SEC Votes in Favor of Strict Conflict Minerals Audit Rule

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The SEC in a 3-2 vote this morning passed comprehensive rules requiring companies and their supply chains purchasing the group of metals called “Conflict Minerals” (this group of metals includes: tantalum and columbite-tantalite or coltan, tin and cassiterite, tungsten and wolframite, gold and their derivatives) to file annual audited statements by May 1 of each year.

Check out MetalMiner’s Conflict Minerals Legislative Guide for expert analysis and commentary.

Large companies will have a two-year implementation timeline, while smaller companies will have a four-year timeline. In addition, the audit must include both a review of the program implementation as well as program design.

3-2 Vote

The vote contained two nays and two yeas with the deciding vote taken by SEC Chairman Mary Schapiro in favor of the rules.

The two commissioners opposing the rules objected on several grounds, but primarily on the fact that humanitarian and social issues they felt do not belong in the SEC domain, according to Lawrence Heim, director of the Elm Consulting Group International who has provided expert commentary on this subject to MetalMiner and who attended the meeting in person.

Other criticisms of the rules included: no exclusions made for small businesses and a number of technical issues not addressed.

Cost to Implement and Impact

The SEC now puts the cost estimate to implement the rules at $3-4 billion initially and $200-400 million annually, according to Heim.

The rules will have a profound impact on manufacturing organizations – perhaps similar in scope to Sarbanes-Oxley passed in 2002. Manufacturing organizations will need to think about all of their sources of supply, traceability processes and underlying systems and technologies as well as the formal audit process and procedures.

Unlike Sarbanes-Oxley, which largely impacted the financial reporting/IT aspects and functions within companies, the conflict minerals rules will impact a larger number of functions within organizations, all the way from product design and development to sourcing and procurement to supply chain, finance and IT.

What makes this legislation more complex than Sarbanes-Oxley, however, involves the external relationships across the extended supply chain.

In a follow-up post, we’ll cover that angle in greater detail.

Check out MetalMiner’s Conflict Minerals Legislative Guide for expert analysis and commentary.

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Comments (3)

  1. ITS says:

    Bravo S.E.C.

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