by Cydney Posner
According to this article from The Washington Post with Bloomberg, in February, House Financial Services Committee Chair Jeb Hensarling and three other House members (Scott Garrett of New Jersey, Bill Huizenga of Michigan, and Ed Royce of California) sent a letter to SEC Chair Mary Jo White urging that the SEC end its appeal of the conflict minerals case, National Association of Manufacturers, Inc. v. SEC, currently pending in the DC Circuit. Whether the pressure will have any impact remains to be seen. Hensarling asked for a report on the amount of funds and time spent defending the rule.
[Sidebar: That should be interesting. Last year, Hensarling sent a similar missive to White asking for data and urging that the SEC stop spending time on the pay-ratio disclosure rules. The SEC reported that it had devoted over 7,000 hours since 2011 working on the development of the still-in-the-proposal-stage pay-ratio disclosure rules. Notably, the SEC has yet to issue those rules, although it is not publicly known whether the letter had any impact on the delay, especially given that a group of Democrats and Independents followed up with a letter of their own, urging that she accelerate adoption of the pay-ratio rules.]
You may recall that, in April, a three-judge panel of the D.C. Circuit struck down a portion of the SEC’s conflict minerals rule on First Amendment grounds. In that case, the Court decided that the requirement to disclose whether companies’ products were “not found to be DRC conflict free” amounted to “compelled speech” in violation of companies’ First Amendment rights. Both the SEC and Amnesty International filed petitions with the D.C. Circuit requesting a rehearing regarding the First Amendment issue, and all sides have now filed briefs on the key issues identified by the Court.
Cleverly, the Congressmen’s letter jumped on remarks that White had made in 2013 regarding the independence and mission of the SEC. (See this news brief.) According to the article, the letter indicated that the signatories were “troubled by the SEC’s discretionary use of valuable time and resources appealing the D.C. Circuit’s ruling in light of statements you have made regarding the questionable use of the federal securities laws to advance social or political goals.” As part of that speech, White had argued that the SEC “is best able to shape disclosure rules consistent with the federal securities laws and its core mission. But from time to time, the SEC is directed by Congress or asked by interest groups to issue rules requiring disclosure that does not fit within our core mission.” [emphasis added] While Dodd-Frank was landmark legislation, some aspects of it “seem more directed at exerting societal pressure on companies to change behavior, rather than to disclose financial information that primarily informs investment decisions. That is not to say that the goals of such mandates are not laudable. Indeed, most are. Seeking to improve safety in mines for workers or to end horrible human rights atrocities in the Democratic Republic of the Congo are compelling objectives, which, as a citizen, I wholeheartedly share. But, as the Chair of the SEC, I must question, as a policy matter, using the federal securities laws and the SEC’s powers of mandatory disclosure to accomplish these goals.” [emphasis added.]