Acting SEC Chair Michael Piwowar has directed the staff to consider whether guidance on the conflict mineral rule is still appropriate and whether additional guidance is needed. The SEC partially stayed compliance with the rule in May 2014 after the D.C. Circuit Court ruled that certain of its provisions violated the First Amendment. Following the ruling, the SEC issued an order staying the compliance date for the provisions found unconstitutional and the Division of Corporation Finance issued guidance on complying with the remaining provisions. The case was remanded to the district court for further consideration.
Rule 13p-1 and Form SD were adopted pursuant to Exchange Act Section 13(p), which was added by Section 1502 of the Dodd-Frank Act. The court concluded that Section 13(p) and Rule 13p-1 violated the First Amendment to the extent that they required regulated entities to report to the SEC and to disclose on their websites that any of their products were not found to be Democratic Republic of Congo conflict free. The court had no objection to any of the other required disclosures.
Piwowar noted that the temporary transition period for the rule has expired and the reporting period beginning January 1, 2017 is the first reporting period for which no issuer falls within the terms of the transition period. Since the litigation is ongoing, Piwowar asked interested parties to submit comments within the next 45 days on whether the 2014 guidance is still appropriate.
Rule’s impact. In a separate statement, Piwowar reported on a trip he took to Africa last year where he heard first-hand about the effects of the rule. He said the disclosure requirements have led to a de facto boycott of minerals from certain areas beyond the Congo region, and legitimate mining operations are being forced to close due to the onerous costs of compliance. Piwowar added that it is unclear whether the rule has reduced the armed gangs or eased the suffering of innocent people in the Congo and surrounding areas. He also warned that withdrawal from the region could undermine U.S. national security interests by creating a vacuum filled by those with “less benign interests.”
A comment page has been created so that interested parties can express their views on the reconsideration of the conflict minerals rule and the 2014 guidance.