Circuits Assembly Online Magazine - SEC Says ‘No More Enforcement’ of Conflict Minerals Rule

WASHINGTON – The acting chairman of the US Securities Exchange Commission suggested enforcement of a rule requiring public companies to disclose the origin of any conflict minerals would be tabled pending new commission recommendations.

“The primary function of the extensive and costly requirements for due diligence on the source and chain of custody of conflict minerals set forth in paragraph (c) of Item 1.01 of Form SD is to enable companies to make the disclosure found to be unconstitutional,” wrote Acting Chairman Michael S. Piwowar. “In light of the foregoing regulatory uncertainties, until these issues are resolved, it is difficult to conceive of a circumstance that would counsel in favor of enforcing Item 1.01(c) of Form SD.”

Form SD (for Special Disclosure) sets forth the requirements by which companies must declare the constituents in their products.

Piwowar issued the statement in response to a recent US District Court ruling that put the decision over whether the Dodd-Frank Act was in violation of First Amendment laws back in the hands of the SEC.

The Court judgment had previously 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,'" Piwowar wrote. However, he added, the Court did not address whether description is required by statute or, rather, is solely a product of the commission’s rulemaking.

“The commission will now be called upon to determine how to address the Court of Appeals decision, including whether Congress’s intent in Section 13(p)(1) can be achieved through a descriptor that avoids the constitutional defect identified by the court – and how that determination affects overall implementation of the conflict minerals rule.”

SEC staff will begin work on a recommendation for future commission action, taking into account public comment received in response to a Jan. 31 request for comment.