Last week, a federal appeals court ruled that one section of the Securities and Exchange Commission’s conflict mineral rule, its response to Sect. 1502 of the Dodd-Frank financial reform law, was unconstitutional. At issue was the mandate that public companies declare, in their SEC filings and on their websites, whether their minerals were conflict-free. The term conflict-free, the court felt, connotes a value judgment, and requiring companies to use a term they may not agree with (a “metaphor,” it was called) is compelled speech and in violation of the First Amendment.
Initial news reports, including JCK’s, portrayed the ruling as a major defeat for Sect. 1502. Certainly, the dueling sides seemed to view it that way. The National Association of Manufacturers, which challenged the law in court, said it was “pleased.” NGO Enough Project called it a “major step backward.”
That was quickly followed by a different consensus, which argued that the ruling was actually a validation of the conflict mineral provision, even a victory for its proponents. For one, the court rejected a series of challenges to the law, striking down only one provision. Which means that the affected companies will almost certainly have to file reports with the SEC anyway, barring another legal twist and turn (which is a remote possibility).
