As mentioned here, on April 29, 2014, the National Association of Manufacturers (NAM), Chamber of Commerce and Business Roundtable filed a motion for stay with the SEC. The motion requested that the SEC stay its final Conflict Minerals Rule or at least stay the filing deadline for the Form SD and reports associated with the rule. This request followed the U.S. Court of Appeals for the District of Columbia’s holding that the SEC’s requirement that covered companies state which of their covered products “have not been found to be DRC Conflict Free” violates the First Amendment.

In summary, the petitioners argued that issuers will suffer irreparable injury in the absence of the stay due to loss of First Amendment freedoms and the financial implications of complying with the rule. They argue that the entire rule should be stayed because the resulting compelled statement is closely intertwined with the due diligence and country of origin inquiry. Since the “shaming mechanism” of the rule has been struck down on First Amendment grounds, petitioners argued the benefit of the rule is now questionable. Petitioners emphasized Commissioners Gallagher and Piwowar’s comments that “the listing of products – the apotheosis of the diligence process… is central to the rule.” Without the compelled disclosure requirements, the purpose of the rule is undermined and the due diligence requirements become an unnecessary burden to issuers. Petitioners assert that even the current proposed solutions (e.g., the SEC compiling its own list of products that are not conflict free) require a lengthy determination of the standards for classifying the products. The petitioners argue that there is not enough time to resolve these issues before the June 2, 2014, reporting deadline and thus the rule should be stayed until the process of implementing the court’s decision can be completed.

The petitioners requested that the SEC rule on their motion by May 1, 2014, to allow them to “promptly proceed to court to seek appropriate relief if a stay is not granted,” strongly suggesting that the petitioners will file for injunctive relief in the event that the SEC denies their motion. However, given that only one month remains before the filing deadline, companies should still prepare to file pursuant to the SEC’s most recent guidance. On April 30, NAM confirmed in a statement that it plans to file for injunctive relief with the U.S. Court of Appeals for the D.C. Circuit in order to provide the time necessary for Congress, the SEC and industry members to fully understand the implications of the court’s April 14 decision. As of the time of this posting, the Commission had not issued a public ruling on the petitioner’s motion.

 

Topics:  Conflict Mineral Rules, Disclosure Requirements, First Amendment, Form SD, Motion To Stay, National Association of Manufacturers

Published In: Civil Procedure Updates, Civil Remedies Updates, General Business Updates, Constitutional Law Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Akin Gump Strauss Hauer & Feld LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »