Financial Transparency Coalition

Global Witness calls on the SEC to resist industry pressure and issue robust regulations

Global Witness

WASHINGTON, DC – Global Witness is calling on the Securities and Exchange Commission (SEC) not to cave in to industry pressure and to issue effective regulations to combat the trade in conflict minerals. The call comes on the day of a crucial SEC roundtable and in the face of aggressive industry lobbying aimed at making the new rules weak and ineffective.

The minerals trade in eastern Congo has been in the grip of different armed groups for over a decade. Illicit profits from the trade provide an incentive and a means for rebels and certain units of the Congolese army to maintain their operations and carry out attacks on the civilian population.

The SEC is finalizing rules to implement a provision contained in the Dodd-Frank Act passed by Congress last year. Section 1502 of the law aims to break the link between minerals and conflict in the eastern Congo by requiring companies to carry out ‘due diligence’ checks on their supply chains to determine whether their products contain conflict minerals.

Section 1502 has already had positive impacts, including helping to end the Congolese army’s illegal control of the largest tin ore mine in the region earlier this year, and promoting mining sector reforms by the Congolese government. While serious challenges remain, the law presents the best chance in over a decade to establish a clean minerals trade that contributes to development, rather than fuelling instability.

“This law is already catalyzing some positive changes on the ground, including demilitarization of some mining areas in eastern Congo and laudable efforts by certain companies to clean up supply chains,” said Mike Davis of Global Witness.  “Despite these efforts, the US Chamber of Commerce is working at all levels to derail the regulations and continue business as usual.”

The Chamber of Commerce claims that it is too burdensome for companies to trace their supply chains and has argued for the rulemaking process to be re-started. However, Global Witness research to map out the trade route from mine to manufacturer demonstrates that the supply chain is not nearly as complex as the corporate lobbyists would have us believe.

Leading electronics manufacturers have already implemented the new law’s requirement to trace metals in their products back to the smelters that refined them.  Two industry associations are developing systems for reviewing smelters’ own supply chain controls – another initiative that can help companies comply with Dodd Frank. Some businesses have begun investing in sourcing clean minerals directly from Congo.

These positive moves are being undermined by delays in the SEC’s publication of the regulations to complete Dodd Frank’s 1502 provision on conflict minerals, which were supposed to be announced in April. The delay has already sown uncertainty in the minerals trade and deterred many buyers from purchasing Congolese materials.

The announcement of new rules was always likely to cause some short-term uncertainty and disruption to the trade.  Months of paralysis in the regulatory process have prolonged and deepened these impacts and caused unnecessary suffering for those Congolese who rely on mining for a living. It is crucial that the SEC announces clear and robust rules as soon as possible, so that companies can be in no doubt about what standards they have to meet and can begin applying them, and so that any disruption caused to people on the ground is kept to a minimum.

###

Notes to editors:

1. The SEC is holding a roundtable on Section 1502 of the Dodd-Frank Financial Reform and Consumer Protection Act, the conflict minerals provision, as part of its rulemaking process.  The roundtable will involve the participation of representatives from Global Witness, other civil society groups, companies and investors.
2. For more information on the Chamber of Commerce’s arguments against Section 1502, see US Chamber of Commerce submission to the SEC on February 28th, 2011 http://www.sec.gov/comments/s7-40-10/s74010-87.pdf and US Chamber of Commerce’s Center for Capitol Market Competitiveness submission to the SEC on July 18th, 2011 http://www.sec.gov/comments/s7-40-10/s74010-276.pdf

Contact:

• US: Mike Davis +44 7872 600 860
• US: Corinna Gilfillan +1 202 621 6665, cell: 202 725 8705
• UK: Annie Dunnebacke +44 7912 517127