Democratic Senators Up Pressure on SEC Disclosure

Democratic Senators Up Pressure on SEC Disclosure

(Photo: AP/Bill Clark/CQ Roll Call)

A handful of Democratic senators who sit on the Senate Banking, Housing and Urban Affairs Committee have stepped up pressure on the U.S. Securities and Exchange Commission to require corporations to comprehensively disclose their political spending, even though Congress limited the agency's ability to do so in last year’s spending bill.

Senators Elizabeth Warren of Massachusetts, Chuck Schumer of New York, Jeff Merkley of Oregon, and New Jersey’s Bob Menendez—along with the good-government group Public Citizen—joined in a press call Thursday to call on the SEC to draft a rule that would require publicly traded corporations to disclose all money spent on elections. Corporate money is often funneled through trade associations and purported social-welfare groups that operate outside of existing disclosure law and have been spending unprecedented amounts of “dark” money on the 2016 presidential election.  

“Shareholders have a right to see how the companies they invest in are spending their money, but corporations are keeping their political contributions secret. Six years after Citizens United, the need for a strong corporate political disclosure rule is clearer than ever,” Warren said on a press call Thursday, the sixth anniversary of the Supreme Court’s Citizens United v. FEC ruling to deregulate independent political spending.

Such a rule would provide more information to shareholders, the senators argued, and would shine a light on corporations’ undisclosed political spending, which has exploded in the wake of Citizens United.

Earlier this month, the SEC canceled a public roundtable meeting on the rule, following congressional approval of a budget deal late last year that included a GOP rider that temporarily prohibits the agency from finalizing a rule. The SEC’s move to cancel the roundtable angered Democrats, who accused the agency of using the rider as political cover to drop the rule entirely.

Warren has publicly criticized SEC Commissioner Mary Jo White for failing to fully use the SEC’s authority, including on the corporate disclosure rule. She reiterated that criticism Thursday.

“There is absolutely nothing preventing the agency from making real progress toward an eventual rule. The SEC should stop delaying and get to work on outlining a meaningful disclosure rule,” Warren said on the call.         

Senate Majority Leader Mitch McConnell said yesterday that any action taken by the SEC on disclosure would be unconstitutional, and called the rule—along with other disclosure measures that were hamstrung in the budget deal—“terrible policy.”

“Congress has rejected these types of policies already,” McConnell said.

Democrats, however, contend that the SEC has legal room to move. The budget rider left an avenue open for the SEC to take action, explained John Coates, a securities legal expert who filed an opinion with Public Citizen after the SEC provision was included in last year’s spending bill. That’s because the rider didn’t bar the agency from using appropriated funding to plan or propose the disclosure rule.

“What Congress did instead was to ban use of funds on finalizing such a rule,” Coates said on the call. “The lead-up to a rule would require a lengthy investigation and proposal phase, for good reason.”

Progressive groups have been pushing the Obama administration to use its executive authority on a number of policy proposals that would increase transparency in election spending. Their top priority is a presidential executive order that would require federal contractors to disclose all political spending, an action that Obama is reportedly “seriously considering.” In addition to the SEC rule, progressives have also pushed the Internal Revenue Service to define “political activity” in order to hold tax-exempt social-welfare groups more accountable for their undisclosed political spending.

The SEC isn’t the only agency blocked from taking action by a GOP budget rider. Another rider in last year’s budget deal also banned the IRS from issuing new regulations to define tax-exempt “political activity.”

And while disclosure advocates acknowledge that there’s no way the SEC can legally issue the rule, they say it’s important to prepare as much as possible for when the provision expires—next year, when there will be a new president in power.

“We need the SEC to bring this rule to the five-yard line,” Schumer told reporters.