Court upholds SEC’s conflict minerals rule

A federal judge on Tuesday ruled against business groups’ court challenge to new conflict mineral rules, which require U.S. issuers to monitor their supply chains in an effort to curtail human rights abuses in Africa where the raw materials are mined.

Judge Robert Wilkins of the U.S. District Court for the District of Columbia denied the motion for summary judgment filed by the National Association of Manufacturers, the U.S. Chamber of Commerce, and the Business Roundtable.

The business groups had challenged the conflict minerals rule as arbitrary and capricious, and claimed that the disclosures required by the SEC run afoul of the First Amendment.

Wilkins ruled that the business groups’ claims lacked merit. The first Conflict Minerals Reports are due to the SEC on May 31, 2014, to report on the 2013 calendar year.

Businesses are developing procedures to comply with the rule that was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 111-203, and was enacted by the SEC in August 2012.

The rule directly affects an estimated 6,000 U.S. issuers and requires tracing of conflict minerals (gold, tantalum, tin, and tungsten) through supply chains to determine and disclose whether the raw materials originate at mines in the Democratic Republic of the Congo (DRC) or its nine adjoining countries. If the conflict minerals originated in the DRC or its neighboring countries, the issuer must determine and disclose whether they financed or benefited armed groups.

Using minerals from “conflict” mines remains legal, but human rights groups hope that the disclosure requirement will cause companies that wish to be seen as good corporate citizens to source from conflict-free mines.

For more information on conflict minerals and independent private-sector audits of Conflict Minerals Reports, visit the AICPA’s Conflict Minerals Resources page.

—Ken Tysiac (ktysiac@aicpa.org) is a JofA senior editor.