The impetus for the new rules came from the overhaul of financial regulations enacted by Congress in 2010. The Dodd-Frank bill included prominent changes such as the creation of a new consumer watchdog agency and gave regulators authority to seize and wind down troubled large financial firms.
The legislation also contained a provision, which garnered relatively little attention at the time, requiring companies listed on the U.S. stock markets to detail whether their products contain “conflict minerals” — substances that originate in Congo, formerly known as Zaire, or neighboring countries.
Lawmakers and activist groups such as Global Witness that backed the effort have argued that requiring such disclosure is an essential step in helping to combat human rights abuses in the region.
But industry groups such as the U.S. Chamber of Commerce and the American Petroleum Institute have insisted that the new regulations, while written with noble intentions, would prove expensive and difficult to implement and could hamstring U.S. companies that compete with foreign firms that are not subject to the same standards.
SEC officials have struggled to translate the law into a rule that accomplishes the goals set by Congress while also not overburdening companies that rely on thousands of vendors and a global supply chain that is sometimes difficult to track. They altered early drafts of the new rules and pushed back the initial deadline of April 2011.
Last fall, the agency took the unusual step of convening a roundtable of policymakers, human rights advocates and corporate executives as part of an effort to solicit more input from all sides of the debate.
Under the new rule adopted Wednesday, companies will have until May 31, 2014, to make their first disclosures of whether the minerals they use in manufacturing are “conflict-free,” meaning that they do not benefit the armed groups in and around Congo.
SEC Chairman Mary L. Schapiro and fellow Democratic commissioners Luis A. Aguilar and Elisse B. Walter voted in favor of the new provision. Republican commissioners Daniel Gallagher and Troy Paredes opposed the rule, saying it was outside the agency’s mandate.
Schapiro noted the overwhelming amount of input that the commissioners had received on the issue and the changes they had made to the proposal as a result. “I believe the final rule faithfully implements the statutory requirement as mandated by Congress in a fair and balanced manner,” she said.
Also Wednesday, the commission narrowly approved another set of rules mandated by the Dodd-Frank legislation, which requires companies to disclose payments they make to foreign governments for the extraction of oil and minerals — including payments for drilling and exploration licenses. The measure is aimed at curbing bribery and corruption abroad, though companies have complained that the new rules could put them at a competitive disadvantage overseas.