D.C. Circuit Denies Trade Groups' Motion To Stay SEC's Conflict Minerals Regulation

Bloomberg BNA’s Corporate Law & Accountability Report is available on the Corporate Law Resource Center. This news service keeps corporate practitioners informed of legal developments of...

By Yin Wilczek  

May 14 — In a major blow for three industry groups, the U.S. Court of Appeals for the District of Columbia Circuit May 14 denied an emergency motion to stay the Securities and Exchange Commission's conflict minerals rule.

In a brief per curiam order, the court said it denied the motion based on the parties' filings.

The request was filed by the National Association of Manufacturers, the U.S. Chamber of Commerce and the Business Roundtable. The industry groups did not immediately respond to a request for comment.

SEC spokesman John Nester declined to comment on the court's ruling.

Global Witness, a group that lobbied Congress for Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act—the statute requiring the SEC rule—commended the decision.

“Immediate implementation of the rule is crucial to ensure that U.S.-listed companies take responsibility for their supply chains,” said Global Witness representative Carly Oboth in a release. “Companies have a legal reporting obligation to the SEC in this regard, as well as a moral responsibility to show that the metals they use do not fuel conflict in the” Democratic Republic of Congo.

SEC Rule

1934 Securities Exchange Act Rule 13p-1 requires companies and foreign private issuers in the U.S. to disclose their use of so-called “conflict minerals”—gold, tantalum, tin and tungsten from the DRC and adjacent countries—if those minerals are “necessary” to a product made by the companies.

The first disclosures must be submitted to the SEC by June 2.

The D.C. Circuit—in a lawsuit brought by the three trade groups—April 14 concluded that parts of the rule violated the First Amendment to the extent they require issuers 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 has since said it will continue implementing those portions of the rule not found unconstitutional, and that issuers do not have to identify their products as “DRC conflict free,” “not been found to be `DRC conflict free,'” or “DRC conflict undeterminable.”

Following the SEC's announcement, the trade groups May 5 petitioned the court to stay the entire rule.

In opposition to the motion, the SEC argued that the disclosures are important even without the characterizations found unconstitutional by the appellate court.

To contact the reporter on this story: Yin Wilczek in Washington at ywilczek@bna.com

To contact the editor responsible for this story: Phyllis Diamond at pdiamond@bna.com

The court's order is available at http://www.bloomberglaw.com/public/document/Natl_Assoc_of_Manufacturers_et_al_v_SEC_et_al_Docket_No_1305252_D/12.