Last Friday, the SEC extended the deadlines for submitting comments on a trio of Corp Fin proposals: conflict minerals, mine safety and resource extraction disclosure. The new deadline is March 2nd.
Last year, I blogged several times analyzing potential "sleepers" in Dodd-Frank and soliciting ideas from the community. As I define "sleeper," it should be a provision that applies to many companies. Given the feedback I've received, including the comment letters submitted to the SEC so far - and the memos in our "Conflict Minerals" Practice Area - I'm now ready to deem Section 1502 regarding conflict minerals as the Dodd-Frank sleeper for disclosure lawyers. Here is an excerpt from remarks made by Amy Goodman during our recent Dodd-Frank webcast:
From talking to a number of companies in trade associations, people are realizing that this is a huge issue and could impact upwards of 6,000 issuers. While the SEC speculates that only 1,200 will actually file reports, we're hearing from companies that it's almost impossible under the current circumstances to determine that minerals do not come from the Congo. And in that case, the SEC proposal would require the report. So I would urge people to take a look at this requirement. I think it's taken a while for people to realize the seriousness of this requirement. But it could be quite burdensome.
To understand the magnitude of the undertaking that companies face in order to comply with this requirement, check out this memo - which besides providing guidance on how to comply with the provision, it explains supply chain due diligence, what entities like the OECD recommend and what various industry organizations like the EICC-GeSI are doing. There even have been readiness rankings of various industries created, such as this report on the electronics industry from the Enough Project.
My guess is that the costs of providing this disclosure are going to vastly exceed the benefits to investors. As such, it is yet another example of how narrow interest groups were able to hijack the legislative process during Dodd-Frank's drafting so as to advance an agenda wholly distinct from the financial crisis. It's thus also an example of how Congress keeps raising the cost of being public. It's thus yet another example of why American capital markets are losing their competitive standing in the global economy.
