Court Upholds SEC Conflict Minerals Rule

The United States District Court for the District of Columbia has upheld the SEC’s conflict minerals rule in National Association of Manufacturers et al v. Securities and Exchange Commission.  Points noted by the Court include:

  • There is no statutory support for plaintiffs’ argument that the SEC was required to evaluate whether the conflict minerals rule would actually achieve the social benefits Congress envisioned.
  • The conflict minerals rules differ significantly from other SEC rules that have been invalidated.  Those cases involved rules or regulations that were proposed and adopted by the SEC of its own accord, with the Commission having independently perceived a problem within its purview and having exercised its own judgment to craft a rule or regulation aimed at that problem.
  • While it may be true that the adoption of some type of de minimis approach could also have been a reasonable, alternative option, this does not render the SEC’s contrary determination arbitrary or unreasonable.
  • Congress did not directly speak to the precise circumstances triggering disclosure obligations (and, by implication, due diligence and reporting requirements) in enacting Section 1502 of the Dodd-Frank Act.
  • The conflicts mineral rule and statute does not violate the first amendment because  it compels “burdensome and stigmatizing speech.”  The disclosure scheme directly and materially advances Congress’s interest in promoting peace and security in and around the DRC.  There is a reasonable fit between the government’s goals and the means chosen to advance those goals.