WASHINGTON (Reuters) - Public companies whose products contain certain so-called African “conflict minerals” will not be forced to immediately start complying with the new disclosure regulations set to be adopted this year, the top U.S. securities regulator revealed on Tuesday.
“The commission is working to finalize the adoption and I‘m hopeful in the next couple of months, it will be done,” U.S. Securities and Exchange Commission Chairman Mary Schapiro told lawmakers during a hearing on the agency’s 2013 budget request.
“We will have a phase-in period, I don’t know how long, that will... give sufficient time for some of the supply chain due diligence mechanisms to be developed and put in place.”
A move to establish a phase-in period for the controversial conflict minerals rule would constitute a big victory for U.S. companies who have been vigorously lobbying the SEC in opposition to the rule since it was first proposed in late 2010.
The conflict-minerals rule stems from a provision tucked into the 2010 Dodd-Frank financial oversight law at the last minute. The provision requires the SEC to establish new rules forcing companies to disclose whether they use tantalum, tin, gold or tungsten from the war-torn Democratic Republic of the Congo.
As proposed, companies would need to identify if any conflict minerals are used in their products. If the minerals are present, they would then need to conduct a due diligence check to track them through the supply chain to their origins. An audited conflict minerals disclosure would also need to be filed as an exhibit to a company’s annual report.
Human rights groups have been urging the SEC to hurry up and finish the rule.
But the SEC has been snagged with delays after it became clear the rule was much more complex to implement than it appeared on paper. The law also gives the SEC little wiggle-room to be flexible, frustrating U.S. companies and regulators alike.
Companies and business groups like the U.S. Chamber of Commerce have strongly cautioned the SEC to slow down and scale back its proposal. They say it will be costly and difficult to put into practice, as these minerals can be used in minuscule amounts and are almost impossible to track through the numerous layers of the supply chain.
To address some of their big concerns, companies have pushed for a phase-in compliance period. They have also asked the SEC to consider including a de minimis standard to help protect companies that may only use trace amounts of the minerals from extensive reporting requirements and potential enforcement actions.
Although corporate America appears to be winning over the SEC on the push for a phase-in, Schapiro played down on Tuesday the possibility of a de minimis standard.
“I don’t believe a de minimis exception is possible under the statute,” she said. “But the rule will try to give latitude and flexibility in some areas that I think will be helpful to different kinds of businesses in order to comply.”
Reporting By Sarah N. Lynch; Editing by Tim Dobbyn