SEC Acting Chair Michael S. Piwowar directed Commission staff to reconsider the Commission's 2014 guidance on the SEC Conflict Minerals Rule. The guidance was adopted in response to a D.C. Circuit Court of Appeals' holding that the conflict minerals rule in Section 1502 of the Dodd-Frank Act violated the First Amendment. Subsequently, the SEC "issued an order staying the effect of the compliance date for those portions of the rule that were considered unconstitutional."
The 2014 SEC Order Issuing Stay addressed the Court's determination that Securities Exchange Act Section 13(p) and Rule 13p-1 "violate the First Amendment to the extent the statute and rule require regulated entities to report to the Commission and to state on their website that any of their products have 'not been found to be "DRC conflict free."'" The effect of the Court's decision, and of the SEC Order, was not to excuse companies from filing Form SDs, but rather to allow them to refrain from using the term "not DRC conflict free" when describing their products.
Acting Chair Piwowar also asked interested parties to submit comments on the enforcement of the rule and on Commission guidance in general. He noted that the transition period, during which companies were allowed to file Form SDs claiming that the source of their minerals was "DRC conflict undeterminable," has now expired. Acting Chair Piwowar also noted that personal experience supports his position:
"While visiting Africa last year, I heard first-hand from the people affected by this misguided rule. The disclosure requirements have caused a de facto boycott of minerals from portions of Africa, with effects far beyond the Congo-adjacent region."
Comments on the conflict minerals rule and SEC guidance must be submitted within the next 45 days.
Commentary / Karen Woody
It is unsurprising that Acting Chair Piwowar is not a fan of the conflict minerals rule. In 2014, he joined then-SEC Commissioner Daniel Gallagher in calling for a full stay of the rule; in a speech from November 2015, Acting Chair Piwowar also cited the conflict minerals rule as an example of the disclosure regime being "hijacked" by special interests. The good news for him is that the current administration and Congress are likely to agree with his stance, and the demise of the conflict minerals provision may come at some point in the near future. In 2016, the House passed H.R. 5485, which would defund the implementation or enforcement of the rule. Also in 2016, the House introduced H.R. 5983 (the "Financial CHOICE Act"), which would repeal the conflict minerals rule entirely. For its part, the SEC has not been enthusiastic about enforcing the rule and, in early 2016, declined to seek Supreme Court review of the D.C. Circuit's decision.
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