SEC Gets a Temporary Reprieve in Conflict Minerals Case
The SEC got a temporary reprieve in the on-going conflict minerals case (discussed here and here) when the Chief Justice granted another extension of time for the agency to file a petition for cert. The SEC now has until April 7, 2016 to file its petition.
As things stand now, the conflict minerals rule remains in effect and companies must file the required disclosure document but need to state in such disclosure whether their products were “not found to be DRC conflict free.” That clause was found by the DC Circuit to be compelled corporate speech that violated issuers First Amendment rights.
The potential impact of the ruling in the conflict minerals case is huge as it calls into question the reach of Zauderer v. Office of Regulatory Counsel which uses a relatively lenient standard of review for compelled commercial speech. As things now stand, the state of the law governing compelled commercial speech is hopelessly confused. Courts differ on whether Zauderer review applies broadly or if it is limited (as the conflict minerals rule holding suggests) to disclosures aimed at preventing consumer deception. If the latter is true, many types of disclosure may be subject to challenge.
If the SEC does file by the new deadline, it will be seeking reconsideration only of the portion of the ruling that dealt with the First Amendment issue. But that issue is critical, not only to the particular case at hand but to the entire field of securities disclosure regulation. It is a case worthy of much closer attention that has been paid to it so far. The SEC almost certainly will seek further review as it cannot allow the current unsettled state of affairs to remain.