Beveridge & Diamond
 

Senate Passes Conflict Minerals Legislation

Beveridge & Diamond, P.C., May 25, 2010

The Senate has passed legislation that would expand Securities and Exchange Commission (“SEC”) reporting and public disclosure obligations for a wide range of companies using certain “conflict minerals” and their derivatives.  On May 18, 2010, the Senate amended its version of financial reform legislation with a provision, introduced by Senator Brownback (R-KS), that would require annual disclosures to the Securities and Exchange Commission relating to columbite-tantalite, cassiterite, gold, and wolframite originating in the Democratic Republic of Congo (“DRC”) or adjoining countries.  The Senate passed the underlying financial reform legislation, H.R. 4173, the Wall Street Reform and Consumer Protection Act, on May 20, 2010.  The House has already passed its version of H.R. 4173, which did not contain any conflict minerals provisions.  A House-Senate conference committee will work to reconcile the two versions of the bill in the coming weeks.  It seems likely that some version of the conflict minerals provision in the Senate bill will be included in the legislation delivered to the President.

The Brownback amendment requires the SEC to promulgate rules within 180 days mandating specified annual disclosures to the SEC by certain entities that manufacture a product, the functionality or production of which relies on certain “conflict minerals” and their derivatives.  The covered minerals are columbite-tantalite, cassiterite, gold, and wolframite.  The rules would apply to entities subject to the SEC’s quarterly and annual reporting obligations under Section 13(a)(2) of the Securities Exchange Act.  Under the Senate provision, entities covered by the new rules would be required to:

  • disclose annually whether any of the conflict minerals or derivatives came or may have come from the DRC or an adjoining country; 
  • describe the due diligence exercised on the source and chain of custody of the minerals or derivatives to ensure that the covered entity’s activities that involve the minerals or derivatives did not directly or indirectly benefit armed groups in DRC or an adjoining country; and 
  • make the information in its disclosures available to the public on the entity’s website.

The Brownback amendment is similar to S. 891, the Congo Conflict Minerals Act of 2009, that Senators Brownback, Durbin (D-IL), and Feingold (D-WI) introduced earlier this session.  Both proposals include the SEC disclosure model, which differs from the import declaration process proposed in legislation introduced in the House by Representative McDermott (D-WA).  For further background on S. 891, see http://www.bdlaw.com/news-575.html.

For more information, please contact Paul Hagen at (202) 789-6022 (phagen@bdlaw.com) or Holly Cannon at (202)789-6029 (dcannon@bdlaw.com).  This alert was prepared with the assistance of Graham Zorn.

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