Last week, the saga of the U.S. Securities and Exchange Commission’s (SEC) conflict minerals disclosure rule took another turn as the U.S. Court of Appeals for the District of Columbia Circuit denied an emergency motion filed by industry groups to stay the rule. The rule, known as Exchange Act Rule 13p-1, was authorized by section 1502 of the Dodd-Frank Act and requires companies to make their first disclosures about their use of conflict minerals – such as gold, tantalum, tin, and tungsten from the Democratic Republic of Congo and adjacent countries – by June 2, 2014. The motion for stay was filed by three trade groups: the National Association of Manufacturers, the U.S. Chamber of Commerce, and the Business Roundtable.
We previously reported that in April, the D.C. Circuit Court of Appeals partially struck down the conflict minerals disclosure rule in National Association of Manufacturers v. Securities and Exchange Commission, finding that the rule’s requirement that companies describe whether their products have been found to be “DRC conflict free” constituted compelled commercial speech in violation of the First Amendment. Following that decision, the SEC released a statement on April 29 clarifying how companies should make disclosures under Rule 13p-1 while the court case continues. In that guidance, the SEC said companies need not use the phrase “DRC conflict free,” although companies could elect to do so as long as an independent private sector audit (IPSA) was conducted. Companies required by the rule to file a Conflict Minerals Report should describe “the due diligence that the company undertook.” In the case of products that cannot be determined to be DRC conflict-free, companies should disclose “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.”
On May 2, the SEC itself issued a stay [PDF] applying to “those portions of [the rule] subject to the Court of Appeals’s constitutional holding… pending the completion of judicial review, at which point the stay will terminate.”
Following the Court’s denial of the motion for stay, companies must file their first Rule 13p-1 disclosures by June 2 in accordance with the SEC’s April 29 guidance. Yesterday, the Court held its en banc rehearing of oral arguments in a related case, American Meat Institute v. USDA, which the SEC has not sought to join.