Last week, as many investors celebrated Thanksgiving and kept an eye on Black Friday sales, the Securities and Exchange Commission quietly halted progress on a proposed rule that investors have been demanding for years. The rule would require publicly traded companies to tell shareholders when they spend money to influence elections.
In 2011, a group of experts in corporate and securities law petitioned the SEC for a rulemaking that would require disclosure of political spending. Late last year, the agency put the rule on its agenda for 2013. In the meantime, the SEC has received more than 650,000 comments on the petition – virtually all in support. This record-breaking number of comments includes major institutional investors like mutual fund managers, state treasurers, and pension funds.
The Brennan Center released a report in 2012 describing the benefits such a rule would have both for investors and the health of our democracy. Transparency empowers investors’ oversight of potentially risky spending and allows them to make sure their money is not used to support candidates or causes that conflict with their beliefs.
Just last week, a report revealed unprecedented levels of support for disclosure of political donations from mutual funds. Earlier in the year, another study reported on the pronounced trend of the nation’s largest companies voluntarily sharing this information, showing that disclosure is completely feasible.
Now, the SEC has taken political spending off its agenda, disappointing investors who support transparency. But investors and advocates haven’t taken their eyes off the ball. The push for an SEC rule requiring disclosure about political uses of shareholder capital will continue.