The National Association of Manufacturers and the US Chamber of Commerce have filed a lawsuit with the goal of reversing the SEC rules implemented in August, under the Dodd-Frank Act of 2011, requiring disclosure of "conflict minerals." The rules go into effect in 2014.
Dodd-Frank enacted this rule as a way to try to stop the conflict in the Congo and certain adjoining countries in Central Africa. Apparently the conflict is funded in part by the sale of conflict minerals. So the act will require every public reporting company to disclose if their supply chain includes minerals from these countries that are important to their products.
The lawsuit says that the final SEC rules are unworkable and put an undue burden, particularly on larger companies with far-flung operations. These companies now have to determine not only where they source materials, but where their suppliers and their suppliers do, all the way down the chain. This does seem like a lot.
When the regulators try to require disclosure relating to what may indeed be important social issues, it can get dicey. Back in the Apartheid days in South Africa, you had to disclose if you did business there. Did that help end Apartheid or ruin companies that did business there? I don't think so frankly.
The rules are well-intentioned, but maybe this lawsuit will help the SEC reconsider how far companies need to go.
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