Will the SEC be instructed to waive any or all of the conflict minerals requirements on the basis of national security interests? (Updated)

by Cydney Posner

Remember all the way back to last week when Acting SEC Chair Michael Piwowar issued two statements on the conflict minerals rules?  (See this PubCo post.) Remember too that the first statement directed the staff to revisit the 2014 guidance from the director of corp fin regarding conflict minerals, and that, in the additional statement, he talked about what he had learned in his recent trip to Africa? In that additional statement, he concluded that the rule was “misguided,” had led to “a de facto boycott of minerals from portions of Africa” and was putting legitimate mining operators out of business because of the onerous costs of compliance with the rules. Now here’s critical sentence: “Moreover, the withdrawal from the region may undermine U.S. national security interests by creating a vacuum filled by those with less benign interests.” Apparently, that sentence may well have sent a signal to the White House.

According to an exclusive report from Reuters, the President “is planning to issue an executive order targeting [the conflict minerals disclosure rule],” and while Reuters did not know the precise contents or timing of that order— including how broadly it might apply and whether or not it could implicate reporting due in May 2017— the suggestion is that it would be based on the national security waiver provision in Dodd-Frank.  That provision (Exchange Act Section 13(p)(3)) requires the SEC to revise or temporarily waive the basic requirements of the conflict minerals provisions “if the President transmits to the Commission a determination that—(A) such revision or waiver is in the national security interest of the United States and the President includes the reasons therefor….”  While the exemption would be limited by statute to two years, the conflict minerals provision in Dodd-Frank is one that was identified for repeal in the original Financial CHOICE Act and could be jettisoned under the Financial Choice Act 2.0 — if it passes through Congress unscathed that is. (See this PubCo post.)

As of now, conflict minerals filings are still due on May 31 and, until the timing and precise details of the reported executive order become known, it is still too soon— and too uncertain at this point— to say “pencils down” on conflict minerals disclosure. Nevertheless, companies that are subject to the conflict minerals requirements should stay tuned.

Update of February 9: Thecorporatecounsel.net blog has posted what purports to be  a draft of the executive order.  Is the draft real or is it fake news? That remains an open question for now. (He also links to an interesting piece in Mother Jones.)

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