and Means Committee's Subcommittee on Trade. Rep. Waters is the Ranking Member of the House Financial Services Committee's Subcommittee on Capital Markets and Government-Sponsored Enterprises.