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U.S. Botches Terror-Support List

Global companies cried 'foul' this summer when the U.S. government incorrectly listed them as supporters of terrorist states.
Kate Plourd, CFO Magazine
October 30, 2007

The Securities and Exchange Commission's attempt to publicize a list of companies with business ties to terrorist-sponsoring states caused quite a stir this summer. The list of more than 90 companies included a number of household names, from AstraZeneca to Cadbury Schweppes to Reuters to Xerox. Posted in June on the SEC's Website, it was accompanied by strong words from chairman Christopher Cox, who said that investors shouldn't have to wonder whether their investments "are indirectly subsidizing a terrorist haven or genocidal state."

As it turned out, the SEC's method for determining offending companies was itself indirect, and incorrect. Companies were singled out for simply mentioning Iran, North Korea, Sudan, Syria, or Cuba in their annual 10-Ks. Outraged companies, and lawmakers, cried foul, calling the SEC's method inaccurate, unfair, and based on outdated information. The list was removed weeks later and the SEC has vowed to retool its approach to identifying such companies, although it has not stated publicly when it will unveil a new list or describe its criteria for inclusion.

Investors concerned about buying stock in companies that have ties to terrorist-sponsoring states already have access to information on the issue. Several private firms not only offer lists of such companies, but say they define material ties to terrorist states more accurately and quickly than the SEC. The Conflict Securities Advisory Group, for one, maintains a list of more than 400 companies differentiated by type of business connection, which can range from equity ties to actual on-the-ground operational facilities.