The Independent View: Using the SEC for Campaign Finance Transparency

Ever since the Supreme Court ruled in Citizens United v. FEC that corporations can spend an unlimited amount of money on political ads, policy makers have struggled to find workable ways to address the new influx of money into U.S. elections.

Short of the arduous process of amending the United States Constitution, many have been looking at ways to make corporate contributions much more transparent and easily seen by the public.

Both good government advocates and investors, the people who own publicly traded companies, find this idea attractive. Currently, even though corporations have a constitutional right to make political expenditures they have no duty to report such spending to the voting public or investors. But there may be a way to enforce transparency for corporate political expenditures through regulations issued by the U.S. Securities and Exchange Commission (SEC), which already requires various disclosures by publicly traded firms.

The Securities and Exchange Commission already enforces regulations in the area of money in politics, under the authority granted to it by two rules (MSRB Rule G-37 and Rule 206(4)-5) and under the Foreign Corrupt Practices Act of 1977 (FCPA). The Foreign Corrupt Practices Act was a reform that was crafted at the request of officials who then led the Securities and Exchange Commission, after the Watergate investigation revealed that several publicly traded companies had given illegal campaign contributions to the Nixon campaign and other election campaigns. The SEC also found that these contributions were not properly recorded in the books and records of the offending corporations. These revelations troubled the Securities and Exchange Commission and prompted it to launch a wide-ranging investigation into the political spending of U.S. corporations both domestically and abroad. After the results documented many previous illegal contributions in the United States by hundreds of firms, as well as instances of bribery abroad, the Securities and Exchange Commission urged Congress to enact the Federal Corrupt Practices Act.

So the Securities and Exchange Commission is perfectly capable of regulating campaign spending. In fact, it has tackled complex issues in this area, like foreign bribery and the building of barriers between elected officials and companies that stand to benefit from decisions they influence about public financial investments. How hard would it be for the Commission to tackle issues of transparency in the new corporate campaign finance environment?

In 2011, a group of corporate law professors petitioned the Commission to ask it to define and implement a new rule requiring transparency for corporate political spending. This would be straightforward, easier to execute than current kinds of investigations and regulatory enforcement actions the Commission now undertakes, because publicly traded corporations would simply be required to inform their shareholders how much they are spending, and where, for election campaigns. The Securities and Exchange Commission would institute and oversee a new step in corporate record-keeping and reporting, one that, by the simple fact of happening in a prompt way after campaign contributions are given, would enlighten both investors in publicly traded firms and the American public overall.

Over one million public comments have urged the Securities and Exchange Commission to adopt this common sense reform. This is the natural next step in SEC’s already well established tradition of regulating political behaviors of U.S. corporations that have the risk of facilitating corruption.