Earlier this week, the Securities and Exchange Commission's conflict minerals rule went back to court as the rule's challengers asked for a stay. The SEC adopted the rule under a Dodd-Frank provision intended to mitigate the violence in the Democratic Republic of the Congo. The Court of Appeals for the DC Circuit held last month that "to the extent the statute and rule require regulated entities 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,''" they violate the First Amendment. The court remanded the case to the district court, but the actual mandate for the district court to act will not be issued until early June--after the conflict mineral rule's impending reporting deadline of June 2. It would have made sense for the SEC to stay the enforcement of the rule until the district court clarifies the degree to which the First Amendment violation impairs the rule. SEC Commissioners Daniel Gallagher and Michael Piwowar argued for a full stay on the grounds that the whole rule carries the First Amendment taint. Instead, the SEC issued only a partial stay of the elements of the rule that the court clearly identified as unconstitutional. Companies were directed to comply with the remainder of the rule on the existing timeline. Even if the SEC has technical legal grounds to proceed without waiting to hear from the district court, doing so displays a troubling lack of sensitivity to practical realities. Such indifference to the rule's costs, complexities, and unintended consequences is typical of the SEC's approach to implementing the conflict minerals provision. The SEC has failed to take steps within its discretion to identify and minimize these effects. For example, the SEC decided to require companies to file reports under the rule, rather than furnish them--a wording change with serious implications for legal liability. Once again, in refusing to tweak the rule's compliance timeline, the SEC is acting with unnecessary inflexibility.
Conflict Minerals Conflict Continues
- Conflict Minerals: Unmeasured Benefits and Unspoken Burdens
- Richard Epstein: The Improbable Fate of the Durbin Amendment
- CFTC's Aimless Budgeting
- Dodd-Frank's Central Risk-Takers
- Is Volcker the New FCPA?
- CFTC's Latest Invitation to Court
- 100 Days at the SEC
- Banking on Wind
- New Column by Walter Olson: SEC Unveils Expensive Rule on CEO Pay Ratio
- SEC Steps Further Away from Its Mission
- Unaccountable CFPB Avoids Court Scrutiny
- Court Demands Durbin Rewrite
- SEC Wins its Latest Conflict
- CFTC Regulation Clears Court's Low Bar