Portions of conflict minerals rule stayed by SEC

Companies will not have to explicitly declare whether their products contain minerals that originated in mines in the Democratic Republic of Congo or its neighboring countries, according to the SEC.

The SEC issued an order Friday staying the effective date for compliance with portions of its conflict minerals rule that requires statements that an appeals court ruled last month would violate the First Amendment.

The first reports relating to the conflict minerals rule are due to be submitted to the SEC by issuers on or before June 2.

The order formally states guidance that already had been provided Tuesday in a prepared statement by Keith Higgins, director of the SEC’s Division of Corporation Finance.

Issuers are required under the conflict minerals rule to determine whether the gold, tantalum, tin, and tungsten in their products originated in mines run by warlords in the Democratic Republic of the Congo or its neighboring countries. The rule also requires issuers to report on their efforts to determine where the minerals originated.

The U.S. Court of Appeals for the District of Columbia Circuit ruled April 14 that the First Amendment was violated by part of the rule that requires companies to disclose whether their own products are “DRC conflict free.”

The effective date for compliance with that part of the rule was stayed by the SEC’s order on Friday. But in the order, the commission denied a motion for a stay of the entire rule, filed by the National Association of Manufacturers, U.S. Chamber of Commerce, and Business Roundtable.

The stay also does not go nearly as far as two of the five SEC commissioners, Daniel Gallagher and Michael Piwowar, suggested in a public statement Monday. Gallagher and Piwowar said the entire conflict minerals rule should be stayed until litigation surrounding the rule is completed.

According to the SEC, staying the specific portions of the rule prevents a risk of First Amendment harm pending future legal proceedings that will transpire after the appeals court remanded the case to district court. The earliest date on which the court of appeals’ mandate is likely to issue is June 5, the SEC said.

Staying only those portions of the rule furthers the public’s interest in having issuers comply with the remainder of the rule, according to the SEC. The appeals court upheld the remainder of the rule, which was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 111-203.

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