Despite a recent court ruling that called a provision of the Securities and Exchange Commission’s conflict minerals rule unconstitutional, covered companies will still have to comply with the bulk of its dictates, says Jewelers Vigilance Committee president and CEO Cecilia Gardner.
She noted that the decision, issued April 14 by the United States Court of Appeals for the District of Columbia, decreed that most of the rule could stand, upholding a ruling from a lower court. It did object, however, to a requirement that publicly traded companies label their products conflict-free in SEC filings, since that particular phrase assumes what it calls “an assessment of moral responsibly,” and could be seen as “compelled speech,” which would violate the First Amendment.
“An issuer…may disagree with that assessment,” wrote Senior Circuit Judge A. Raymond Randolph in the majority opinion, adding the current wording compels companies to admit “blood on their hands.” The decision remanded the issue to a lower court.
Gardner does think the wording requirement will be reexamined by the SEC prior to the intial reporting date of May 31. She also thinks there could be further litigation on this issue and the SEC rule in general, with the appeals court possibly considering it in an en banc (French for “on the bench”) or full court session.
But the recent decision makes it more likely than ever that the rule will move forward, Gardner says.
“No company should be reading the decision and think, ‘Never mind,’ ” she says. “The public companies will still have to file their conflict mineral reports. The court found it unconstitutional to force companies to use a certain set of words. They didn’t find it unconstitutional to have them to report that their minerals come from covered countries.”
A blog post from former State Dept. advisor for conflict diamonds Brad Brooks-Rubin largely agrees.
“Nearly all of the requirements of the rule remain in place, and company compliance efforts should continue,” he wrote on his law firm’s blog.
The SEC’s rule was finalized on Aug. 22, in response to Sect. 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. That section requires publicly traded firms to publicly disclose whether they source conflict minerals—including gold and tungsten—from the Democratic Republic of the Congo and surrounding countries.
Gardner adds that since a small percentage of the industry’s gold comes from the DRC, most companies will declare their gold did not come from the region in their public filings.