The “Conflicts Minerals” rule was enacted, with very little debate, as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. This rule places new regulatory requirements on the nation’s financial system in the wake of the 2008 economic emergency. To many observers, the most troublesome aspect of the rule involves the federal government’s authority to compel the regulated community—in this instance, companies that may have some connection to the civil wars in the Congo—to label what they do in censorious terms as part of public SEC filings. In particular, the SEC’s conflict minerals rule purports to compel certain disclosures affecting the acquisition of certain minerals produced in the Democratic Republic of the Congo. How far can the government go, consistent with the First Amendment, to require companies and corporations to say what the government rules that that must say?
Commercial speech is entitled to the protections of the First Amendment, whether it is in advertising or in regulatory filings. The courts have been struggling to define what the proper balance is. The argument is generally that, if one industry’s speech or communications are subject to government oversight, then many other industries may be similarly affected.
The U.S. Court of Appeals for the District of Columbia recently declined to review its August 2015 ruling that the SEC’s “conflict minerals” rules, called for by Section 1502 of the Section 1502 of the Dodd-Frank, violate the First Amendment. In a summary order handed down by the Court of Appeals on November 9, 2015, the Court rejected the SEC and Amnesty International petitions for a rehearing en banc of the Court’s opinion in National Association of Manufacturers v. Securities and Exchange Commission.
In the earlier opinion, a divided panel of the Court of Appeals held that “15 U.S.C. § 78m(p)(1)(A)(ii) & (E), and the [SEC’s] final rule, 56 Fed. Reg. at 56,362-65, violate the First Amendment to the extent the statute and rule require regulated entities to report to the [SEC] and to state on their website that any of their products have ‘not been found to be ‘DRC conflict free.”” Two Senior Circuit judges (Randolph and Sentelle) formed the majority, and Judge Srinivasan dissented.
If this ruling is not appealed to the Supreme Court or if the appeal is rejected, the matter will go back to the U.S. District Court “for further proceedings.” In any event, anyone subject to the conflict mineral rules should, in an abundance of caution, prepare to comply with them.