The SEC is scheduled to hold a roundtable on conflict minerals disclosures tomorrow. When the roundtable was announced, BNA reported that:
The matters to be debated include appropriate reporting approaches for the final rule, the challenges of tracking conflict minerals through the supply chain, and due diligence and other requirements, the agency said in a release. Participants will include representatives from public companies, human rights organizations, and “other stakeholders.” ...
The Dodd-Frank Wall Street Reform and Consumer Protection Act's conflict minerals provision has emerged as one of the more controversial requirements because of its potential significant impact on public companies (26 CCW 13, 1/12/11).The reform statute's Section 1502 directs the SEC to impose additional disclosure requirements on issuers that use cassiterite, columbite-tantalite, gold, wolframite or their derivatives—so-called “conflict minerals”—from the Democratic Republic of Congo and neighboring countries. The provision—an amendment introduced by then-Sen. Sam Brownback (R-Kan.) and co-sponsored by a bipartisan group of lawmakers—was intended to stem the financing of armed conflict in the region through the reporting requirements.The SEC issued a proposal under Section 1502 in December (25 CCW 385, 12/29/10). However, experiencing pushback from business interests, the SEC extended the comment period for the proposal, and pushed final action on it to the August to December timeframe (26 CCW 35, 2/2/11; 26 CCW 125, 4/20/11). ...
Meanwhile, the commission has come under pressure from Congress and human rights groups to finalize the rulemaking. Conversely, the U.S. Chamber of Commerce urged the SEC in a July letter to hold a second comment period for its proposal, citing the need for more cost-benefit analysis of the requirements (26 CCW 249, 8/17/11).
I've posted on conflict minerals disclosure twice previously. In February 2011, I quoted a discussion of the issue by Broc Romanek and opined that:
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.
In May 2011, I quoted an earlier BNA report predicting that conflict mineral disclosures were going to be hugely expensive to prepare and noted that:
Congress seems to love what I call Kumbayah laws. Everybody on the Hill gets around in a circle, holds hands, condemns some (often admittedly heinous) abuse, sings a couple of choruses of Kumbayah, and then dumps the problem in somebody else's lap. Congress gets to feel good, NGOs pat them on the back, and it costs Congress nothing.
But somebody pays. Consider, for example, the mandate in Dodd-Frank that companies "certify that their products contain no conflict minerals from the Democratic Republic of the Congo (D.R.C.) and adjoining countries." BNA reports that this mandate is going to prove hugely expensive for companies--especially tech companies--and amount to a de facto embargo on such minerals ....
I continued:
Last year President Obama pledged to double US exports by 2015. As the Economist recently commented in a report on the declining value of the US dollar, however:
For Americans concerned about their country’s export prospects, the depressed value of the greenback ought to be good news. In February, the most recent month for which trade data are available, the dollar was 4.5% cheaper in real terms than a year earlier. But although America’s trade deficit did fall in February, it was only because exports fell less steeply than imports. That month’s deficit was still $6 billion higher than a year earlier, when Barack Obama announced a plan to double exports in five years. Achieving that will take more than a cheap currency.
One thing that would help top achieve that goal would be to stop heaping these sort of costs on US business. How about a 4 year freeze on Kumbayah laws?
I still think that a regulatory holiday isn't a bad idea. And I still think this rule is a bad idea.
