SEC May Toughen Proposal on Minerals Tied to Violence

July 20, 2012
Wall Street Journal
JESSICA HOLZER

WASHINGTON—The Securities and Exchange Commission may toughen a proposed rule requiring U.S. publicly traded companies to report whether their goods contain minerals linked to violence in central Africa, people familiar with the matter said.

The proposal, required by the 2010 Dodd-Frank financial law, aims to pressure U.S. companies to purge their supply chains of "conflict minerals"—tin, tantalum, tungsten or gold mined from Democratic Republic of Congo or surrounding countries.

Trade in those minerals is blamed for financing armed groups committing atrocities in the region. The provision was added to the law by a bipartisan group of lawmakers concerned about the violence.

The SEC plans to vote on the rule in late August. Compared with the original proposal, a final draft circulated to SEC commissioners would outline a series of items for companies to review before they can assume their goods don't contain minerals from the area, people familiar with the document said.

If adopted, the rule could create more costs for companies trying to determine whether they need to submit a "conflict-minerals report" to the SEC. The reports require companies to say what steps they took to verify whether the minerals were taxed or controlled by rebel groups.

For some companies, the report may require scouring supply chains made up of hundreds or even thousands of suppliers and vendors.

The draft tightens the standards for an independent audit that must be conducted on the report and would require top executives to sign off on the report, something companies believe could subject them to greater liability.

Under the draft, the SEC would give companies a two-year transition period to determine if certain goods contain conflict minerals, one of several concessions sought by business groups. The details of the final rule could change ahead of next month's vote, but people familiar with the matter said they didn't expect major negotiations among the SEC's five commissioners. A three-person majority of the SEC's five-member commission is required for the rule to pass.

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