SEC Wants Conflict Gold Reporting Requirements

Publicly held jewelry manufacturing companies could now have
to regularly report if their products contain conflict gold from war-torn areas
of the Democratic Republic of Congo or adjoining countries, according to new rules
proposed by Securities and Exchange Commission (SEC) regulators Dec. 15.

The reports must describe the company’s measures to
determine whether any of their gold has been sourced from conflict regions.
They must also be independently audited, filed to the SEC as part of their
annual report, and posted on the company’s website.

“The overall goal of the legislation is a worthy one: To
de-link these minerals from the ongoing human rights violations in the DRC,”
JVC president and CEO Cecilia Gardner tells JCK.
“It’s a goal the industry supports. But we are still the analyzing the proposed
rule.”

The rule, which also impacts other so-called conflict
minerals, such as tin and tungsten, stems from a provision of the Dodd-Frank
Wall Street Reform and Consumer Protection Act, which passed July 21.

The SEC’s proposal seemingly runs counter to a cautionary
submission from industry associations about “conflict mineral” regulations, warning that
determining where gold comes from was close to impossible.

“There is no test to determine the country of origin of
gold,” said a submission
signed by the Jewelers Vigilance Committee, the American Gem Society, Jewelers
of America, the Manufacturing Jewelers & Suppliers of America, and the
Responsible Jewellery Council. “Therefore, establishing provenance outside of a
reliable chain-of-custody record is not possible.”

Patrick Dorsey, senior vice president, secretary, and
general counsel of Tiffany & Co., similarly argued
that the noted retailer does “not believe that it, or any jeweler, whether or
not it manufactures its products, can certify where the gold used in its
products ‘originated.’ All that [Tiffany] can certify to is the identity of the
party from whom it purchases its gold.”

The new rule has a direct impact
only on
jewelers that are public or part of public companies and that use
the minerals in manufacturing or contract to have the goods manufactured. In
the jewelry sector, that might mean Walmart, the Signet Group, Tiffany &
Co., and companies that are part of Berkshire-Hathaway, including Richline.

Signet spokesman David Bouffard says, “We are closely
monitoring the situation through our trade associations to better understand
what the proposed rules might mean to our business.”

The SEC’s proposed rules are not yet final, and are open for
public comment
until January 31, 2011. Final rules will be released April 17. Companies must adopt the new disclosure requirements in the first full fiscal year after the rules are adopted.