A rule requiring US firms to report their use of conflict minerals could be relaxed following a review by the regulator.
Michael Piwowar, the new acting chair of the Securities and Exchange Commission (SEC), said in a statement he had asked staff to look at whether its guidance on the disclosure rule was still appropriate, or if companies should be given “additional relief”.
However, an NGO warned rolling back the rule could cause armed groups to return to mines and cause “a new humanitarian crisis”.
The rule in question – the Exchange Act Rule 13p-1 and the accompanying SEC document Form FD – forms part of the Dodd-Frank financial sector reforms. These require firms using conflict minerals, including tin, tungsten and gold, to investigate and report on whether they were sourced from the Democratic Republic of Congo (DRC) or neighbouring countries.
SEC is now reviewing guidance it issued and pausing some parts of the rule that were found unconstitutional by a court in 2014.
Piwowar has expressed his opposition to the rule. “While visiting Africa last year, I heard first hand from the people affected by this misguided rule,” he said.
“The disclosure requirements have caused a de facto boycott of minerals from portions of Africa, with effects far beyond the Congo-adjacent region. Legitimate mining operators are facing such onerous costs to comply with the rule that they are being put out of business. It is also unclear that the rule has in fact resulted in any reduction in the power and control of armed gangs or eased the human suffering.
“Moreover, the withdrawal from the region may undermine US national security interests by creating a vacuum filled by those with less benign interests.”
However, Sasha Lezhnev, associate director of policy at NGO the Enough Project, said the rule has spurred major corporate transparency reforms. “Before the law passed, the UN stated that nearly every mine was controlled by an armed group, and yet today 79% of tin, tantalum, and tungsten miners work at conflict-free mines. This has taken significant funds out of the hands of armed groups,” he said.
“Halting implementation would likely bring back armed groups to tin and tantalum mines, create loopholes for smuggling minerals, and cause a new humanitarian crisis,” he said.
In 2014 the rule was challenged in a federal court by the National Association of Manufacturers. While most of the rule was upheld, the court ruled provisions requiring firms to publicly state which products had not been found “DRC conflict-free” violated freedom of speech.
The litigation is still ongoing.
Piwowar was tapped to be acting chair by president Donald Trump a few days after the new president's inauguration. The previous chair, Mary Jo White, had been planning to leave the post at the end of the Obama administration.
The SEC is calling for comments on the issue.
☛ Want to stay up to date with the news? Sign up to our daily bulletin.