Testimony of SEC Chairman• On March 6, 2012, SEC Chairman Mary Schapiro appeared before the U.S. House Subcommittee on Financial Services and General Government.• The Chairman responded to a series of questions from Subcommittee member Kevin Yoder (R-Kansas) on Section 1502 and the status of the conflict minerals rulemaking.
Timing• Question: “What is the anticipated date for the adoption of the final rule regarding conflict minerals?”• Answer: “Im hopeful that in the next couple of months, we will be done.”
De Minimis• Question: “Has there been any consideration given to setting clear guidelines for the amount of a conflict mineral that would trigger the proposed reporting requirement? I think last year we discussed the concept of [whether] it’s possible to create some sort of de minimis level, and whether there had been enough latitude given to the SEC in federal statute that allows you to do that.”• Answer: “I don’t believe a de minimis exception is possible under the statute.”
Indeterminate Origin• Question: “Would the SEC consider moving to a category for indeterminate origin, or situations where minerals are purchased and no origin can be determined in these minimal amounts?• Answer: “We will have a phase in period – I don’t know how long that will be – to give sufficient time for some supply chain due diligence mechanism to be developed and put in place. We are looking closely at what the OECD has done in terms of guidelines. So it’s still a bit of a work in progress.”
Implementation• Question: “Are there situations where companies like that [companies that make small devices] could work with the SEC to come up with a rule that was actually feasible to be implemented?”• Answer: “The rule will try to give latitude and flexibility in some areas that I think will be helpful to different kinds of businesses in order to comply.”
Economic Analysis• Subcommittee Chairwoman Emerson (R-Missouri): “It seems to me that – regardless of the intent of Congress, that in fact the economic impact on a company … who needs to use some of those minerals because you can’t get them anywhere else or they would be – they would become anti- competitive – should be subject to some kind of economic analysis. Do you actually ask those folks within your organization to help on this?”
Economic Analysis• Answer: “Absolutely. We have significantly expanded the size of our economics group in the last two years. They are involved right from the beginning in the cost/benefit analysis of the regulations that we might propose, helping us analyze the costs of different alternatives, if those are possible.”
European Commission• The EC has formed an inter-agency working group to evaluate the conflict minerals issue.• The working group is conducting an initial assessment of the challenges and expects to file a preliminary report in May or June and then evaluate further actions.• ITI met with an EC official in Washington in February to provide our assessment of section 1502 and the overall issue.
Maryland• In March, the Maryland Legislature approved a measure (H.B. 425) to prohibit the state from procuring supplies or services from any company that fails to properly meet its federal disclosure and reporting requirements under Dodd-Frank section 1502.• The bill will now go to the Governor for consideration.
Maryland• ITI reviewed the bill with our members and we did not identify any major concerns. It is very similar to the new California law in that it only applies to a company that: – Fails to file its required disclosures – Is considered under federal law to have filed an unreliable determination – Files false information