(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
By Reynolds Holding
Hidden nuggets in the year-old Dodd-Frank law are a risky distraction. With financial reform already plenty complex, and the Securities and Exchange Commission overburdened, writing and complying with disclosure rules on the use of African minerals, for one, is likely to be counterproductive.
Buried in more than 2,000 pages of legislation to overhaul Wall Street were some peculiar pet projects. First, there's one aiming to curb funding for Democratic Republic of Congo combatants by requiring disclosure about products that contain gold, coltan or other minerals from the bloodied nation.
Cellular phones are primary suspects, but it's tough for manufacturers like Motorola to track down mineral sources, especially in recycled materials. It's even harder for retailers like Wal-Mart, which also must comply. And under the proposal, all reports require independent audits, a task the SEC estimates will cost companies at least $71 million a year.
There's another rule prompted by a deadly 2010 Massey Energy mine explosion. It calls for an SEC filing each time a mine is cited for "an imminent danger." That may sound sensible, but it includes trivial matters, too. In January, for instance, Consol Energy submitted notice after it was cited for icy roads near a mine.
A third provision mandates disclosure of any payments to governments, U.S. or foreign, for rights to develop oil, gas or minerals. The rule's purpose is murky. But public companies may lose out on deals to rivals able to keep items like leasing terms confidential.
The laws may derive from good intentions, but the benefits look dubious. Nothing actually prevents the use of Congolese minerals, and a company can just say it's too difficult to identify a substance's source. The SEC also doesn't regulate mining, so it's not obvious what the agency might do about, say, unsafe road conditions, or how investors might be enlightened by knowing such tidbits.
Yet the underfunded SEC must still write detailed rules to navigate the ambiguities. The agency already has fallen behind drafting Dodd-Frank regulations on swaps, derivatives, executive pay, brokers and other pressing issues. That, not serving social policy, should be the watchdog's first order of business.
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