(Updates with comments from SEC Commissioner Stein)
By Sarah N. Lynch
WASHINGTON, April 7 The U.S. Securities and
Exchange Commission said on Friday it is suspending enforcement
of the costliest requirements of its "conflict minerals" rule,
after a court remanded it back to the regulator because part of
it violates the U.S. Constitution.
Acting SEC Chairman Mike Piwowar, a Republican, said he has
asked staff for a recommendation on how to proceed with the
rule, which requires companies to disclose if their products
contain certain minerals from a war-torn part of Africa.
For now, he added, companies will not be required to conduct
a due diligence review or an audit, which are both part of the
process used to determine the origin of the minerals.
"Until these issues are resolved, it is difficult to
conceive of a circumstance that would counsel in favor of
enforcing" the due diligence requirements, he said in a
The move sparked backlash from SEC Democratic Commissioner
Kara Stein, who accused Piwowar of acting beyond his authority
to gut the meat of a rule mandated by Congress, adopted by the
SEC and reviewed by the courts.
“It is unprecedented for one commissioner, acting alone and
without official notice and comment, to engage in de facto
rulemaking," she said.
"It represents a troubling attack not only on the Commission
process, but also on the restraints of government power.”
The conflict minerals rule was required by the 2010
Dodd-Frank Wall Street reform law and is supported by human
rights groups that want companies to tell investors if their
products contain tantalum, tin, gold or tungsten mined from the
Democratic Republic of Congo, in the hope that such disclosures
will curb funding to armed groups.
Business groups have contended that it forces companies to
furnish politically charged information that is irrelevant to
making investment decisions and that it costs too much for
companies to trace the source of minerals through the supply
In 2014, a U.S. appeals court struck down part of the
conflict minerals law after the Business Roundtable, the U.S.
Chamber of Commerce and the National Association of
Manufacturers sued the SEC over it.
The court found part of it violated free speech rights of
companies by forcing them to publicly state that their products
were not conflict free.
The rest of the rule was left intact.
Since then, companies have furnished reports with SEC and
conducted due diligence, though they were granted a reprieve
from the audit requirement and the labeling of the minerals
The litigation formally came to an end on Monday, when the
lower court remanded the rule back to the SEC to address the
First Amendment concerns.
The appeals court did not say whether the Dodd-Frank law
itself or the SEC's implementation of the rule violated the
Constitution, a matter that the SEC will now need to determine.
Companies will still need to file required forms with the SEC
and do origin inquiries, as they have been doing.
(Reporting by Sarah N. Lynch; Editing by Marguerita Choy and