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October 20, 2014

Is The Dodd Frank Conflict Minerals Provision Keeping The SEC From Its True Mandate?

It is – at least according to Securities and Exchange Commission (SEC) commissioner Daniel Gallagher Jr. According to The Wall Street Journal, in a speech at Fordham University’s law school Gallagher said the Dodd Frank conflict minerals provision, and the resulting SEC rule, “distract(s) from the SEC’s proper regulatory oversight and strap(s) its limited resources.” Gallagher suggested Congress repeal the provision or find an agency better suited for dealing with conflict minerals to execute it. 

A study released this summer by the international law firm Davis Polk & Wardell seemed to draw a similar conclusion. It said, “While repeal of Section 1502 would be strongly resisted by human rights groups and some members of Congress, it would perhaps enable the SEC to redirect scarce resources to its core corporate disclosure, market regulation and enforcement roles and away from ever-proliferating ‘specialized disclosure’ mandates.” The law firm also suggested that repeal could be on Congress’s radar if Republicans win control of the U.S. Senate on Election Day 2014. (To see what other rules the 114th Congress could target, read this article from The Hill.) 

As Connecting the Dots reported last week, Tulane University estimates the SEC’s conflict mineral regulation this year cost public companies $709.7 million to comply with. The average company spent $545,962 while smaller companies (those with less than $100 million in revenues) spent $190,333. As such, MSCI would strongly support any legislation in the 114th Congress to repeal the Dodd-Frank conflict minerals provision.