GAO Issues Report on SEC Conflicts Minerals Rule
Commentary by Steven Lofchie
The GAO has issued a report to congressional committees regarding the effectiveness of Section 1502(b) ("Conflict Minerals") of Dodd-Frank concerning the exploitation of conflict minerals and the extreme levels of violence in the Democratic Republic of the Congo ("DRC").
As required by Section 1502(b), the SEC issued a rule in August 2012 that requires companies to disclose their use of conflict minerals and the origins of those minerals. GAO found that stake-holder developed initiatives, like audit protocols and in-region sourcing of conflict minerals, may facilitate companies' compliance with the SEC final conflict minerals rule, but other factors may reduce the prospect that the SEC rule will have any material positive effect.
Commentary
The discussion of the various reasons that the rule would seem unlikely to be successful begins on page 17 of the GAO report. Reading this discussion should give one pause as to whether this rule is worthwhile, however well-intentioned it may be. Query: Could the money spent on complying with the rule be devoted to the cause in a manner better suited to achieving the worthy goal yet consistent with the amount of expense and effort?