The SEC adopted two final rules yesterday, on disclosures with respect to conflict minerals (proposed in December 2010) and on disclosures of payments resource extraction issuers make to governments (also proposed in December 2010). Statements by the Commissioners raised questions about whether the SEC should be involved in requiring disclosures about either of these matters, given that the purpose of the disclosures is not primarily about informing investors but is about illuminating the actions of governments and achieving humanitarian objectives. Daniel Gallagher said (with respect to the resource extraction rules (he also critiqued the conflict minerals rules)):
As an independent agency, the SEC should have played a significant role in informing Congress about the pitfalls of mandating rulemakings that are not germane to our mission….In any event, even if I had no objection in principle to efforts to achieve social and foreign policy objectives through the disclosure requirements of the securities laws, I am not able to support this rule today, because the analysis is incomplete. The costs this rule will impose are clear enough. Its intended benefits, by contrast, are socio-political and aspirational in nature, worthy but indeterminate — although they are presumed to justify all costs. And certain key discretionary choices made by the Commission’s rule will have the effect of increasing the rule’s burdens….we have no reason to think the SEC will succeed in achieving complex social and foreign policy objectives as to which the policymaking entities that do have relevant expertise have, to date, largely failed.
With respect to the conflict minerals rules, Troy Paredes said:
We all want the violence in the DRC to end. Unfortunately, the adopting release does not offer a reasoned basis for concluding that the final rule will help bring this about, and there is cause for concern that the hardship and suffering could worsen if the outcome is a de facto embargo. Accordingly, I caution against any sense that the need for action to abate the humanitarian crisis is allayed because of the rule the Commission is adopting today.
Luis Aguilar took a very different view. For example (with respect to conflict minerals):
Today’s rulemaking is the culmination of a careful and comprehensive process and a clear Congressional directive. The Commission has faithfully administered its judgment and expertise, as the independent agency tasked by Congress to implement Section 13(p). The rule under consideration today is in the interest of investors and the public interest.
Looks like the set-up for the lawsuits.