Conflict Minerals: SEC Delays Federal Rules and California Senate Passes New Bill

The Securities and Exchange Commission ("SEC") has delayed the release of final rules applicable to companies that source "conflict minerals" from the Democratic Republic of Congo ("DRC") and adjoining countries. Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires companies that utilize tin, tungsten, tantalum, and gold to conduct and disclose due diligence on their supply chains in order to identify whether the sourcing of these minerals is supporting the ongoing conflict in the Democratic Republic of Congo.

In an announcement regarding "upcoming activity" related to the implementation of Dodd-Frank, the SEC has indicated that final rules for Section 1502 will be adopted between August and December 2011. Final rules were originally scheduled to be issued no later than April 15.

Even as the federal rules on conflict minerals have been delayed, companies impacted by Section 1502 should pay attention to recent legislative activity in California. On April 12, the California State Senate passed a bill that would prohibit the state government from doing business with companies that fail to comply with federal regulations on conflict minerals. The California legislation, even if passed, is unlikely to impact many companies: it would apply only to companies against which the SEC has filed a civil or administrative enforcement action. That said, California’s legislative activity reflects significant stakeholder concern, as well as advocacy activity, regarding the ways in which the sourcing of specific minerals may be contributing to the ongoing conflict in the DRC.

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