DC Circuit Court Reaffirms Earlier Decision Partially Invalidating Conflict Minerals Rule On First Amendment Grounds

Mintz - Securities & Capital Markets Viewpoints

Pursuant to Section 1502 of the Dodd-Frank Act, which added new Section 13(p)(1) to the Securities Exchange Act of 1934, as amended, the SEC promulgated Rule 13p-1 (the “Conflict Minerals Rule”), which required that issuers that manufacture (or contract to manufacture) products in which conflict minerals are “necessary to the functionality or production of the product” are required to disclose whether or not their products contain tin, gold, tantalum, or tungsten mined from the Democratic Republic of Congo (the “DRC”) and nine of its neighboring countries.  This provision was included in the Dodd-Frank Act at the request of legislators who believed that the process of mining for and producing these particular minerals in certain countries is contributing to a grave, ongoing humanitarian crisis in that region of Africa.

In April 2014, in National Association of Manufacturers v. SEC, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit (the “D.C. Circuit Court”) issued a decision finding that a portion of the Conflict Minerals Rule violated the First Amendment of the United States Constitution, to the extent that issuers were required “to report to the Commission and to state on their website that any of their products have ‘not been found to be ‘DRC conflict free.’” In response to this decision, the SEC issued an order formalizing previous guidance that “[n]o company is required to describe its products as ‘DRC conflict free,’ having ‘not been found to be ‘DRC conflict free, or ‘DRC conflict undeterminable.’”  However, in light of a subsequent decision by the D.C. Circuit Court expanding the application of a U.S. Supreme Court ruling that applies a lower threshold for a government to show that a law does not violate First Amendment rights, the SEC (along with Amnesty International) filed a petition for a rehearing of the panel decision, which was granted by the court in November 2014.

On August 18, 2015, in a 2-1 split decision, the D.C. Circuit Court reaffirmed its prior decision that the Conflict Mineral Rule “violates the First Amendment to the extent the statute and the rule require [issuers] to report to the Commission and to state on their website that any of their products have ‘not been found to be DRC conflict free.’”  The SEC has not yet responded to this decision, and the fate of the Conflict Minerals Rule remains uncertain at this time.  We do, however, expect that the SEC will issue additional guidance to provide clarity as to issuers reporting obligations in light of this decision, and we will keep you posted.

[View source.]

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.

© Mintz - Securities & Capital Markets Viewpoints | Attorney Advertising

Written by:

Mintz - Securities & Capital Markets Viewpoints

Mintz - Securities & Capital Markets Viewpoints on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.