(Adds background, details)
By Aruna Viswanatha and Sarah N. Lynch
WASHINGTON, Oct 3 (Reuters) - The top U.S. securities
regulator took Congress to task on Thursday for directing the
agency to write rules that force companies to disclose
information about political or social issues, saying such rules
fall outside the regulator's mission.
"Recent disclosure directives from Congress have been quite
prescriptive, essentially leaving no room for the SEC to
exercise its independent expertise and judgment in deciding
whether or not to make the specified mandated disclosures,"
said Securities and Exchange Commission Chair Mary Jo White in a
speech delivered at a seminar at Fordham Law School.
As an example, White obliquely referenced one controversial
rule required by the 2010 Dodd-Frank Wall Street reform law that
forces manufacturers to disclose whether their products contain
"conflict minerals" produced in the war-torn Democratic Republic
The SEC in July won a legal challenge to the conflict
minerals rule filed by industry groups, including the U.S.
Chamber of Commerce. The groups, who had argued the rule was too
costly and violated companies' free speech rights, are appealing
While the goals of the conflict minerals rule are
"laudable," White said, these types of mandates "seem more
directed at exerting societal pressure on companies to change
behavior, rather than to disclose financial information that
primarily informs investment decisions."
"As the Chair of the SEC, I must question, as a policy
matter, using the federal securities laws and the SEC's powers
of mandatory disclosure to accomplish these goals," she added.
Thursday marked the first time White has offered an opinion
about the contentious debate surrounding exactly how the SEC
should use its powers to mandate disclosures.
The issue has often pitted Democratic and Republican SEC
commissioners against one another over the past few years.
As head of the agency, White controls the agenda. She is
also the sole independent on the five-member panel, making her a
likely swing vote on many key issues.
Her comments could potentially influence how the SEC
proceeds in re-writing a second Dodd-Frank rule that forces oil,
natural gas and mining companies to disclose the payments they
make to foreign governments.
This so-called "resource extraction rule" was overturned in
a federal court in July following a successful challenge by
business trade groups.
The SEC in September opted not to appeal the ruling, saying
it would go back to the drawing board and try again.
Human rights organizations and some members of Congress have
urged the SEC not to water down the disclosure requirements, but
the SEC has not yet discussed how a new rule may look.
White said she respects the requirement that the SEC must
follow mandates from Congress and the White House, noting the
commission cannot "just say no" if it disagrees with a policy.
But, she said, when possible, the SEC should "write the rule
in a way that best comports with our view of our mission and
tries to mitigate the costs."
It is unclear exactly what her comments could mean for
proponents of another rule, not mandated by Congress, to force
companies to disclose their political spending.
As of May, the SEC had received over 600,000 comment letters
on a petition submitted to the agency that called for rulemaking
on political contributions by corporations.
Liberal-leaning groups have been hopeful the SEC would take
it up, though some at the SEC such as Republican Commissioner
Dan Gallagher have said they would not support it.
White did not mention the political disclosure rule in her
In a congressional hearing in May, she told lawmakers that
SEC staff were not actively drafting a rule.
(Reporting by Aruna Viswanatha and Sarah N. Lynch; Editing by
David Gregorio and Ken Wills)