Securities Regulation -- 2013

National Association of Manufacturers v. SEC   (U.S. District Court for the District of Columbia)

Challenging law and SEC rule on Conflict Minerals

The NAM's suit challenging the conflict minerals rule issued by the Securities and Exchange Commission (SEC) in August 2012 was transferred from the D.C. Circuit to the district court on May 2, 2013. Judge Wilkins agreed to our request for expedited consideration of the case, to treat the petition for review as a complaint, and to decide the case on the briefing already submitted to the Court of Appeals.

Our main brief on the merits asked the court to modify or set aside the rule, arguing that the SEC adopted one of the costliest rules in its history while rejecting alternative regulatory options that would have substantially reduced the costs. The SEC also misread the statute and imposed new burdens not required by Congress on far more companies than expected. The business community understands the seriousness of the conflict occurring in the Democratic Republic of Congo and the need to implement solutions to bring an end to the violence. However, while well intentioned, the SEC’s final rule goes too far, and business groups have suggested constructive ways to make the rule more workable. The final rule imposes an unworkable, overly broad and burdensome system that will undermine jobs and growth and may not achieve Congress’s overall objectives.

On July 23, the judge upheld all aspects of the rule, deferring to the SEC for considering the rule's burden on efficiency and competition and the costs of compliance. It deferred to the agency's conclusion rejecting a de minimis exception, imposing a "reasonable country of origin inquiry" for minerals that "may" have originated in the region of the Congo, and setting different phase-in periods for large and small companies. It found the word "manufacture" to be ambiguous and accepted the application of the rule to those who contract to manufacture.

Finally, applying an intermediate level of scrutiny to our First Amendment challenge to the requirement that conflict mineral disclosures be on public web sites, the judge cited the government's foreign relations interest as justification for again deferring to the SEC. The ruling found a "reasonable fit" between the rule and Congress's objectives in promoting peace and security in and around the Congo.

We appealed this decision. Click here for this subsequent history.

Click here for the briefs and other details on the case originally filed in the D.C. Circuit.

Related Documents:
NAM Notice of Suplemental Authority  (July 3, 2013)
NAM Response to SEC Notice of Supplemental Authority  (June 28, 2013)


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