U.S. court says SEC’s conflict mineral ruling violates freedom of speech

The ruling is part of a mounting effort to get companies to reveal their products that contain any of the four minerals from war-torn regions, specifically in the DRC

Tin, tantalum, tungsten, and gold are four of the most controversial minerals on the planet because of their origins in regions where human rights violations are common due in part to civil warfare. They are the four main conflict minerals that have become the center of aggressive regulation proposals in both the U.S. and Europe, with recent rulings in the U.S. somewhat turning the tables on the progression of strict transparency regarding companies that use these minerals.

The Securities and Exchange Commission (SEC) released a new set of guidelines earlier this month that oversee disclosure requirements within the Dodd-Frank Act that pertain to companies that deal with conflict minerals. The Democratic Republic of Congo (DRC) is the focal country that these guidelines concern themselves with, but also includes some of the surrounding regions. 

The guidelines deal with audits of the independent private sector as well as the requirements that must be included in a company’s Conflict Minerals Report. The details aimed at enabling a better focus on investigating companies that deal with DRC-mined goods, and ones that manufacture products including minerals derived from the DRC. But on April 14, a federal appeals court struck down parts of the SEC’s ruling on grounds that it violates the First Amendment and freedom of speech. 

The Wall Street Journal quotes the court: "It requires an issuer to tell consumers that its products are ethically tainted, even if they only indirectly finance armed groups. An issuer, including an issuer who condemns the atrocities of the Congo war in the strongest terms, may disagree with that assessment of its moral responsibility.” 

The court did not altogether overturn the SEC’s ruling, leaving in approval of provisions to have companies conduct investigations into whether their products include conflict minerals, and requiring those companies to file public reports. But for now, the ruling has been somewhat dimmed by the court. No doubt the SEC will respond.

 

Further reading:

The art of conflict minerals compliance 

EU drafts conflict mineral compliance regulation 

Technology for minding your compliance P’s and Q’s: Spotlight on conflict minerals

Contributing Author

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Juliana Kenny

Juliana Kenny is a contributor to InsideCounsel.com, covering a range of topics including patent litigation, conflict mineral laws, executive compensation, and antitrust regulation. Juliana earned B.A.s...

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