Fifty-eight members of Congress are demanding that the Securities and Exchange Commission either vote on final rules to implement Dodd-Frank Act requirements regarding “conflict minerals” by July 1 or, at the very least, set a “definitive date for a vote” by June 29.
The prodding came in a June 22 letter delivered to SEC Chairman Mary Schapiro.
Section 1504 of Dodd-Frank (also referred to as the “Cardin-Lugar” provision) requires companies — primarily oil, gas, and mining enterprises—to disclose in their annual SEC reports all payments made to either the United States or a foreign government for the extraction of oil and minerals.
Section 1502 requires disclosures relating to the use of minerals (in particular, tantalum, tin, gold, tungsten, columbite-tantalite, cassiterite, and wolframite) mined in the Democratic Republic of Congo (DRC), the proceeds from which have funded militia groups. Companies would be required to document their supply chain for these minerals and detail efforts in place to prevent their importation from these war-torn countries.
The SEC published proposed rules to implement these provisions of the law in December 2010. The delay in rulemaking prompted the demand for action.
“Final rules will take the issues of non-transparent payments and conflict minerals out of the shadows and into the open, making it possible to fight corruption, increase government accountability, and end the resource curse in developing countries,” the letter reads. “They will also provide material information to investors to reduce their risk and increase choices in ethical investment. Unfortunately, the Commission has exceeded the statutory deadline of April 17, 2011, for final rules by more than a year.”
The letter was led by House Democrats, including: Edward Markey of Massachusetts, ranking member of the House Natural Resources Committee; Barney Frank of Massachusetts ranking member of the House Financial Services Committee; Howard Berman of California, ranking member of the House Foreign Affairs Committee; Jim McDermott of Washington, ranking member on the House Ways and Means Committee's Sub-committee on Trade; and Maxine Waters of California, ranking member of the House Financial Services Committee's Subc-ommittee on Capital Markets and Government-Sponsored Enterprises.
“There is no sign that a final version of either rule will soon be published,” the letter says, adding that there is “no clear reason for the delay.”
It has been nearly 18 months since the proposed rules were received, and the comment period for both rules closed more than a year ago. Even though the SEC received nearly 200,000 comments, the authors say it “has had more than enough time to consider and respond to all of the substantive comments from industry, civil society, investors, and others.”
“The issue is too serious to allow further delay,” they wrote, adding that if the new rules are not released soon, some companies will not have to file their first reports until Summer 2014, four years after Dodd-Frank was passed.
On May 16, Oxfam America, an international relief and development organization, filed a lawsuit against the SEC for “unlawfully delaying the issuance of a final rule for Section 1504.” The lawsuit was filed in the U.S. District Court for the District of Massachusetts and asks the court to order the SEC to issue a final rule as required by law.
Ian Gary, senior policy manager of Oxfam America's oil, gas, and mining program, praised the pressure from legislators.
“The financial transparency and regulation promised by the Dodd-Frank Act are more important than ever, and Congress is rightly demanding that the promise of the Cardin-Lugar provision be fulfilled by the SEC,” Gary said. “New discoveries of oil and minerals, such as in East Africa, are being announced almost every week, and quick implementation of this provision will help ensure that these countries build on a foundation of transparency.”