- The Washington Times - Wednesday, May 16, 2001

Federal regulators, under pressure from human rights activists, are stepping up requirements that foreign companies listed on American stock exchanges disclose in detail their activities in countries that are subject to U.S. sanctions.

The Securities and Exchange Commission quietly revealed last week that it would require foreign businesses that want their shares traded on American markets to reveal detailed information about activities in countries such as Iran, Iraq, Libya, Sudan, Burma and Cuba.

Activists claimed victory, saying they had persuaded the SEC to apply the principle of disclosure to the contentious issue of whether companies should invest in pariah states that are the target of American sanctions.

"People are really going to have to stretch to make a case against expanded disclosure," said Roger Robinson, president of the William J. Casey Institute, a think thank with strong links to conservative human rights activists. "It's a basic free-market principle."

The SEC decision, which is sure to draw fire from U.S. allies, marks the latest victory for human rights activists who want to stop the flow of money foreign companies give to repressive regimes. In recent years, they have abandoned efforts to impose trade sanctions in favor of trying to inhibit foreign firms' access to U.S. capital markets.

They pulled off their biggest coup in April 2000 by persuading large institutional investors to boycott an initial public offering by PetroChina, a Chinese energy conglomerate. The company managed to sell $2.9 billion in stock, not even one-third of the $10 billion it had hoped to raise.

PetroChina has invested in the petroleum industry in Sudan, which the U.S. government has cited as a terrorism sponsor and human rights violator. Sudan's persecution of Christians in particular outraged human rights groups.

Foreign companies are charging that the new rules amount to excessive government interference in the purely financial matter of whether a company wants to list its shares on U.S. stock exchanges.

"This rule is the nanny state run amok," said Todd Malan, executive director of the Organization for International Investment, a group that represents foreign companies with operations in the United States.

Acting SEC Chairman Laura Unger told Rep. Frank R. Wolf, Virginia Republican, in a May 8 letter that the agency has concluded that existence of U.S. sanctions could constitute a "material risk" that potential investors should be aware of before deciding to buy a foreign company's stock.

Mr. Wolf heads the House Appropriations commerce, justice, state and the judiciary subcommittee, which oversees SEC funding.

In a memorandum accompanying the letter, the agency said the prospect of a boycott by concerned people, as happened in the case of PetroChina, is information foreign companies must disclose to potential U.S. investors.

As a result, the SEC said its staff will boost its scrutiny of foreign companies that are listed on the New York Stock Exchange, the Nasdaq Stock Market, or any other market.

"Our aim is to make available to investors additional information about situations in which the material proceeds of an offering could however indirectly benefit countries, governments or entities that, as a matter of U.S. foreign policy, are off-limits to U.S. companies," she wrote.

The SEC is likely to apply the new policy to only a few foreign companies, an agency spokesman said. Only about 10 percent of the 13,000 companies filing documents with the SEC are foreign.

Of those, only a fraction are active in countries that are subject to U.S. economic sanctions.

Last year, 200 overseas companies applied to list in the United States.

It will fall to Harvey Pitt, President Bush's nominee to head the SEC, to carry out the new practice.

Mr. Malan said the new policy may mark the first step on a slippery slope toward other restrictions that would be based on political considerations.

"Any political view can now be hung on this new hook that the SEC has established," he said.

But foreign companies could be out of luck, because the decision has drawn little opposition from American securities firms, the industry that has the best chance of scuttling a new SEC policy. Industry representatives said the new rule appears to be only a shift towards heightened disclosure by foreign companies, something securities brokers have always supported.


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