African conflict areas: US trade rules just tightened
The US Securities and Exchange Commission (SEC) has released a long-awaited rule covering the use of ‘conflict minerals’ by American companies under the Dodd-Frank financial reforms act. The rule relates to US-listed companies using tantalum, tin, gold or tungsten sourced from the Democratic Republic of the Congo or one of its nine adjoining neighbours. Countries using such ‘conflict minerals’ will have to disclose details of their sourcing, prompting lawyers to flag up an increase in compliance requirements.
Michael Littenberg, a partner at Schulte Roth & Zabel in New York, told Corporate Counsel magazine that for some companies, ‘getting their compliance programmes in place is going to be time-consuming and expensive’, especially increasing the work of in-house counsel and those managing the supply chain, as companies may not currently have sufficient information about how they source materials.
Companies covered by the rule will have to hire independent auditors to conduct due diligence on the sourcing, before publishing a link to the report on their websites. The intention of the rule is to improve transparency regarding the use of materials from war-torn regions.
Obiamaka Madubuko – a partner at the New York office of law firm McDermott Will & Emery -- warned the new regulations may be difficult to apply because of ‘uncertainty’ in the wording about who is covered.
Meanwhile, another Dodd-Frank scheme came into force this week, as the SEC made its first payout to a whistleblower under conditions established by the act. According to London-based Legal Week newspaper, an unnamed individual received $50,000 for helping to stop a multimillion-dollar fraud. The individual will also gain 30 per cent of collected sanctions, potentially totalling $300,000.