The Enough Project takes serious issue with recent statements by Securities and Exchange Commission (SEC) Acting Chairman Michael Piwowar and the SEC Division of Corporate Finance regarding the SEC’s Conflict Minerals Rule. The statements are in strong contradiction to recent public comments submitted to the SEC and appear to be highly irregular.
On April 7th, Commissioner Piwowar cast doubt on his commitment to enforce the core reporting requirements in the SEC Conflict Minerals Rule, as part of Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The SEC Corporate Finance Division then released a statement recommending non-enforcement of the requirement in the Rule for companies to report on their due diligence. Non-enforcement of this component would effectively nullify the value of the due diligence reporting requirement enshrined in the Rule.
Sasha Lezhnev, Enough Project Associate Director of Policy, said: “One commissioner doesn’t have the authority to change the conflict minerals law or regulation unilaterally. Companies are still legally required to file conflict minerals reports and disclose their due diligence, according to the law that Congress passed and the SEC rule that the courts upheld. We look forward to reading companies’ full conflict minerals reports in May.”
The statement from the Corporate Finance Division, by its own admission, “does not express any legal conclusion on the rule.”
Brad Brooks-Rubin, Enough Project Policy Advisor, said: “We are concerned about the apparent attempt to gut the essence of conflict minerals due diligence without authority or cause. The goal of reports pursuant to Section 1502, and the focus of review by investors and the public, is to understand the specific steps companies have taken to address conflict minerals concerns. Specific labeling or description is not the essence of due diligence; meaningful and transparent action is.”
The goal of company reports to the SEC pursuant to Section 1502, and the focus of review by investors and the public, is to understand the specific steps companies have taken to address conflict minerals concerns. Specific labeling or description is not the essence of due diligence; meaningful and transparent action is. It is critical that companies report on their tracing and auditing in their supply chains, as this transparency is what changes incentives for minerals businesses and, in turn, armed groups at mines.
Holly Dranginis, Enough Project Senior Policy Analyst, said: “Several companies have been filing thorough, illuminating reports for three years without the descriptor requirement in place due to grace periods and pending litigation. In that short time we’ve seen major progress in service to Congress’ original intent: a cleaner more transparent global minerals supply chain and more security in several of Congo’s mining areas.”
Importantly, the SEC statements seem to have ignored the public comment period initiated by Commissioner Piwowar in 2017. Over the past two months, over 10,000 individuals have written to the SEC asking for the conflict minerals rule to be upheld for public interest. This includes letters from 111 Congolese civil society organizations based in Congo, who expressed in clear terms that suspension or weakening of the rule would cause more violence and incentivize armed groups to return to mines.
The recent final decision from the court on the conflict minerals rule was clear and narrow. It invalidated one specific, severable component of the Conflict Minerals Rule — the descriptor requirement — and held that the rest of the Rule’s requirements were not in violation of any laws.