On April 14, 2014, the U.S. Court of Appeals for the District of Columbia Circuit issued its long-awaited opinion in the challenge brought by industry groups to the SEC’s conflict minerals reporting rule under Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The court agreed with the SEC that it had not acted arbitrarily or capriciously under the Administrative Procedure Act in adopting the conflict minerals rule and that the SEC had properly analyzed the rule’s costs and benefits as well as the impact of the rule on competition. Perhaps more importantly, however, the court held that the rule (and the underlying statutory provision) violates the First Amendment rights of public companies by compelling them to make public disclosures regarding the “conflict-free” status of their products.
The court’s decision leaves much of the SEC’s rule intact, and thus creates uncertainty for public companies which have been preparing to file their initial reports under the rule by May 31, 2014.
For more on the ruling and expected next steps by the lower court and the SEC, please click here.
This post was authored by David Engvall, a Covington partner who has been actively engaged in advising clients on a number of securities law provisions under the Dodd-Frank Act, including executive compensation, corporate governance, and specialized disclosures such as those pertaining to conflict minerals.