Despite a recent court ruling deeming part of the Securities and Exchange Commission’s conflict minerals rule unconstitutional, the overall reporting requirements will not be delayed, agency chair Mary Jo White told a House of Representatives panel on April 29.
“The D.C. Circuit, and I studied this very very carefully, has upheld the vast majority of the [SEC’s] rule-making, and quite clearly so,” White said. “The intentions are…that reporters under that set of regulations would be required to report as to the portions of that rule that have been clearly upheld by the court’s decision. As to the aspect that has not been, clearly there would be no requirement to make those disclosures.”
White added: “There might be things going forward that affect the invalid part of that rule-making. But the rest of it stands on its own.”
She added she expects the SEC to issue guidance soon. The SEC devised and voted in favor of its rule on Aug. 22, in response to Sect. 1502 of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires public companies to disclose whether they source conflict minerals, including gold and tungsten.
On April 14, a three-judge panel from the D.C. Court of Appeals upheld most of the SEC’s rule, turning away a challenge from the National Association of Manufacturers (NAM). But it agreed with NAM that requiring a company to call its minerals “not DRC conflict-free” represents compelled speech in violation of the First Amendment, as the term conflict-free is “a metaphor” with which companies may not agree. It remanded the rule to a lower court to resolve the issue.
White’s comments run contrary to a statement from two SEC commissioners, Daniel M. Gallagher and Michael S. Piwowar, who issued a joint statement on April 28 urging the rule be delayed.
“The wisest course of action would be for the commission to stay the effectiveness of the entire rule until the litigation has concluded,” they wrote. “Marching ahead with some portion of the rule that might ultimately be invalidated is a waste of the commission’s time and resources—far too much of which have been spent on this rule already.”
The statement argues that Dodd-Frank Sect. 1502 has been “counterproductive, resulting in a de facto embargo on Congolese tin, tantalum, tungsten, and gold, thereby impoverishing approximately a million legitimate miners who cannot sell their products up the supply chain to U.S. companies.”
In response to similar complaints at the House hearing, White noted that the SEC did not devise the provision but was tasked with implementing it.