Last week, on April 14, the DC Circuit Court of Appeals issued a decision in the legal challenge of the conflict minerals rule and affirmed most of the provisions of the rule, but it found that portions of the SEC’s conflict minerals rule violated the First Amendment when they required that reporting companies report to the SEC and state on their websites that any of their products have “not been found to be ‘DRC conflict free.’” Since the decision was handed down, companies have been working hard to complete their RCOIs, due diligence, analysis of supplier responses, and the drafting of their reports, all while they try to understand the implications of the decision. The first conflict minerals disclosure filings are due in just weeks, on June 2nd.
It is likely that there will be some additional activity on the legal challenge within the next few weeks, either by the parties who challenged the rule or by the SEC itself. Some are hoping that the implementation of the rule will be delayed to allow the implications of the ruling to be clarified. The parties that challenged the rule might want such a delay, and it is possible that the SEC could see some benefit to a delay as well.
However, on Monday, April 21, 12 members of Congress sent a letter to the SEC, urging the SEC to proceed with the implementation of the rule without delay. The letter, signed by 6 Senators and 6 Representatives, cites “strong court decisions affirming the key components of the rule,” recognizes that “remaining free speech issues” still need to be resolved, but proposes that companies can, in the meantime, disclose their use of conflict minerals and describe what is being done to reduce the risk of sourcing of conflict minerals from non-legitimate sources.
It is impossible to predict what actions the SEC will take, but the implications of the court ruling are unclear, and companies are struggling to draft their reports in light of this uncertainty.
Senators who signed the letter to the SEC are: Dick J. Durbin, Tim Johnson, Benjamin L. Cardin, Barbara Boxer, Sherrod Brown, and Ed Markey; and Representatives who signed the letter are: Jim McDermott, Maxine Waters, Raul M. Grijalva, Jim Moran, John Lewis, and Gwen Moore.