Today, during a hearing of the Capital Markets Subcommittee, Congressman Brad Sherman (D -- CA) questioned Securities and Exchange Commission (SEC) Chair Mary Schapiro on efforts to require greater disclosure and more effective dissemination of information about publically traded companies that conduct business with sanctioned State Sponsors of Terrorism, especially Iran.
Sherman urged that the SEC put back in place a web-based system to allow investors to easily search SEC filings for disclosures by companies detailing business relationships with these sanctioned countries. That web-based tool, which was implemented four years ago, was terminated by Schapiro's predecessor after companies complained that the information being made available was "defective."
"It was taken down at least in part because it was too successful," Sherman said. "Any real problems with the system should have been fixed by now and it should be back up and running -- this needs to be done as soon as possible." Sherman further noted that in July 2010 testimony Chairman Schapiro promised that the SEC would take steps to educate investors about the dangers of investing in firms that conduct business with Iran and other sanctioned countries.
"The capability for investors to quickly search SEC fillings would be an extremely effective way to help educate them," Sherman said.
Sherman also noted that the House has passed the Iran Threat Reduction Act by a wide margin, and this legislation will likely be enacted this year. The bill would require greater disclosure by companies regarding their business relationships with Iran. Sherman also called for the SEC to takes steps in anticipation of the new law to ensure that business relationships with Iran be considered "material information" that must be disclosed.
"Companies that do business with Iran, particularly with the government of Iran, particularly in areas of strategic significance, not only undermine American foreign policy, but also expose their shareholders to risk -- namely the risk that the firms will be sanctioned."
Sherman is an original cosponsor of the Iran Threat Reduction Act, and is the author of several of its provisions. Chairwoman Schapiro noted in response that the SEC staff has begun working on a rule to require better disclosure of firms' business in or with Iran as part of their regular fillings with the Commission.