Monday, June 11, 2012

House Leader Asks SEC to Clarify Proposed Regulations Implementing Conflict Minerals Provision of Dodd-Frank

In a letter to the SEC, House Assistant Majority Whip Robert Latta (R-OH) asked the SEC to exempt all scrap and recycled minerals from the regulations implementing Section 1502 of the Dodd-Frank Act involving conflict minerals disclosures. Section 1502 does not address recycled or scrap minerals, noted Rep. Latta, presumably because it would be too difficult to determine their origin. However, despite the law being silent on these minerals, as written, SEC proposed regulations may disadvantage U.S. manufacturers by creating costly, impractical, and at times impossible, compliance requirements for manufacturers who use them. 

While commending the intentions of Section 1502, and agreeing with the section's humanitarian goals, the House leader requested that the SEC revisit this rule proposal to achieve those same ends without negatively effecting US manufacturers. Specifically, manufacturers are concerned about the proposed rule's lack of clarity. 

The SEC's proposal states that the minerals covered by Section 1502 can be considered conflict free if they are derived from recycled or scrap sources, rather than mined sources. However,noted Rep. Latta, the proposal does not define "recycled" or "scrap" and fails to specify how the issuer would exemplify that the mineral at issue is covered by the exemption. As a result, the issuer seeking protection under the exemption would be required to provide its reasons for believing the exemption applies in a Conflict Minerals Report, which would describe the company's due diligence process on determining the source of the mineral, offsetting the reduced burden provided by the exemption.

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