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By Yin Wilczek
May 2 --The Securities and Exchange Commission May 2 said it will stay--until the completion of judicial review--the parts of its conflict minerals rule recently found unconstitutional by the U.S. Court of Appeals for the District of Columbia Circuit.
The partial stay is in line with April 29 guidance by the Division of Corporation Finance that said companies and foreign private issuers--when filing their disclosures by June 2--do not have to describe their products as “DRC conflict free,” “not been found to be 'DRC conflict free,'” or “DRC conflict undeterminable.”
“[A] stay of those portions of the rule avoids the risk of First Amendment harm pending further proceedings,” the SEC said in its order. “Moreover, limiting the stay to those portions of the rule requiring the disclosures that the Court of Appeals held would impinge on issuers' First Amendment rights furthers the public's interest in having issuers comply with the remainder of the rule, which was mandated by Congress” and upheld by the appellate court.
The rule requires companies and foreign private issuers in the U.S. to report their use of so-called “conflict minerals”--gold, tantalum, tin and tungsten from the Democratic Republic of Congo and adjacent countries--if those minerals are “necessary” to a product made by the companies.
The rule was mandated by Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (27 CCW 265, 8/29/12).
On April 14, a divided D.C. Circuit--in response to a legal challenge by the Business Roundtable, the U.S. Chamber of Commerce and the National Association of Manufacturers--concluded that the statute and the SEC rule violated the First Amendment to the extent that 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” (29 CCW 121, 4/16/14).
SEC Chairman Mary Jo White April 29 told the House Financial Services Committee that the commission will press ahead with implementing the “vast majority” of the rule that the D.C. Circuit upheld.
The SEC's partial stay was in response to a petition by the three business groups that sued over the rulemaking. The commission denied the groups' request to stay the entire rule.
The groups in a May 1 joint statement described the Corp. Fin. guidance as an “inadequate response” to the court's decision “given that the disclosure requirements that the court struck down are a central pillar of the statute and the rule.”
The industry groups May 5 filed a motion asking the D.C. Circuit to stay the conflict minerals rule, citing the “unresolvable legal uncertainty about the rule's requirements.” The groups requested a decision by May 26.
To contact the reporter on this story: Yin Wilczek in Washington at email@example.com
To contact the editor responsible for this story: Phyllis Diamond at firstname.lastname@example.org
The SEC's order is available at http://www.sec.gov/rules/
The Corp. Fin. guidance is available at http://www.sec.gov/News/PublicStmt/Detail
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