US Court of Appeals Issues Ruling Invalidating Portion of SEC Conflict Minerals Rule

On April 14, 2014, the Court of Appeals for the District of Columbia Circuit upheld in part and invalidated in part the SEC’s conflict minerals rule. The court struck down, on First Amendment grounds, the portion of the rule that requires companies to identify products as “not DRC conflict free.” Specifically, the court ruled:

We therefore hold that 15 U.S.C. § 78m(p)(1)(A)(ii) & (E), and the Commission’s final rule, 56 Fed. Reg. at 56,362-65, violate the First Amendment to the extent the statute and rule require regulated entities to report to the Commission and to state on their website that any of their products have “not been found to be ‘DRC conflict free.’”

The remainder of the rule, which relates to disclosure of the sources of conflict minerals and supply chain diligence, was upheld by the court.

It is not immediately clear what this decision will mean in terms of 2014 conflict minerals reporting. The decision does not necessarily prevent the SEC from continuing to require reporting by companies going forward, with the exception of the requirement that companies designate products as “not DRC conflict free” if their diligence led to such a finding. We expect the SEC to clarify the impact on 2014 filings in the near future. Pending any additional SEC guidance, companies subject to the rule should assume that the June 2, 2014 filing deadline will remain in effect. 

For further information contact: David Hackett, Daniel Goelzer or Reagan Demas.