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U.S. Securities and Exchange Commission

Speech by SEC Chairman:
Statement at SEC Open Meeting


Chairman Mary L. Schapiro

U.S. Securities and Exchange Commission

Washington, D.C.
December 15, 2010

Specialized Disclosure

We next turn to the final three items on our agenda — recommendations that would fulfill Congress’ direction to create additional disclosure obligations for certain issuers.

Because of my personal stock holdings, I am recused from participating in the third of these matters — concerning issuers in extractive industries.

The first of these three specialized disclosure proposals implements Section 1502 of Dodd-Frank. This proposal imposes disclosure requirement on companies that file certain reports with the SEC. Specifically, the companies would be required to disclose annually whether they use conflict minerals that are “necessary to the functionality or production” of a product that is either manufactured, or contracted to be manufactured, by the issuer, that originate from the Democratic Republic of Congo or adjoining countries. The conflict minerals are cassiterite, columbite-tantalite, gold, wolframite or their derivatives. They are essential components in many products — from jewelry to cell phones to jet engines.

The release accompanying these proposed rules explores critical questions — such as, what does it means to “manufacture” or “contract to manufacture” a product? When is a mineral “necessary” to a product?

The proposal further describes the type of inquiry that would be required by the issuer in order to reach a country-of-origin conclusion.

If a company determines that its conflict minerals did originate in the DRC or adjoining countries, or if it is unable to conclude that they did not originate in the DRC, the issuer is required to disclose their conclusion, and furnish a Conflict Minerals Report. That Report would include a description of the products it manufactures that contain conflict minerals that are not DRC-conflict free; the facilities used to process the minerals; the conflict minerals country of origin; and the efforts to determine the mine or location of origin with the greatest possible specificity.

The Report would also include a description of the measures taken to exercise due diligence on the source and chain of custody of its conflict minerals, including a certified independent private sector audit of the Conflict Minerals report.

In adopting this statute, Congress expressed its hope that the reporting requirements of the securities laws will help to curb the violence in the eastern Democratic Republic of the Congo. Congress was concerned that the exploitation and trade of conflict minerals originating in the Democratic Republic of the Congo is helping to finance conflict that is characterized by extreme levels of violence, particularly sexual- and gender-based violence, and is contributing to an emergency humanitarian situation.

Because expertise about these events does not reside within the Commission or our staff, we have drafted these proposed rules carefully to follow the direction of Congress. As with all of our rulemaking, we look forward to the additional insights and perspective that commenters will provide.

The second specialized disclosure proposal we will consider would implement Section 1503 of the Dodd-Frank Act. That section requires mining companies to include information about mine safety and health standards in their annual and quarterly reports filed with the Commission.

It also requires mining companies to file a Form 8-K when they receive certain notices from the Mine Safety and Health Administration. The disclosure requirements are based on the safety and health requirements that apply to mines under the Federal Mine Safety and Health Act of 1977.

Finally, the last matter, from which I am recused, would implement Section 1504 of Dodd-Frank, and staff will provide additional details.

If approved for release, comments with respect to all three of these specialized disclosure proposals would be due by January 31, 2011.

Before I turn the meeting over to Meredith Cross, our Director of the Division of Corporation Finance, I would like to thank the staff members who have worked so hard for so many months to bring these proposals before us. Since we have three proposals, the list is very long.

From the Division of Corporation Finance, thank you to Meredith Cross, Paula Dubberly, Felicia Kung, Steven Hearne, John Fieldsend, Lillian Brown, Jennifer Zepralka, Tamara Brightwell, Elliot Staffin, Jennifer Riegel, Wayne Carnall, Paul Belvin, Paul Dudek, Gerald LaPorte, Roger Schwall, Cecile Peters, and George Schuler .

From our General Counsel’s Office, thanks to Richard Levine, David Fredrickson, Bryant Morris, and Dorothy McCuaig.

Thank you also to our colleagues in the Division of Risk, Strategy and Financial Innovation, specifically Jeff Naumann, Stas Nikolova, Vladimir Ivanov, and Walter Hamscher.

From the Office of the Chief Accountant, thank you to Jeff Minton, Brian Croteau, Annemarie Ettinger, John Cook, Jenifer Minke-Girard, and Jonathan Duersch. And from our Enforcement Division, thanks to Cheryl Scarboro.



Modified: 12/15/2010