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SEC Orders Stay of Part of Conflict Minerals Rule Pending Judicial Review

The U.S. Securities and Exchange Commission (SEC) published an Order Issuing Stay on May 2 for that portion of the Conflict Minerals Rule that requires companies with certain covered products to publicly describe them as not "DRC conflict free." In particular, on April 14, 2014, the U.S. Court of Appeals for the D.C. Circuit found that the Conflict Minerals Rule "violate[s] 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 SEC's Order addresses that decision.

The Conflict Minerals Rule implements Section 1502 of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The statute and the SEC's implementing rule require companies to investigate and publicly disclose whether their products contain conflict minerals, which are defined as columbite-tantalite (coltan), cassiterite, gold, and wolframite; related derivatives (tantalum, tin, and tungsten); or any other mineral or derivative, which the Secretary of State determines is financing armed conflict in the Democratic Republic of the Congo (DRC) or any adjoining country.

The National Association of Manufacturers, the U.S. Chamber of Commerce, and the Business Roundtable (collectively NAM) challenged various aspects of the SEC's rule in U.S. federal district court in 2013. After that court upheld the final rule, finding in favor of the SEC on all counts, NAM filed an appeal. While the DC Circuit struck down the public disclosure aspect of the rule, it did uphold the information collecting, record keeping, and reporting requirements . (For more information on the litigation, see the article, U.S. Circuit Court of Appeals Upholds Most of SEC Conflict Minerals Rule.)

Two SEC Commissioners recommended delaying the entire Conflict Minerals Rule pending the outcome of the litigation. In an April 28 Joint Statement on the Conflict Minerals Decision, SEC Commissioners Daniel M. Gallagher and Michael S. Piwowar stated, "A full stay is essential because the district court could (and, in our view, should) determine that the entire rule is invalid." However, a day later, on April 29, Keith F. Higgins, Director, SEC Division of Corporation Finance, issued a Statement on the Effect of the Court of Appeals Decision on the Conflict Minerals Rule announcing that companies are expected to comply with those portions of the Form SD and Conflict Minerals Report requirements that were upheld by the court, and make such filing by the due date of June 2, 2014. (The Conflict Minerals Rule states that the first reports are due May 31, 2014, however, since May 31 falls on a weekend, the reports are due Monday, June 2.)

The April 29 statement explains that companies that are required to file a Conflict Minerals Report do not need to identify their product using the specific descriptors "DRC conflict undeterminable" and "not found to be DRC conflict free." While they may be required to disclose, for those products, the facilities used to produce the conflict minerals, the country of origin of the minerals, and the efforts to determine the mine or location of origin, the companies do not need to use the specific language originally prescribed in the rule.

In response to the SEC's Order, on May 5, 2014, NAM filed a motion with the D.C. Circuit requesting an emergency stay of the Conflict Minerals Rule before May 26, 2014.