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US: SEC Suspends Online Listing Of Companies Tied to Terrorism

by Deborah Solomon and Neil King Wall Street Journal
July 20th, 2007

Amid a barrage of criticism, the Securities and Exchange Commission is temporarily suspending an online list intended to spotlight companies doing business in countries tied to terrorism.

The online tool, unveiled in June, allows users to click on certain countries identified as state-sponsors of terrorism-such as Iran-and see a list of companies doing business there. It included information from public companies' annual reports, in which they disclosed business activities "in or relating to any of the five State Department-designated State Sponsors of Terrorism," the SEC said.

Several members of Congress, along with the banking industry and other international organizations objected, saying the list wasn't up to date and often included companies that didn't do business in those countries or had already severed ties. In some cases, critics said, the list included firms that simply mentioned the name of a country. That was the case with Immtech Pharmaceuticals, Inc., which disclosed in its annual report that it was conducting clinical trials for sleeping sickness medicine in Sudan.

"This list provided misleading information that could have damaged individual investors and needed to be brought down," said Todd Malan, president and CEO of the Organization for International Investment.

On Capitol Hill, among those who complained were Rep. Barney Frank, the Massachusetts Democrat who oversees the SEC as chair of the House Financial Services committee. Also critical was the committee's senior Republican, Alabama Rep. Spencer Bachus. In a letter to the SEC, Mr. Bachus said the list appeared to have been created through a "cursory word search."

In a written statement, SEC Chairman Christopher Cox said the agency was halting access to the list until it figures out a way to address the concerns raised about its accuracy. "We will work to improve the Web tool so that it meets the various concerns that have been expressed," Mr. Cox said. The SEC also defended the list, saying it allowed users to click on the company's disclosure and read exactly what association the corporation had with those countries.

"All of the disclosures were linked directly to the full text of the company's annual report to insure proper context," Mr. Cox said.

After its launch, the SEC's list raised concerns not only among companies and lawmakers, but also within other parts of the U.S. government-such as the State Department and the Treasury-mainly because it was so simple and unrefined. "It was basically a word-search list," said one U.S. official. "There was nothing the least bit sophisticated about it."

U.S. officials say they have been under pressure for months from Congress and state legislatures to develop an official list of publicly traded companies active in countries listed as sponsors of terrorism. Such a list would aid an effort that has caught fire in states such as Florida, California and Ohio to mandate that public pension funds divest from companies active in countries such as Iran, Sudan and Syria.

The administration opposes the groundswell of divestment efforts. Deputy Treasury Secretary Robert Kimmitt said in a speech in May that such legislation threatened to complicate international diplomatic efforts underway to isolate Iran.

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