‘Conflict Minerals’ Gold, Tin & Tungsten Face New Layer Of Regulation

July 31, 2012


Further Comments


Perhaps one of the greatest causes of concern in anything to do with Section 1502 is the action, or inaction, of the SEC. Its delay in framing any rules can only be described as egregious.

Delays have been multiple, with even an April 17, 2011, deadline laid down in the Dodd-Frank missed. In a table on the opening page of its report CONFLICT MINERALS DISCLOSURE RULE - SEC’s Actions and Stakeholder-Developed Initiatives, the GAO illustrates the course of these delays with information from the SEC itself.



As it looks now, decision-making by the SEC is set for Aug. 22, helped, no doubt, not only by the publication of the GAO report, but also by a letter to it on June 22 signed by no fewer than 58 members of Congress urging the SEC most diplomatically to begin taking action.

Since Dodd-Frank was enacted, there have been myriad excuses. The “various factors” described to the GAO by the SEC as having “caused delays in developing, modifying, and finalizing a rule” are:

  • Significant learning curve
  • Intense stakeholder interest and input
  • Heavy rule-making workload
  • Rigorous economic analysis in rule-making process


It would be very interesting to know the contribution of each of these factors to the overall delay and, not least, whether, in light of the successful use by the U.S. Chamber of Commerce of the cost argument in the proxy access case, attention to the last of these four has taken up an inordinate amount of time and attention. The estimate of around $71 million the SEC has approximated for the cost of compliance of all affected U.S. public companies will undoubtedly be the focus of considerable scrutiny.

The SEC: underfunded, overworked, incompetent, put upon …? The argument still rages. But regarding Section 1502, its inaction has had some unforeseen (?) consequences, not just for companies affected by the act, both in the U.S. and abroad (how can you design tools without rules?), but in the DRC itself.

Although there are reports, from the United Nations Group of Experts in October 2011, that despite the absence of an SEC rule, the situation on the ground in the DRC has improved because of Dodd-Frank.

Consider what Serge Tshamala, an official at the Embassy of the Democratic Republic of Congo, said as quoted by Wyatt in his New York Times article: “It is causing, I would say, a sort of embargo on traders and diggers in Eastern Congo… The longer it takes the SEC to come up with guidelines, the worse it is for our people.’” (By extension, one does wonder whether, even with “guidelines” in place, if compliance with the act is too onerous, will companies just throw in the towel and buy from ex-African and, therefore, “safe” sources, either leaving those in the affected parts of the DRC with no market, or leaving the market to others less concerned about the situation and able effectively to “launder” the minerals into the global market?)

Whether Section 1502, alone or in conjunction with other measures, will ever be effective in realizing its intention is another matter. It is, and always will be, open to debate. Similarly, for some, even predicated on the section’s possible success, there will always be a level at which either the prevention of human suffering, or the possibility of it, becomes too expensive an enterprise. As, once again, Cook describes it: “Many firms and trade groups, some Members of Congress, and others, however, question whether the potentially large costs associated with implementing Section 1502 are justifiable.”


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