Two of the SEC’s five commissioners said Monday the conflict mineral disclosure rule shouldn’t be enforced during a federal court challenge and the entire rule should be struck down.
Daniel M. Gallagher and Michael S. Piwowar, both appointed by President Obama to five-year terms, said in a statement: “A full stay is essential because the district court could (and, in our view, should) determine that the entire rule is invalid.”
The D.C. Circuit Court of Appeals ruled on April 14 that requiring issuers to describe that certain products could not be determined to be “DRC conflict free” violated the First Amendment.
The appeals court sent the case back to the trial, subject to the First Amendment ruling.
Commissioners Gallagher and Piwowar said all of the required disclosures in the conflict minerals rule trigger First Amendment concerns, not just the portion requiring the list of products that haven’t been determined to be “DRC conflict free.”
“A limited modification to our rule eliminating the requirement to declare certain products as ‘not DRC conflict free’ would fail to fully address the First Amendment violation,” they said.
Gallagher and Piwowar said the embargo on Congolese tin, tantalum, tungsten, and gold has affected a million miners who cannot sell their products up the supply chain to U.S. companies.
They said “requiring an issuer to include a description of its due diligence procedures in its reports would suggest that the issuer may have ‘blood on its hands’ for its products” if it is sourcing certain minerals from the DRC.
Issuers face a May 31 quarterly reporting deadline, Gallagher and Piwowar said, so “given the uncertainty, the wisest course of action would be for the [SEC] to stay the effectiveness of the entire rule until the litigation has concluded.”
Julie DiMauro is the executive editor of the FCPA Blog and can be reached here.