WASHINGTON (TrustLaw) - Following are comments from civil society groups on new regulations on conflict minerals and extractive industry payments that were approved by the U.S. Securities and Exchange on Wednesday.
The SEC rule on Section 1502 of the Dodd-Frank financial reform law requires U.S.-listed manufacturers to report the source of minerals bought from the war-torn region of the Democratic Republic of Congo (DRC) that are in their products from anywhere in the supply chain, while Section 1504 requires oil, gas and mining companies to report payments made to governments to exploit natural resources.
PUBLISH WHAT YOU PAY COALITION: Simon Taylor, who also is director of Global Witness
Section 1502: "1502 has very definitely fallen short. They have failed to understand the extent of the situation in the eastern DRC and that is a serious problem.... For people facing mass rape, mass violence and mass disruptions this certainly isn't going to help. If this was going on in upstate New York, would we be having this conversation today? I don't think so, so why the double standard? So why are we talking about this?
"On 1504, let's see who they come out with in their guidance for project definition. There are lots of good things about this, but let's see what the final regulations have to say."
GLOBAL WITNESS: Corinna Gilfillan, head of U.S. office:
Section 1502: "We are extremely disappointed that the rule will allow companies to describe the origin of their minerals as ‘undeterminable’ for a period of two years, or four years for small companies. The minerals trade is fuelling violent conflict and human rights abuses in eastern DRC and delays in implementing the law postpone the moment at which companies take responsibility for the impact of their purchases, jeopardising efforts to stop minerals funding conflict and seriously undermining the aim of the law. By allowing companies to say ‘I don’t know where my minerals are from’, the regulators are effectively inviting issuers to evade all of the substantive measures required by the law.
“On a more positive note, SEC staff made clear in today’s meeting that the OECD five-step due diligence framework is the benchmark against which companies’ due diligence should be measured….. By meeting these standards, companies can provide assurances to consumers and investors that they are checking all along their supply chains and taking the necessary steps to ensure that their purchases are not funding conflict.”
Section 1504: “This is a landmark regulation and has catalyzed global action in this area. It will spur action by the Europe. Getting access to this information is critical for citizens to combat corruption and hold their governments accountable for resource monies..... There are some encouraging things we have heard in the regulation, for instance, no exemptions for corporations, which is absolutely critical. Some oil companies had argued that some countries would prohibit you from disclosing payments. We had said that would be like a tyrant’s charter, creating a perverse incentive for countries to adopt laws to prohibit disclosure. It was encouraging and a good thing that that was not included.
“The project definition, we need to look at. We wanted the SEC to say ‘a licence, lease or concession,’ which would give a clear contractual basis to make sure you are capturing projects, which was the congressional intent. The SEC chose not to define project, but we need to look at their guidance document on this.”
REVENUE WATCH: Karin Lissakers, director:
Section 1504: "Information is the lifeblood of markets and of democratic governance, and 1504 marked a huge advance in improving governance and the performance of oil, gas and mining companies around the world. Sub-soil minerals are public assets that governments manage in trust for their citizens, but in dozens and dozens of countries they have failed to deliver the benefits from those resources. Disclosure will make it possible for citizens to track what is happening with their money, and for governments to check they are getting the revenues they deserve vis a vis what their neighbors are paid. "Overall the rulemaking is positive -- the $100,000 level for minimum disclosure and no exemption for countries that forbid disclosure. There is a question around their definition of projects we have to look into further."
Lissakers said the SEC regulation will act as a benchmark globally, especially as the European Union considers its legislation. "They will look to what is done here in refining their own standards. Once you have the United States and the European Union capital markets, you have captured a very high percentage of global industry."
OXFAM AMERICA: Ian Gray, senior policy manager for extractive industries
Section 1504: "There are some significant positives in how the rule was described this morning and important gains there, and it reflects the congressional intent." He singled out as positives -- no exemptions for issuers in countries that forbid disclosure, the $100,000 threshhold for disclosing payments, and that the SEC would make public each company's filings rather than aggregating them. The definition for a project also had some encouraging elements, but Gray said he was withholding further comment until he has seen the final language. Asked about his lawsuit against the SEC for delay in issuing the rules, Gray said once the federal regulations have been published "we will be looking at that."
CALVERT INVESTMENTS: Bennett Freeman, senior vice president for sustainability research and policy for the socially responsible mutual fund
Section 1504: He called it a "high water mark" in the movement for transparency and one that will compel substantial disclosure. "We are also hopeful that this will provide similar momentum for regulations in other jurisdicitions for oil, gas and mining companies. .... This rule appears to be an overall victory for investors, given the comprehensiveness of disclosure that appears to be required without any allowance for conventions in individual countries."
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