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115th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 115-570
======================================================================
TO AMEND THE SECURITIES EXCHANGE ACT OF 1934 TO REPEAL CERTAIN
DISCLOSURE REQUIREMENTS RELATED TO CONFLICT MINERALS, AND FOR OTHER
PURPOSES
_______
February 20, 2018.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Hensarling, from the Committee on Financial Services, submitted the
following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 4248]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 4248) to amend the Securities Exchange Act of
1934 to repeal certain disclosure requirements related to
conflict minerals, and for other purposes, having considered
the same, report favorably thereon without amendment and
recommend that the bill do pass.
Purpose and Summary
On November 3, 2017, Representative Bill Huizenga
introduced H.R. 4248 to repeal Section 1502 of the Dodd-Frank
Wall Street Reform and Consumer Protection Act (``Dodd-Frank
Act'') (P.L. 111-203), which requires public companies to
disclose in annual reports filed with the Securities and
Exchange Commission (SEC) whether the company sources
``conflict minerals'' tin, tungsten, tantalum, and gold from
the Democratic Republic of Congo and its nine neighboring
countries.
Background and Need for Legislation
H.R. 4248 reinforces the fact that the purpose of the
federal securities laws and its disclosure regime is to provide
material information to shareholders or potential investors so
that they can make appropriately informed investment decisions.
When legislation forces investors to read superfluous
information that requires public companies to disclose
information to satisfy politically motivated interests, it
thwarts the purpose of the federal securities laws and
undermines the interests of investors.
Section 1502 of the Dodd-Frank Act not only is unnecessary,
it presents new challenges for the SEC. The SEC is ill-equipped
to handle rulemaking requirements that fall outside of its
statutory mission to protect investors, maintain fair, orderly,
and efficient markets, and facilitate capital formation.
As an initial matter, the Dodd-Frank Act's conflict
minerals provisions are explicitly designed to achieve foreign
policy objectives and bear no relation to the underlying
purpose of the federal securities laws, which is to protect
investors by providing them with information that is material
to their investment decisions and promote the formation of
capital. In the words of former SEC Chair Mary Jo White:
``Seeking to improve safety in mines for workers or to end
horrible human rights atrocities in the Democratic Republic of
the Congo are compelling objectives, which, as a citizen, I
wholeheartedly share. But, as the Chair of the SEC, I must
question, as a policy matter, using the federal securities laws
and the SEC's powers of mandatory disclosure to accomplish
these goals.''
Former SEC Chair White's words are echoed in the revised
rule the SEC issued to implement Section 1502, following the
judicial rejection of its first attempt: ``The use of
securities law disclosure requirements to advance foreign
policy objectives is uncommon, and therefore foreign policy is
not a topic we routinely address in our rulemaking.'' Writing
in the Fordham Law Review, Karen Woody, Assistant Professor of
Law at Indiana University, argues that the mission creep
imposed by foreign policy-related disclosure requirements
threatens the SEC's effectiveness. Section 1502, she writes,
``flies in the face of the SEC's mandate. . . . Furthermore,
requiring the SEC to enforce these disclosure requirements
stretches thin an already overburdened agency and demands that
it oversee diplomatic and humanitarian regulations for which it
lacks the institutional competence.''
Additionally, by imposing enormous compliance costs on
public companies, Section 1502 impedes the ability of those
firms to innovate, grow, and create jobs, while at the same
time lowering the returns they can offer their investors. In
its economic analysis of the final rule to implement Section
1502, the SEC estimated the initial cost of compliance as
``between approximately $3 billion to $4 billion, while the
annual cost of ongoing compliance will be between $207 million
and $609 million.''
To illustrate just how far out of its lane Section 1502
requires the SEC to operate, since the SEC issued its
disclosure rule in August 2012, federal courts have highlighted
the unconstitutionality of certain requirements. In April 2014,
a panel of the U.S. Court of Appeals for the D.C. Circuit ruled
that forcing companies to describe the conflict-free status of
their products violated their First Amendment rights. This
decision was upheld by the same three-judge panel in August
2015, with the court also noting that the SEC had failed to
demonstrate that its rulemaking would alleviate the
humanitarian crisis in the Dominican Republic of Congo. The SEC
and Amnesty International requested an en banc rehearing before
the full D.C. Circuit, but this petition was denied. The
Justice Department later declined to seek Supreme Court review
of the decision.
On April 3, 2017, the U.S. District Court for the District
of Columbia entered final judgment in the case. The district
court set aside those portions of the rule that require
companies to report to the SEC and state on their website that
any of their products ``have not been found to be DRC conflict
free,''' but that court and the Court of Appeals left open the
question of whether this description is required by the statute
or, rather, had been a product of the SEC's rulemaking. In
response to the decision, SEC Commissioner Michael Piwowar
while serving as Acting Chairman--issued a statement indicating
he has directed the staff to consider whether and how the rule
can be changed to avoid the ``constitutional defect identified
by the court.'' In the meantime, the SEC staff has indicated
that it would not recommend enforcement action against
companies that decide not to file a Conflict Minerals report as
an exhibit to their annual Form Specialized Disclosure or Form
SD. In his testimony before the Senate Banking Committee on
September 26, 2017, SEC Chairman Jay Clayton reiterated that
the SEC is reviewing the rule and has issued no-action guidance
on the rule in the interim.
Section 1502's constitutional and procedural deficiencies
have been compounded by the damage it has done to the citizens
of Central Africa, the very region it purports to help.
Critics, many from the region itself, argue that Section 1502
has led to a de facto embargo on the region's minerals, further
impoverishing Africans while leaving local militias unaffected.
In one letter to the SEC, leaders from three Congolese mining
cooperatives wrote, ``We the local population in the areas that
will be the most effected [sic] by your proposed legislation
Dodd-Frank Bill, have not been consulted. . . .'' Noting that
the SEC's rule would lead to a boycott of their minerals, the
Congolese went on to plead, ``[W]e cannot continue to suffer
any longer. Do we now have to choose between dying by a bullet
or starving to death?''
A New York Times investigation in 2011 painted an even
bleaker picture of what locals refer to as the ``Loi Obama''
(the Obama Law-Dodd-Frank), noting that ``the Dodd-Frank law
has had unintended and devastating consequences,'' and ``has
brought about a de facto embargo on the minerals mined in the
region.'' The author explains that
Villagers who relied on their mining income to buy
food when harvests failed are beginning to go hungry. .
. . Meanwhile, [Dodd-Frank] is benefiting some of the
very people it was meant to single out. The chief
beneficiary is Gen. Bosco Ntaganda, who is nicknamed
The Terminator and is sought by the International
Criminal Court. Ostensibly a member of the Congolese
Army, he is in fact a freelance killer with his own
ethnic Tutsi militia, which provides ``security'' to
traders smuggling minerals across the border to
neighboring Rwanda.
Another letter signed by more than 70 researchers and
Africa observers, many from Congo itself, echoed the charge
that the Congolese had been excluded from policymaking that
profoundly affected their livelihoods. ``As a result,'' the
signatories concluded, ``the conflict minerals movement has yet
to lead to meaningful improvement on the ground, and has had a
number of unintended and damaging consequences.'' Indeed, a
recent study found that ``instead of reducing violence, the
evidence indicates the [Dodd-Frank conflict minerals regime]
increased the incidents in which armed groups looted civilians
and committed violence against them.''
In addition to the harm inflicted on Africans, research has
shown that the SEC's rule has not illuminated companies'
sourcing of conflict minerals to any meaningful degree.
According to the GAO, initial company disclosures have revealed
little: 67% of companies reported not being able to determine
their minerals' country of origin, and another 3% did not
provide a clear determination. No company in GAO's sample could
determine whether its minerals financed armed groups. GAO
confirmed these findings the following year, with 67% of
companies still unable to confirm the source of their conflict
minerals, and 97% reporting that they could not determine
whether those minerals benefitted armed groups in the DRC.
Professor Jeff Schwartz of the University of Utah Law
School has come to similar conclusions, having reviewed 1,300
inaugural filings under Section 1502. He writes, ``The overall
picture is not pretty. I argue that the filings do not contain
sufficient information about conflict-mineral supply chains for
the legislation to work as intended, and that this is the
result of shortcomings in the original law, in the SEC rules
that followed, and in the corporate compliance effort.''
Even the U.S. government has found tracing minerals to
armed groups to be an impossible task: in a 2014 analysis
mandated by Dodd-Frank, the Commerce Department reported it was
unable to determine whether smelters drew on minerals that
benefited armed groups--``We do not have the ability to
distinguish such facilities.''
On October 6, 2017, the U.S. Department of the Treasury
released its report on Capital Markets, issued pursuant to
President Trump's February 3, 2017 Executive Order 13772.
Regarding SEC disclosures, the Treasury report observed that
``Materiality is an objective standard based on the reasonable
investor, as opposed to a subjective standard that is based on
what a particular investor may view as important.
Unfortunately, amendments in Dodd-Frank to the federal
securities laws have imposed requirements to disclose
information that is not material to the reasonable investor for
making investment decisions, including information related to
conflict minerals.''
While Treasury recognized the original support for the
provisions was well-intentioned, it echoed the concerns of
former SEC Chair Mary Jo White and others that the federal
securities laws are ill-equipped to achieve such policy goals.
The Treasury report also noted that the intent of influencing
business conduct is undermined by only imposing requirements on
public companies and not on private companies. Treasury
recommended that Congress repeal Section 1502 and any rules
issued pursuant to this section, and that if Congress
determines this disclosure should be required for companies,
this oversight should be moved to a ``more appropriate federal
agency, such as the Departments of State, Commerce, Homeland
Security, Labor, or Energy.'' H.R. 1502 makes good on the most
important piece of this recommendation: removing immaterial
disclosures from the federal securities laws and the SEC's
purview.
Hearings
The Committee on Financial Services held a hearing
examining matters relating to H.R. 4248 on April 26, 2017 and
April 28, 2017.
Committee Consideration
The Committee on Financial Services met in open session on
November 14, 2017 and November 15, 2017 and ordered H.R. 4248
to be reported favorably to the House by a recorded vote of 32
yeas to 27 nays (Record vote no. FC-110), a quorum being
present.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. The
sole recorded vote was on a motion by Chairman Hensarling to
report the bill favorably to the House without amendment. The
motion was agreed to by a recorded vote of 32 yeas to 27 nays
(Record vote no. FC-110), a quorum being present.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the findings and recommendations of
the Committee based on oversight activities under clause
2(b)(1) of rule X of the Rules of the House of Representatives,
are incorporated in the descriptive portions of this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee states that H.R. 4248
will remove burdensome compliance costs on public companies and
return the securities laws to their intent of providing
material information to investors by repealing Section 1502 of
the Dodd Frank Act.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
Congressional Budget Office Estimates
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, February 16, 2018.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4248, a bill to
amend the Securities Exchange Act of 1934 to repeal certain
disclosure requirements related to conflict minerals, and for
other purposes.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Stephen
Rabent.
Sincerely,
Keith Hall,
Director.
H.R. 4248--A bill to amend the Securities Exchange Act of 1934 to
repeal certain disclosure requirements related to conflict
minerals, and for other purposes
Under current law, the Securities and Exchange Commission
(SEC) requires certain companies to disclose their use of
conflict minerals that originate from the Democratic Republic
of the Congo or an adjoining country in an annual report to the
agency and to make that information available on the reporting
company's website.\1\ The Department of Commerce, the
Government Accountability Office, and the Department of State
also are required to produce certain reports on conflict
minerals and on the accuracy of company reporting. H.R. 4248
would repeal those requirements.
---------------------------------------------------------------------------
\1\Conflict minerals are those that the Secretary of State has
identified as helping finance conflict in the Democratic Republic of
the Congo and adjoining countries in Africa. The list includes
cassiterite, columbite-tantalite, gold, wolframite, and their
derivatives.
---------------------------------------------------------------------------
Using information from the SEC, CBO estimates that
implementing H.R. 4248 would have an insignificant effect on
the affected agencies' costs and operations. Moreover, the SEC
is authorized to collect fees sufficient to offset its annual
appropriation; therefore, CBO estimates that the net effect on
discretionary spending from implementing the bill would be
negligible, assuming appropriation actions consistent with that
authority. Furthermore, CBO estimates that repealing the
reporting requirements for the other federal agencies would
reduce spending subject to appropriation by less than $500,000
a year.
Enacting H.R. 4248 would not affect direct spending or
revenues; therefore, pay-as-you-go procedures do not apply.
CBO estimates that enacting H.R. 4248 would not increase
net direct spending or on-budget deficits in any of the four
consecutive 10-year periods beginning in 2028.
The bill contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act.
The CBO staff contact for this estimate is Stephen Rabent.
The estimate was approved by H. Samuel Papenfuss, Deputy
Assistant Director for Budget Analysis.
Federal Mandates Statement
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995.
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of the section
102(b)(3) of the Congressional Accountability Act.
Earmark Identification
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
Duplication of Federal Programs
In compliance with clause 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program; (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139; or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to the Federal Program
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No.
98-169).
Disclosure of Directed Rulemaking
Pursuant to section 3(i) of H. Res. 5, (115th Congress),
the following statement is made concerning directed
rulemakings: The Committee estimates that the bill requires no
directed rulemakings within the meaning of such section.
Section-by-Section Analysis of the Legislation
Section 1. Repeal of conflict mineral requirements
This section repeals subsection (p) of section 13 of the
Securities Exchange Act of 1934, and consequently amends the
Dodd-Frank Act to strike section 1502, to eliminate the
requirement that companies disclose to the SEC whether the
company sources ``conflict minerals.''
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italics, and existing law in which no change is
proposed is shown in roman):
SECURITIES EXCHANGE ACT OF 1934
TITLE I--REGULATION OF SECURITIES EXCHANGES
* * * * * * *
periodical and other reports
Sec. 13. (a) Every issuer of a security registered pursuant
to section 12 of this title shall file with the Commission, in
accordance with such rules and regulations as the Commission
may prescribe as necessary or appropriate for the proper
protection of investors and to insure fair dealing in the
security--
(1) such information and documents (and such copies
thereof) as the Commission shall require to keep
reasonably current the information and documents
required to be included in or filed with an application
or registration statement filed pursuant to section 12,
except that the Commission may not require the filing
of any material contract wholly executed before July 1,
1962.
(2) such annual reports (and such copies thereof),
certified if required by the rules and regulations of
the Commission by independent public accountants, and
such quarterly reports (and such copies thereof), as
the Commission may prescribe.
Every issuer of a security registered on a national securities
exchange shall also file a duplicate original of such
information, documents, and reports with the exchange. In any
registration statement, periodic report, or other reports to be
filed with the Commission, an emerging growth company need not
present selected financial data in accordance with section
229.301 of title 17, Code of Federal Regulations, for any
period prior to the earliest audited period presented in
connection with its first registration statement that became
effective under this Act or the Securities Act of 1933 and,
with respect to any such statement or reports, an emerging
growth company may not be required to comply with any new or
revised financial accounting standard until such date that a
company that is not an issuer (as defined under section 2(a) of
the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(a))) is required
to comply with such new or revised accounting standard, if such
standard applies to companies that are not issuers.
(b)(1) The Commission may prescribe, in regard to reports
made pursuant to this title, the form or forms in which the
required information shall be set forth, the items or details
to be shown in the balance sheet and the earnings statement,
and the methods to be followed in the preparation of reports,
in the appraisal or valuation of assets and liabilities, in the
determination of depreciation and depletion, in the
differentiation of recurring and nonrecurring income, in the
differentiation of investment and operating income, and in the
preparation, where the Commission deems it necessary or
desirable, of separate and/or consolidated balance sheets or
income accounts of any person directly or indirectly
controlling or controlled by the issuer, or any person under
direct or indirect common control with the issuer; but in the
case of the reports of any person whose methods of accounting
are prescribed under the provisions of any law of the United
States, or any rule or regulation thereunder, the rules and
regulations of the Commission with respect to reports shall not
be inconsistent with the requirements imposed by such law or
rule or regulation in respect of the same subject matter
(except that such rules and regulations of the Commission may
be inconsistent with such requirements to the extent that the
Commission determines that the public interest or the
protection of investors so requires).
(2) Every issuer which has a class of securities registered
pursuant to section 12 of this title and every issuer which is
required to file reports pursuant to section 15(d) of this
title shall--
(A) make and keep books, records, and accounts,
which, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets
of the issuer;
(B) devise and maintain a system of internal
accounting controls sufficient to provide reasonable
assurances that--
(i) transactions are executed in accordance
with management's general or specific
authorization;
(ii) transactions are recorded as necessary
(I) to permit preparation of financial
statements in conformity with generally
accepted accounting principles or any other
criteria applicable to such statements, and
(II) to maintain accountability for assets;
(iii) access to assets is permitted only in
accordance with management's general or
specific authorization; and
(iv) the recorded accountability for assets
is compared with the existing assets at
reasonable intervals and appropriate action is
taken with respect to any differences; and
(C) notwithstanding any other provision of law, pay
the allocable share of such issuer of a reasonable
annual accounting support fee or fees, determined in
accordance with section 109 of the Sarbanes-Oxley Act
of 2002.
(3)(A) With respect to matters concerning the national
security of the United States, no duty or liability under
paragraph (2) of this subsection shall be imposed upon any
person acting in cooperation with the head of any Federal
department or agency responsible for such matters if such act
in cooperation with such head of a department or agency was
done upon the specific, written directive of the head of such
department or agency pursuant to Presidential authority to
issue such directives. Each directive issued under this
paragraph shall set forth the specific facts and circumstances
with respect to which the provisions of this paragraph are to
be invoked. Each such directive shall, unless renewed in
writing, expire one year after the date of issuance.
(B) Each head of a Federal department or agency of the United
States who issues a directive pursuant to this paragraph shall
maintain a complete file of all such directives and shall, on
October 1 of each year, transmit a summary of matters covered
by such directives in force at any time during the previous
year to the Permanent Select Committee on Intelligence of the
House of Representatives and the Select Committee on
Intelligence of the Senate.
(4) No criminal liability shall be imposed for failing to
comply with the requirements of paragraph (2) of this
subsection except as provided in paragraph (5) of this
subsection.
(5) No person shall knowingly circumvent or knowingly fail to
implement a system of internal accounting controls or knowingly
falsify any book, record, or account described in paragraph
(2).
(6) Where an issuer which has a class of securities
registered pursuant to section 12 of this title or an issuer
which is required to file reports pursuant to section 15(d) of
this title holds 50 per centum or less of the voting power with
respect to a domestic or foreign firm, the provisions of
paragraph (2) require only that the issuer proceed in good
faith to use its influence, to the extent reasonable under the
issuer's circumstances, to cause such domestic or foreign firm
to devise and maintain a system of internal accounting controls
consistent with paragraph (2). Such circumstances include the
relative degree of the issuer's ownership of the domestic or
foreign firm and the laws and practices governing the business
operations of the country in which such firm is located. An
issuer which demonstrates good faith efforts to use such
influence shall be conclusively presumed to have complied with
the requirements of paragraph (2).
(7) For the purpose of paragraph (2) of this subsection, the
terms ``reasonable assurances'' and ``reasonable detail'' mean
such level of detail and degree of assurance as would satisfy
prudent officials in the conduct of their own affairs.
(c) If in the judgment of the Commission any report required
under subsection (a) is inapplicable to any specified class or
classes of issuers, the Commission shall require in lieu
thereof the submission of such reports of comparable character
as it may deem applicable to such class or classes of issuers.
(d)(1) Any person who, after acquiring directly or indirectly
the beneficial ownership of any equity security of a class
which is registered pursuant to section 12 of this title, or
any equity security of an insurance company which would have
been required to be so registered except for the exemption
contained in section 12(g)(2)(G) of this title, or any equity
security issued by a closed-end investment company registered
under the Investment Company Act of 1940 or any equity security
issued by a Native Corporation pursuant to section 37(d)(6) of
the Alaska Native Claims Settlement Act, or otherwise becomes
or is deemed to become a beneficial owner of any of the
foregoing upon the purchase or sale of a security-based swap
that the Commission may define by rule, and is directly or
indirectly the beneficial owner of more than 5 per centum of
such class shall, within ten days after such acquisition or
within such shorter time as the Commission may establish by
rule, file with the Commission, a statement containing such of
the following information, and such additional information, as
the Commission may by rules and regulations, prescribe as
necessary or appropriate in the public interest or for the
protection of investors--
(A) the background, and identity, residence, and
citizenship of, and the nature of such beneficial
ownership by, such person and all other persons by whom
or on whose behalf the purchases have been or are to be
effected;
(B) the source and amount of the funds or other
consideration used or to be used in making the
purchases, and if any part of the purchase price is
represented or is to be represented by funds or other
consideration borrowed or otherwise obtained for the
purpose of acquiring, holding, or trading such
security, a description of the transaction and the
names of the parties thereto, except that where a
source of funds is a loan made in the ordinary course
of business by a bank, as defined in section 3(a)(6) of
this title, if the person filing such statement so
requests, the name of the bank shall not be made
available to the public;
(C) if the purpose of the purchases or prospective
purchases is to acquire control of the business of the
issuer of the securities any plans or proposals which
such persons may have to liquidate such issuer, to sell
its assets to or merge it with any other persons, or to
make any other major change in its business or
corporate structure;
(D) the number of shares of such security which are
beneficially owned, and the number of shares concerning
which there is a right to acquire, directly or
indirectly, by (i) such person, and (ii) by each
associate of such person, giving the background,
identity, residence, and citizenship of each such
associate; and
(E) information as to any contracts, arrangements, or
understandings with any person with respect to any
securities of the issuer, including but not limited to
transfer of any of the securities, joint ventures, loan
or option arrangements, puts or calls, guaranties of
loans, guaranties against loss or guaranties of
profits, division of losses or profits, or the giving
or withholding of proxies, naming the persons with whom
such contracts, arrangements, or understandings have
been entered into, and giving the details thereof.
(2) If any material change occurs in the facts set forth in
the statement filed with the Commission, an amendment shall be
filed with the Commission, in accordance with such rules and
regulations as the Commission may prescribe as necessary or
appropriate in the public interest or for the protection of
investors.
(3) When two or more persons act as a partnership, limited
partnership, syndicate, or other group for the purpose of
acquiring, holding, or disposing of securities of an issuer,
such syndicate or group shall be deemed a ``person'' for the
purposes of this subsection.
(4) In determining, for purposes of this subsection, any
percentage of a class of any security, such class shall be
deemed to consist of the amount of the outstanding securities
of such class, exclusive of any securities of such class held
by or for the account of the issuer or a subsidiary of the
issuer.
(5) The Commission, by rule or regulation or by order, may
permit any person to file in lieu of the statement required by
paragraph (1) of this subsection or the rules and regulations
thereunder, a notice stating the name of such person, the
number of shares of any equity securities subject to paragraph
(1) which are owned by him, the date of their acquisition and
such other information as the Commission may specify, if it
appears to the Commission that such securities were acquired by
such person in the ordinary course of his business and were not
acquired for the purpose of and do not have the effect of
changing or influencing the control of the issuer nor in
connection with or as a participant in any transaction having
such purpose or effect.
(6) The provisions of this subsection shall not apply to--
(A) any acquisition or offer to acquire securities
made or proposed to be made by means of a registration
statement under the Securities Act of 1933;
(B) any acquisition of the beneficial ownership of a
security which, together with all other acquisitions by
the same person of securities of the same class during
the preceding twelve months, does not exceed 2 per
centum of that class;
(C) any acquisition of an equity security by the
issuer of such security;
(D) any acquisition or proposed acquisition of a
security which the Commission, by rules or regulations
or by order, shall exempt from the provisions of this
subsection as not entered into for the purpose of, and
not having the effect of, changing or influencing the
control of the issuer or otherwise as not comprehended
within the purposes of this subsection.
(e)(1) It shall be unlawful for an issuer which has a class
of equity securities registered pursuant to section 12 of this
title, or which is a closed-end investment company registered
under the Investment Company Act of 1940, to purchase any
equity security issued by it if such purchase is in
contravention of such rules and regulations as the Commission,
in the public interest or for the protection of investors, may
adopt (A) to define acts and practices which are fraudulent,
deceptive, or manipulative, and (B) to prescribe means
reasonably designed to prevent such acts and practices. Such
rules and regulations may require such issuer to provide
holders of equity securities of such class with such
information relating to the reasons for such purchase, the
source of funds, the number of shares to be purchased, the
price to be paid for such securities, the method of purchase,
and such additional information, as the Commission deems
necessary or appropriate in the public interest or for the
protection of investors, or which the Commission deems to be
material to a determination whether such security should be
sold.
(2) For the purpose of this subsection, a purchase by or for
the issuer or any person controlling, controlled by, or under
common control with the issuer, or a purchase subject to
control of the issuer or any such person, shall be deemed to be
a purchase by the issuer. The Commission shall have power to
make rules and regulations implementing this paragraph in the
public interest and for the protection of investors, including
exemptive rules and regulations covering situations in which
the Commission deems it unnecessary or inappropriate that a
purchase of the type described in this paragraph shall be
deemed to be a purchase by the issuer for purposes of some or
all of the provisions of paragraph (1) of this subsection.
(3) At the time of filing such statement as the Commission
may require by rule pursuant to paragraph (1) of this
subsection, the person making the filing shall pay to the
Commission a fee at a rate that, subject to paragraph (4), is
equal to $92 per $1,000,000 of the value of securities proposed
to be purchased. The fee shall be reduced with respect to
securities in an amount equal to any fee paid with respect to
any securities issued in connection with the proposed
transaction under section 6(b) of the Securities Act of 1933,
or the fee paid under that section shall be reduced in an
amount equal to the fee paid to the Commission in connection
with such transaction under this paragraph.
(4) Annual adjustment.--For each fiscal year, the
Commission shall by order adjust the rate required by
paragraph (3) for such fiscal year to a rate that is
equal to the rate (expressed in dollars per million)
that is applicable under section 6(b) of the Securities
Act of 1933 for such fiscal year.
(5) Fee collections.--Fees collected pursuant to this
subsection for fiscal year 2012 and each fiscal year
thereafter shall be deposited and credited as general
revenue of the Treasury and shall not be available for
obligation.
(6) Effective date; publication.--In exercising its
authority under this subsection, the Commission shall
not be required to comply with the provisions of
section 553 of title 5, United States Code. An adjusted
rate prescribed under paragraph (4) shall be published
and take effect in accordance with section 6(b) of the
Securities Act of 1933 (15 U.S.C. 77f(b)).
(7) Pro rata application.--The rates per $1,000,000
required by this subsection shall be applied pro rata
to amounts and balances of less than $1,000,000.
(f)(1) Every institutional investment manager which uses the
mails, or any means or instrumentality of interstate commerce
in the course of its business as an institutional investment
manager and which exercises investment discretion with respect
to accounts holding equity securities of a class described in
section 13(d)(1) of this title having an aggregate fair market
value on the last trading day in any of the preceding twelve
months of at least $100,000,000 or such lesser amount (but in
no case less than $10,000,000) as the Commission, by rule, may
determine, shall file reports with the Commission in such form,
for such periods, and at such times after the end of such
periods as the Commission, by rule, may prescribe, but in no
event shall such reports be filed for periods longer than one
year or shorter than one quarter. Such reports shall include
for each such equity security held on the last day of the
reporting period by accounts (in aggregate or by type as the
Commission, by rule, may prescribe) with respect to which the
institutional investment manager exercises investment
discretion (other than securities held in amounts which the
Commission, by rule, determines to be insignificant for
purposes of this subsection), the name of the issuer and the
title, class, CUSIP number, number of shares or principal
amount, and aggregate fair market value of each such security.
Such reports may also include for accounts (in aggregate or by
type) with respect to which the institutional investment
manager exercises investment discretion such of the following
information as the Commission, by rule, prescribes--
(A) the name of the issuer and the title, class,
CUSIP number, number of shares or principal amount, and
aggregate fair market value or cost or amortized cost
of each other security (other than an exempted
security) held on the last day of the reporting period
by such accounts;
(B) the aggregate fair market value or cost or
amortized cost of exempted securities (in aggregate or
by class) held on the last day of the reporting period
by such accounts;
(C) the number of shares of each equity security of a
class described in section 13(d)(1) of this title held
on the last day of the reporting period by such
accounts with respect to which the institutional
investment manager possesses sole or shared authority
to exercise the voting rights evidenced by such
securities;
(D) the aggregate purchases and aggregate sales
during the reporting period of each security (other
than an exempted security) effected by or for such
accounts; and
(E) with respect to any transaction or series of
transactions having a market value of at least $500,000
or such other amount as the Commission, by rule, may
determine, effected during the reporting period by or
for such accounts in any equity security of a class
described in section 13(d)(1) of this title--
(i) the name of the issuer and the title,
class, and CUSIP number of the security;
(ii) the number of shares or principal amount
of the security involved in the transaction;
(iii) whether the transaction was a purchase
or sale;
(iv) the per share price or prices at which
the transaction was effected;
(v) the date or dates of the transaction;
(vi) the date or dates of the settlement of
the transaction;
(vii) the broker or dealer through whom the
transaction was effected;
(viii) the market or markets in which the
transaction was effected; and
(ix) such other related information as the
Commission, by rule, may prescribe.
(2) The Commission shall prescribe rules providing
for the public disclosure of the name of the issuer and
the title, class, CUSIP number, aggregate amount of the
number of short sales of each security, and any
additional information determined by the Commission
following the end of the reporting period. At a
minimum, such public disclosure shall occur every
month.
(3) The Commission, by rule or order, may exempt,
conditionally or unconditionally, any institutional investment
manager or security or any class of institutional investment
managers or securities from any or all of the provisions of
this subsection or the rules thereunder.
(4) The Commission shall make available to the public for a
reasonable fee a list of all equity securities of a class
described in section 13(d)(1) of this title, updated no less
frequently than reports are required to be filed pursuant to
paragraph (1) of this subsection. The Commission shall tabulate
the information contained in any report filed pursuant to this
subsection in a manner which will, in the view of the
Commission, maximize the usefulness of the information to other
Federal and State authorities and the public. Promptly after
the filing of any such report, the Commission shall make the
information contained therein conveniently available to the
public for a reasonable fee in such form as the Commission, by
rule, may prescribe, except that the Commission, as it
determines to be necessary or appropriate in the public
interest or for the protection of investors, may delay or
prevent public disclosure of any such information in accordance
with section 552 of title 5, United States Code.
Notwithstanding the preceding sentence, any such information
identifying the securities held by the account of a natural
person or an estate or trust (other than a business trust or
investment company) shall not be disclosed to the public.
(5) In exercising its authority under this subsection, the
Commission shall determine (and so state) that its action is
necessary or appropriate in the public interest and for the
protection of investors or to maintain fair and orderly markets
or, in granting an exemption, that its action is consistent
with the protection of investors and the purposes of this
subsection. In exercising such authority the Commission shall
take such steps as are within its power, including consulting
with the Comptroller General of the United States, the Director
of the Office of Management and Budget, the appropriate
regulatory agencies, Federal and State authorities which,
directly or indirectly, require reports from institutional
investment managers of information substantially similar to
that called for by this subsection, national securities
exchanges, and registered securities associations, (A) to
achieve uniform, centralized reporting of information
concerning the securities holdings of and transactions by or
for accounts with respect to which institutional investment
managers exercise investment discretion, and (B) consistently
with the objective set forth in the preceding subparagraph, to
avoid unnecessarily duplicative reporting by, and minimize the
compliance burden on, institutional investment managers.
Federal authorities which, directly or indirectly, require
reports from institutional investment managers of information
substantially similar to that called for by this subsection
shall cooperate with the Commission in the performance of its
responsibilities under the preceding sentence. An institutional
investment manager which is a bank, the deposits of which are
insured in accordance with the Federal Deposit Insurance Act,
shall file with the appropriate regulatory agency a copy of
every report filed with the Commission pursuant to this
subsection.
(6)(A) For purposes of this subsection the term
``institutional investment manager'' includes any person, other
than a natural person, investing in or buying and selling
securities for its own account, and any person exercising
investment discretion with respect to the account of any other
person.
(B) The Commission shall adopt such rules as it deems
necessary or appropriate to prevent duplicative reporting
pursuant to this subsection by two or more institutional
investment managers exercising investment discretion with
respect to the same amount.
(g)(1) Any person who is directly or indirectly the
beneficial owner of more than 5 per centum of any security of a
class described in subsection (d)(1) of this section or
otherwise becomes or is deemed to become a beneficial owner of
any security of a class described in subsection (d)(1) upon the
purchase or sale of a security-based swap that the Commission
may define by ruleshall file with the Commission a statement
setting forth, in such form and at such time as the Commission
may, by rule, prescribe--
(A) such person's identity, residence, and
citizenship; and
(B) the number and description of the shares in which
such person has an interest and the nature of such
interest.
(2) If any material change occurs in the facts set forth in
the statement filed with the Commission, an amendment shall be
filed with the Commission, in accordance with such rules and
regulations as the Commission may prescribe as necessary or
appropriate in the public interest or for the protection of
investors.
(3) When two or more persons act as a partnership, limited
partnership, syndicate, or other group for the purpose of
acquiring, holding, or disposing of securities of an issuer,
such syndicate or group shall be deemed a ``person'' for the
purposes of this subsection.
(4) In determining, for purposes of this subsection, any
percentage of a class of any security, such class shall be
deemed to consist of the amount of the outstanding securities
of such class, exclusive of any securities of such class held
by or for the account of the issuer or a subsidiary of the
issuer.
(5) In exercising its authority under this subsection, the
Commission shall take such steps as it deems necessary or
appropriate in the public interest or for the protection of
investors (A) to achieve centralized reporting of information
regarding ownership, (B) to avoid unnecessarily duplicative
reporting by and minimize the compliance burden on persons
required to report, and (C) to tabulate and promptly make
available the information contained in any report filed
pursuant to this subsection in a manner which will, in the view
of the Commission, maximize the usefulness of the information
to other Federal and State agencies and the public.
(6) The Commission may, by rule or order, exempt, in whole or
in part, any person or class of persons from any or all of the
reporting requirements of this subsection as it deems necessary
or appropriate in the public interest or for the protection of
investors.
(h) Large Trader Reporting.--
(1) Identification requirements for large traders.--
For the purpose of monitoring the impact on the
securities markets of securities transactions involving
a substantial volume or a large fair market value or
exercise value and for the purpose of otherwise
assisting the Commission in the enforcement of this
title, each large trader shall--
(A) provide such information to the
Commission as the Commission may by rule or
regulation prescribe as necessary or
appropriate, identifying such large trader and
all accounts in or through which such large
trader effects such transactions; and
(B) identify, in accordance with such rules
or regulations as the Commission may prescribe
as necessary or appropriate, to any registered
broker or dealer by or through whom such large
trader directly or indirectly effects
securities transactions, such large trader and
all accounts directly or indirectly maintained
with such broker or dealer by such large trader
in or through which such transactions are
effected.
(2) Recordkeeping and reporting requirements for
brokers and dealers.--Every registered broker or dealer
shall make and keep for prescribed periods such records
as the Commission by rule or regulation prescribes as
necessary or appropriate in the public interest, for
the protection of investors, or otherwise in
furtherance of the purposes of this title, with respect
to securities transactions that equal or exceed the
reporting activity level effected directly or
indirectly by or through such registered broker or
dealer of or for any person that such broker or dealer
knows is a large trader, or any person that such broker
or dealer has reason to know is a large trader on the
basis of transactions in securities effected by or
through such broker or dealer. Such records shall be
available for reporting to the Commission, or any self-
regulatory organization that the Commission shall
designate to receive such reports, on the morning of
the day following the day the transactions were
effected, and shall be reported to the Commission or a
self-regulatory organization designated by the
Commission immediately upon request by the Commission
or such a self-regulatory organization. Such records
and reports shall be in a format and transmitted in a
manner prescribed by the Commission (including, but not
limited to, machine readable form).
(3) Aggregation rules.--The Commission may prescribe
rules or regulations governing the manner in which
transactions and accounts shall be aggregated for the
purpose of this subsection, including aggregation on
the basis of common ownership or control.
(4) Examination of broker and dealer records.--All
records required to be made and kept by registered
brokers and dealers pursuant to this subsection with
respect to transactions effected by large traders are
subject at any time, or from time to time, to such
reasonable periodic, special, or other examinations by
representatives of the Commission as the Commission
deems necessary or appropriate in the public interest,
for the protection of investors, or otherwise in
furtherance of the purposes of this title.
(5) Factors to be considered in commission actions.--
In exercising its authority under this subsection, the
Commission shall take into account--
(A) existing reporting systems;
(B) the costs associated with maintaining
information with respect to transactions
effected by large traders and reporting such
information to the Commission or self-
regulatory organizations; and
(C) the relationship between the United
States and international securities markets.
(6) Exemptions.--The Commission, by rule, regulation,
or order, consistent with the purposes of this title,
may exempt any person or class of persons or any
transaction or class of transactions, either
conditionally or upon specified terms and conditions or
for stated periods, from the operation of this
subsection, and the rules and regulations thereunder.
(7) Authority of commission to limit disclosure of
information.--Notwithstanding any other provision of
law, the Commission shall not be compelled to disclose
any information required to be kept or reported under
this subsection. Nothing in this subsection shall
authorize the Commission to withhold information from
Congress, or prevent the Commission from complying with
a request for information from any other Federal
department or agency requesting information for
purposes within the scope of its jurisdiction, or
complying with an order of a court of the United States
in an action brought by the United States or the
Commission. For purposes of section 552 of title 5,
United States Code, this subsection shall be considered
a statute described in subsection (b)(3)(B) of such
section 552.
(8) Definitions.--For purposes of this subsection--
(A) the term ``large trader'' means every
person who, for his own account or an account
for which he exercises investment discretion,
effects transactions for the purchase or sale
of any publicly traded security or securities
by use of any means or instrumentality of
interstate commerce or of the mails, or of any
facility of a national securities exchange,
directly or indirectly by or through a
registered broker or dealer in an aggregate
amount equal to or in excess of the identifying
activity level;
(B) the term ``publicly traded security''
means any equity security (including an option
on individual equity securities, and an option
on a group or index of such securities) listed,
or admitted to unlisted trading privileges, on
a national securities exchange, or quoted in an
automated interdealer quotation system;
(C) the term ``identifying activity level''
means transactions in publicly traded
securities at or above a level of volume, fair
market value, or exercise value as shall be
fixed from time to time by the Commission by
rule or regulation, specifying the time
interval during which such transactions shall
be aggregated;
(D) the term ``reporting activity level''
means transactions in publicly traded
securities at or above a level of volume, fair
market value, or exercise value as shall be
fixed from time to time by the Commission by
rule, regulation, or order, specifying the time
interval during which such transactions shall
be aggregated; and
(E) the term ``person'' has the meaning given
in section 3(a)(9) of this title and also
includes two or more persons acting as a
partnership, limited partnership, syndicate, or
other group, but does not include a foreign
central bank.
(i) Accuracy of Financial Reports.--Each financial report
that contains financial statements, and that is required to be
prepared in accordance with (or reconciled to) generally
accepted accounting principles under this title and filed with
the Commission shall reflect all material correcting
adjustments that have been identified by a registered public
accounting firm in accordance with generally accepted
accounting principles and the rules and regulations of the
Commission.
(j) Off-Balance Sheet Transactions.--Not later than 180 days
after the date of enactment of the Sarbanes-Oxley Act of 2002,
the Commission shall issue final rules providing that each
annual and quarterly financial report required to be filed with
the Commission shall disclose all material off-balance sheet
transactions, arrangements, obligations (including contingent
obligations), and other relationships of the issuer with
unconsolidated entities or other persons, that may have a
material current or future effect on financial condition,
changes in financial condition, results of operations,
liquidity, capital expenditures, capital resources, or
significant components of revenues or expenses.
(k) Prohibition on Personal Loans to Executives.--
(1) In general.--It shall be unlawful for any issuer
(as defined in section 2 of the Sarbanes-Oxley Act of
2002), directly or indirectly, including through any
subsidiary, to extend or maintain credit, to arrange
for the extension of credit, or to renew an extension
of credit, in the form of a personal loan to or for any
director or executive officer (or equivalent thereof)
of that issuer. An extension of credit maintained by
the issuer on the date of enactment of this subsection
shall not be subject to the provisions of this
subsection, provided that there is no material
modification to any term of any such extension of
credit or any renewal of any such extension of credit
on or after that date of enactment.
(2) Limitation.--Paragraph (1) does not preclude any
home improvement and manufactured home loans (as that
term is defined in section 5 of the Home Owners' Loan
Act (12 U.S.C. 1464)), consumer credit (as defined in
section 103 of the Truth in Lending Act (15 U.S.C.
1602)), or any extension of credit under an open end
credit plan (as defined in section 103 of the Truth in
Lending Act (15 U.S.C. 1602)), or a charge card (as
defined in section 127(c)(4)(e) of the Truth in Lending
Act (15 U.S.C. 1637(c)(4)(e)), or any extension of
credit by a broker or dealer registered under section
15 of this title to an employee of that broker or
dealer to buy, trade, or carry securities, that is
permitted under rules or regulations of the Board of
Governors of the Federal Reserve System pursuant to
section 7 of this title (other than an extension of
credit that would be used to purchase the stock of that
issuer), that is--
(A) made or provided in the ordinary course
of the consumer credit business of such issuer;
(B) of a type that is generally made
available by such issuer to the public; and
(C) made by such issuer on market terms, or
terms that are no more favorable than those
offered by the issuer to the general public for
such extensions of credit.
(3) Rule of construction for certain loans.--
Paragraph (1) does not apply to any loan made or
maintained by an insured depository institution (as
defined in section 3 of the Federal Deposit Insurance
Act (12 U.S.C. 1813)), if the loan is subject to the
insider lending restrictions of section 22(h) of the
Federal Reserve Act (12 U.S.C. 375b).
(l) Real Time Issuer Disclosures.--Each issuer reporting
under section 13(a) or 15(d) shall disclose to the public on a
rapid and current basis such additional information concerning
material changes in the financial condition or operations of
the issuer, in plain English, which may include trend and
qualitative information and graphic presentations, as the
Commission determines, by rule, is necessary or useful for the
protection of investors and in the public interest.
(m) Public Availability of Security-based Swap Transaction
Data.--
(1) In general.--
(A) Definition of real-time public
reporting.--In this paragraph, the term ``real-
time public reporting'' means to report data
relating to a security-based swap transaction,
including price and volume, as soon as
technologically practicable after the time at
which the security-based swap transaction has
been executed.
(B) Purpose.--The purpose of this subsection
is to authorize the Commission to make
security-based swap transaction and pricing
data available to the public in such form and
at such times as the Commission determines
appropriate to enhance price discovery.
(C) General rule.--The Commission is
authorized to provide by rule for the public
availability of security-based swap
transaction, volume, and pricing data as
follows:
(i) With respect to those security-
based swaps that are subject to the
mandatory clearing requirement
described in section 3C(a)(1)
(including those security-based swaps
that are excepted from the requirement
pursuant to section 3C(g)), the
Commission shall require real-time
public reporting for such transactions.
(ii) With respect to those security-
based swaps that are not subject to the
mandatory clearing requirement
described in section 3C(a)(1), but are
cleared at a registered clearing
agency, the Commission shall require
real-time public reporting for such
transactions.
(iii) With respect to security-based
swaps that are not cleared at a
registered clearing agency and which
are reported to a security-based swap
data repository or the Commission under
section 3C(a)(6), the Commission shall
require real-time public reporting for
such transactions, in a manner that
does not disclose the business
transactions and market positions of
any person.
(iv) With respect to security-based
swaps that are determined to be
required to be cleared under section
3C(b) but are not cleared, the
Commission shall require real-time
public reporting for such transactions.
(D) Registered entities and public
reporting.--The Commission may require
registered entities to publicly disseminate the
security-based swap transaction and pricing
data required to be reported under this
paragraph.
(E) Rulemaking required.--With respect to the
rule providing for the public availability of
transaction and pricing data for security-based
swaps described in clauses (i) and (ii) of
subparagraph (C), the rule promulgated by the
Commission shall contain provisions--
(i) to ensure such information does
not identify the participants;
(ii) to specify the criteria for
determining what constitutes a large
notional security-based swap
transaction (block trade) for
particular markets and contracts;
(iii) to specify the appropriate time
delay for reporting large notional
security-based swap transactions (block
trades) to the public; and
(iv) that take into account whether
the public disclosure will materially
reduce market liquidity.
(F) Timeliness of reporting.--Parties to a
security-based swap (including agents of the
parties to a security-based swap) shall be
responsible for reporting security-based swap
transaction information to the appropriate
registered entity in a timely manner as may be
prescribed by the Commission.
(G) Reporting of swaps to registered
security-based swap data repositories.--Each
security-based swap (whether cleared or
uncleared) shall be reported to a registered
security-based swap data repository.
(H) Registration of clearing agencies.--A
clearing agency may register as a security-
based swap data repository.
(2) Semiannual and annual public reporting of
aggregate security-based swap data.--
(A) In general.--In accordance with
subparagraph (B), the Commission shall issue a
written report on a semiannual and annual basis
to make available to the public information
relating to--
(i) the trading and clearing in the
major security-based swap categories;
and
(ii) the market participants and
developments in new products.
(B) Use; consultation.--In preparing a report
under subparagraph (A), the Commission shall--
(i) use information from security-
based swap data repositories and
clearing agencies; and
(ii) consult with the Office of the
Comptroller of the Currency, the Bank
for International Settlements, and such
other regulatory bodies as may be
necessary.
(C) Authority of commission.--The Commission
may, by rule, regulation, or order, delegate
the public reporting responsibilities of the
Commission under this paragraph in accordance
with such terms and conditions as the
Commission determines to be appropriate and in
the public interest.
(n) Security-based Swap Data Repositories.--
(1) Registration requirement.--It shall be unlawful
for any person, unless registered with the Commission,
directly or indirectly, to make use of the mails or any
means or instrumentality of interstate commerce to
perform the functions of a security-based swap data
repository.
(2) Inspection and examination.--Each registered
security-based swap data repository shall be subject to
inspection and examination by any representative of the
Commission.
(3) Compliance with core principles.--
(A) In general.--To be registered, and
maintain registration, as a security-based swap
data repository, the security-based swap data
repository shall comply with--
(i) the requirements and core
principles described in this
subsection; and
(ii) any requirement that the
Commission may impose by rule or
regulation.
(B) Reasonable discretion of security-based
swap data repository.--Unless otherwise
determined by the Commission, by rule or
regulation, a security-based swap data
repository described in subparagraph (A) shall
have reasonable discretion in establishing the
manner in which the security-based swap data
repository complies with the core principles
described in this subsection.
(4) Standard setting.--
(A) Data identification.--
(i) In general.--In accordance with
clause (ii), the Commission shall
prescribe standards that specify the
data elements for each security-based
swap that shall be collected and
maintained by each registered security-
based swap data repository.
(ii) Requirement.--In carrying out
clause (i), the Commission shall
prescribe consistent data element
standards applicable to registered
entities and reporting counterparties.
(B) Data collection and maintenance.--The
Commission shall prescribe data collection and
data maintenance standards for security-based
swap data repositories.
(C) Comparability.--The standards prescribed
by the Commission under this subsection shall
be comparable to the data standards imposed by
the Commission on clearing agencies in
connection with their clearing of security-
based swaps.
(5) Duties.--A security-based swap data repository
shall--
(A) accept data prescribed by the Commission
for each security-based swap under subsection
(b);
(B) confirm with both counterparties to the
security-based swap the accuracy of the data
that was submitted;
(C) maintain the data described in
subparagraph (A) in such form, in such manner,
and for such period as may be required by the
Commission;
(D)(i) provide direct electronic access to
the Commission (or any designee of the
Commission, including another registered
entity); and
(ii) provide the information described in
subparagraph (A) in such form and at such
frequency as the Commission may require to
comply with the public reporting requirements
set forth in subsection (m);
(E) at the direction of the Commission,
establish automated systems for monitoring,
screening, and analyzing security-based swap
data;
(F) maintain the privacy of any and all
security-based swap transaction information
that the security-based swap data repository
receives from a security-based swap dealer,
counterparty, or any other registered entity;
and
(G) on a confidential basis pursuant to
section 24, upon request, and after notifying
the Commission of the request, make available
security-based swap data obtained by the
security-based swap data repository, including
individual counterparty trade and position
data, to--
(i) each appropriate prudential
regulator;
(ii) the Financial Stability
Oversight Council;
(iii) the Commodity Futures Trading
Commission;
(iv) the Department of Justice; and
(v) any other person that the
Commission determines to be
appropriate, including--
(I) foreign financial
supervisors (including foreign
futures authorities);
(II) foreign central banks;
(III) foreign ministries; and
(IV) other foreign
authorities.
(H) Confidentiality agreement.--Before the
security-based swap data repository may share
information with any entity described in
subparagraph (G), the security-based swap data
repository shall receive a written agreement
from each entity stating that the entity shall
abide by the confidentiality requirements
described in section 24 relating to the
information on security-based swap transactions
that is provided.
(6) Designation of chief compliance officer.--
(A) In general.--Each security-based swap
data repository shall designate an individual
to serve as a chief compliance officer.
(B) Duties.--The chief compliance officer
shall--
(i) report directly to the board or
to the senior officer of the security-
based swap data repository;
(ii) review the compliance of the
security-based swap data repository
with respect to the requirements and
core principles described in this
subsection;
(iii) in consultation with the board
of the security-based swap data
repository, a body performing a
function similar to the board of the
security-based swap data repository, or
the senior officer of the security-
based swap data repository, resolve any
conflicts of interest that may arise;
(iv) be responsible for administering
each policy and procedure that is
required to be established pursuant to
this section;
(v) ensure compliance with this title
(including regulations) relating to
agreements, contracts, or transactions,
including each rule prescribed by the
Commission under this section;
(vi) establish procedures for the
remediation of noncompliance issues
identified by the chief compliance
officer through any--
(I) compliance office review;
(II) look-back;
(III) internal or external
audit finding;
(IV) self-reported error; or
(V) validated complaint; and
(vii) establish and follow
appropriate procedures for the
handling, management response,
remediation, retesting, and closing of
noncompliance issues.
(C) Annual reports.--
(i) In general.--In accordance with
rules prescribed by the Commission, the
chief compliance officer shall annually
prepare and sign a report that contains
a description of--
(I) the compliance of the
security-based swap data
repository of the chief
compliance officer with respect
to this title (including
regulations); and
(II) each policy and
procedure of the security-based
swap data repository of the
chief compliance officer
(including the code of ethics
and conflict of interest
policies of the security-based
swap data repository).
(ii) Requirements.--A compliance
report under clause (i) shall--
(I) accompany each
appropriate financial report of
the security-based swap data
repository that is required to
be furnished to the Commission
pursuant to this section; and
(II) include a certification
that, under penalty of law, the
compliance report is accurate
and complete.
(7) Core principles applicable to security-based swap
data repositories.--
(A) Antitrust considerations.--Unless
necessary or appropriate to achieve the
purposes of this title, the swap data
repository shall not--
(i) adopt any rule or take any action
that results in any unreasonable
restraint of trade; or
(ii) impose any material
anticompetitive burden on the trading,
clearing, or reporting of transactions.
(B) Governance arrangements.--Each security-
based swap data repository shall establish
governance arrangements that are transparent--
(i) to fulfill public interest
requirements; and
(ii) to support the objectives of the
Federal Government, owners, and
participants.
(C) Conflicts of interest.--Each security-
based swap data repository shall--
(i) establish and enforce rules to
minimize conflicts of interest in the
decision-making process of the
security-based swap data repository;
and
(ii) establish a process for
resolving any conflicts of interest
described in clause (i).
(D) Additional duties developed by
commission.--
(i) In general.--The Commission may
develop 1 or more additional duties
applicable to security-based swap data
repositories.
(ii) Consideration of evolving
standards.--In developing additional
duties under subparagraph (A), the
Commission may take into consideration
any evolving standard of the United
States or the international community.
(iii) Additional duties for
commission designees.--The Commission
shall establish additional duties for
any registrant described in section
13(m)(2)(C) in order to minimize
conflicts of interest, protect data,
ensure compliance, and guarantee the
safety and security of the security-
based swap data repository.
(8) Required registration for security-based swap
data repositories.--Any person that is required to be
registered as a security-based swap data repository
under this subsection shall register with the
Commission, regardless of whether that person is also
licensed under the Commodity Exchange Act as a swap
data repository.
(9) Rules.--The Commission shall adopt rules
governing persons that are registered under this
subsection.
(o) Beneficial ownership.--For purposes ofthis section and
section 16, a person shall be deemed to acquire
beneficialownership of an equity security based on the purchase
or sale of asecurity-based swap, only to the extent that the
Commission, by rule,determines after consultation with the
prudential regulators and the Secretaryof the Treasury, that
the purchase or sale of the security-based swap, or classof
security-based swap, provides incidents of ownership comparable
to directownership of the equity security, and that it is
necessary to achieve thepurposes of this section that the
purchase or sale of the security-based swaps,or class of
security-based swap, be deemed the acquisition of
beneficialownership of the equitysecurity.
[(p) Disclosures Relating to Conflict Minerals Originating in
the Democratic Republic of the Congo.--
[(1) Regulations.--
[(A) In general.--Not later than 270 days
after the date of the enactment of this
subsection, the Commission shall promulgate
regulations requiring any person described in
paragraph (2) to disclose annually, beginning
with the person's first full fiscal year that
begins after the date of promulgation of such
regulations, whether conflict minerals that are
necessary as described in paragraph (2)(B), in
the year for which such reporting is required,
did originate in the Democratic Republic of the
Congo or an adjoining country and, in cases in
which such conflict minerals did originate in
any such country, submit to the Commission a
report that includes, with respect to the
period covered by the report--
[(i) a description of the measures
taken by the person to exercise due
diligence on the source and chain of
custody of such minerals, which
measures shall include an independent
private sector audit of such report
submitted through the Commission that
is conducted in accordance with
standards established by the
Comptroller General of the United
States, in accordance with rules
promulgated by the Commission, in
consultation with the Secretary of
State; and
[(ii) a description of the products
manufactured or contracted to be
manufactured that are not DRC conflict
free (``DRC conflict free'' is defined
to mean the products that do not
contain minerals that directly or
indirectly finance or benefit armed
groups in the Democratic Republic of
the Congo or an adjoining country), the
entity that conducted the independent
private sector audit in accordance with
clause (i), the facilities used to
process the conflict minerals, the
country of origin of the conflict
minerals, and the efforts to determine
the mine or location of origin with the
greatest possible specificity.
[(B) Certification.--The person submitting a
report under subparagraph (A) shall certify the
audit described in clause (i) of such
subparagraph that is included in such report.
Such a certified audit shall constitute a
critical component of due diligence in
establishing the source and chain of custody of
such minerals.
[(C) Unreliable determination.--If a report
required to be submitted by a person under
subparagraph (A) relies on a determination of
an independent private sector audit, as
described under subparagraph (A)(i), or other
due diligence processes previously determined
by the Commission to be unreliable, the report
shall not satisfy the requirements of the
regulations promulgated under subparagraph
(A)(i).
[(D) DRC conflict free.--For purposes of this
paragraph, a product may be labeled as ``DRC
conflict free'' if the product does not contain
conflict minerals that directly or indirectly
finance or benefit armed groups in the
Democratic Republic of the Congo or an
adjoining country.
[(E) Information available to the public.--
Each person described under paragraph (2) shall
make available to the public on the Internet
website of such person the information
disclosed by such person under subparagraph
(A).
[(2) Person described.--A person is described in this
paragraph if--
[(A) the person is required to file reports
with the Commission pursuant to paragraph
(1)(A); and
[(B) conflict minerals are necessary to the
functionality or production of a product
manufactured by such person.
[(3) Revisions and waivers.--The Commission shall
revise or temporarily waive the requirements described
in paragraph (1) if the President transmits to the
Commission a determination that--
[(A) such revision or waiver is in the
national security interest of the United States
and the President includes the reasons
therefor; and
[(B) establishes a date, not later than 2
years after the initial publication of such
exemption, on which such exemption shall
expire.
[(4) Termination of disclosure requirements.--The
requirements of paragraph (1) shall terminate on the
date on which the President determines and certifies to
the appropriate congressional committees, but in no
case earlier than the date that is one day after the
end of the 5-year period beginning on the date of the
enactment of this subsection, that no armed groups
continue to be directly involved and benefitting from
commercial activity involving conflict minerals.
[(5) Definitions.--For purposes of this subsection,
the terms ``adjoining country'', ``appropriate
congressional committees'', ``armed group'', and
``conflict mineral'' have the meaning given those terms
under section 1502 of the Dodd-Frank Wall Street Reform
and Consumer Protection Act.]
(q) Disclosure of Payments by Resource Extraction Issuers.--
(1) Definitions.--In this subsection--
(A) the term ``commercial development of oil,
natural gas, or minerals'' includes
exploration, extraction, processing, export,
and other significant actions relating to oil,
natural gas, or minerals, or the acquisition of
a license for any such activity, as determined
by the Commission;
(B) the term ``foreign government'' means a
foreign government, a department, agency, or
instrumentality of a foreign government, or a
company owned by a foreign government, as
determined by the Commission;
(C) the term ``payment''--
(i) means a payment that is--
(I) made to further the
commercial development of oil,
natural gas, or minerals; and
(II) not de minimis; and
(ii) includes taxes, royalties, fees
(including license fees), production
entitlements, bonuses, and other
material benefits, that the Commission,
consistent with the guidelines of the
Extractive Industries Transparency
Initiative (to the extent practicable),
determines are part of the commonly
recognized revenue stream for the
commercial development of oil, natural
gas, or minerals;
(D) the term ``resource extraction issuer''
means an issuer that--
(i) is required to file an annual
report with the Commission; and
(ii) engages in the commercial
development of oil, natural gas, or
minerals;
(E) the term ``interactive data format''
means an electronic data format in which pieces
of information are identified using an
interactive data standard; and
(F) the term ``interactive data standard''
means standardized list of electronic tags that
mark information included in the annual report
of a resource extraction issuer.
(2) Disclosure.--
(A) Information required.--Not later than 270
days after the date of enactment of the Dodd-
Frank Wall Street Reform and Consumer
Protection Act, the Commission shall issue
final rules that require each resource
extraction issuer to include in an annual
report of the resource extraction issuer
information relating to any payment made by the
resource extraction issuer, a subsidiary of the
resource extraction issuer, or an entity under
the control of the resource extraction issuer
to a foreign government or the Federal
Government for the purpose of the commercial
development of oil, natural gas, or minerals,
including--
(i) the type and total amount of such
payments made for each project of the
resource extraction issuer relating to
the commercial development of oil,
natural gas, or minerals; and
(ii) the type and total amount of
such payments made to each government.
(B) Consultation in rulemaking.--In issuing
rules under subparagraph (A), the Commission
may consult with any agency or entity that the
Commission determines is relevant.
(C) Interactive data format.--The rules
issued under subparagraph (A) shall require
that the information included in the annual
report of a resource extraction issuer be
submitted in an interactive data format.
(D) Interactive data standard.--
(i) In general.--The rules issued
under subparagraph (A) shall establish
an interactive data standard for the
information included in the annual
report of a resource extraction issuer.
(ii) Electronic tags.--The
interactive data standard shall include
electronic tags that identify, for any
payments made by a resource extraction
issuer to a foreign government or the
Federal Government--
(I) the total amounts of the
payments, by category;
(II) the currency used to
make the payments;
(III) the financial period in
which the payments were made;
(IV) the business segment of
the resource extraction issuer
that made the payments;
(V) the government that
received the payments, and the
country in which the government
is located;
(VI) the project of the
resource extraction issuer to
which the payments relate; and
(VII) such other information
as the Commission may determine
is necessary or appropriate in
the public interest or for the
protection of investors.
(E) International transparency efforts.--To
the extent practicable, the rules issued under
subparagraph (A) shall support the commitment
of the Federal Government to international
transparency promotion efforts relating to the
commercial development of oil, natural gas, or
minerals.
(F) Effective date.--With respect to each
resource extraction issuer, the final rules
issued under subparagraph (A) shall take effect
on the date on which the resource extraction
issuer is required to submit an annual report
relating to the fiscal year of the resource
extraction issuer that ends not earlier than 1
year after the date on which the Commission
issues final rules under subparagraph (A).
(3) Public availability of information.--
(A) In general.--To the extent practicable,
the Commission shall make available online, to
the public, a compilation of the information
required to be submitted under the rules issued
under paragraph (2)(A).
(B) Other information.--Nothing in this
paragraph shall require the Commission to make
available online information other than the
information required to be submitted under the
rules issued under paragraph (2)(A).
(4) Authorization of appropriations.--There are
authorized to be appropriated to the Commission such
sums as may be necessary to carry out this subsection.
(r) Disclosure of Certain Activities Relating to Iran.--
(1) In general.--Each issuer required to file an
annual or quarterly report under subsection (a) shall
disclose in that report the information required by
paragraph (2) if, during the period covered by the
report, the issuer or any affiliate of the issuer--
(A) knowingly engaged in an activity
described in subsection (a) or (b) of section 5
of the Iran Sanctions Act of 1996 (Public Law
104-172; 50 U.S.C. 1701 note);
(B) knowingly engaged in an activity
described in subsection (c)(2) of section 104
of the Comprehensive Iran Sanctions,
Accountability, and Divestment Act of 2010 (22
U.S.C. 8513) or a transaction described in
subsection (d)(1) of that section;
(C) knowingly engaged in an activity
described in section 105A(b)(2) of that Act; or
(D) knowingly conducted any transaction or
dealing with--
(i) any person the property and
interests in property of which are
blocked pursuant to Executive Order No.
13224 (66 Fed. Reg. 49079; relating to
blocking property and prohibiting
transactions with persons who commit,
threaten to commit, or support
terrorism);
(ii) any person the property and
interests in property of which are
blocked pursuant to Executive Order No.
13382 (70 Fed. Reg. 38567; relating to
blocking of property of weapons of mass
destruction proliferators and their
supporters); or
(iii) any person or entity identified
under section 560.304 of title 31, Code
of Federal Regulations (relating to the
definition of the Government of Iran)
without the specific authorization of a
Federal department or agency.
(2) Information required.--If an issuer or an
affiliate of the issuer has engaged in any activity
described in paragraph (1), the issuer shall disclose a
detailed description of each such activity, including--
(A) the nature and extent of the activity;
(B) the gross revenues and net profits, if
any, attributable to the activity; and
(C) whether the issuer or the affiliate of
the issuer (as the case may be) intends to
continue the activity.
(3) Notice of disclosures.--If an issuer reports
under paragraph (1) that the issuer or an affiliate of
the issuer has knowingly engaged in any activity
described in that paragraph, the issuer shall
separately file with the Commission, concurrently with
the annual or quarterly report under subsection (a), a
notice that the disclosure of that activity has been
included in that annual or quarterly report that
identifies the issuer and contains the information
required by paragraph (2).
(4) Public disclosure of information.--Upon receiving
a notice under paragraph (3) that an annual or
quarterly report includes a disclosure of an activity
described in paragraph (1), the Commission shall
promptly--
(A) transmit the report to--
(i) the President;
(ii) the Committee on Foreign Affairs
and the Committee on Financial Services
of the House of Representatives; and
(iii) the Committee on Foreign
Relations and the Committee on Banking,
Housing, and Urban Affairs of the
Senate; and
(B) make the information provided in the
disclosure and the notice available to the
public by posting the information on the
Internet website of the Commission.
(5) Investigations.--Upon receiving a report under
paragraph (4) that includes a disclosure of an activity
described in paragraph (1) (other than an activity
described in subparagraph (D)(iii) of that paragraph),
the President shall--
(A) initiate an investigation into the
possible imposition of sanctions under the Iran
Sanctions Act of 1996 (Public Law 104-172; 50
U.S.C. 1701 note), section 104 or 105A of the
Comprehensive Iran Sanctions, Accountability,
and Divestment Act of 2010, an Executive order
specified in clause (i) or (ii) of paragraph
(1)(D), or any other provision of law relating
to the imposition of sanctions with respect to
Iran, as applicable; and
(B) not later than 180 days after initiating
such an investigation, make a determination
with respect to whether sanctions should be
imposed with respect to the issuer or the
affiliate of the issuer (as the case may be).
(6) Sunset.--The provisions of this subsection shall
terminate on the date that is 30 days after the date on
which the President makes the certification described
in section 401(a) of the Comprehensive Iran Sanctions,
Accountability, and Divestment Act of 2010 (22 U.S.C.
8551(a)).
* * * * * * *
----------
DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Dodd-Frank
Wall Street Reform and Consumer Protection Act''.
(b) Table of Contents.--The table of contents for this Act is
as follows:
Sec. 1. Short title; table of contents.
* * * * * * *
TITLE XV--MISCELLANEOUS PROVISIONS
* * * * * * *
[Sec. 1502. Conflict minerals.]
* * * * * * *
TITLE XV--MISCELLANEOUS PROVISIONS
* * * * * * *
[SEC. 1502. CONFLICT MINERALS.
[(a) Sense of Congress on Exploitation and Trade of Conflict
Minerals Originating in the Democratic Republic of the Congo.--
It is the sense of Congress that the exploitation and trade of
conflict minerals originating in the Democratic Republic of the
Congo is helping to finance conflict characterized by extreme
levels of violence in the eastern Democratic Republic of the
Congo, particularly sexual- and gender-based violence, and
contributing to an emergency humanitarian situation therein,
warranting the provisions of section 13(p) of the Securities
Exchange Act of 1934, as added by subsection (b).
[(b) Disclosure Relating to Conflict Minerals Originating in
the Democratic Republic of the Congo.--Section 13 of the
Securities Exchange Act of 1934 (15 U.S.C. 78m), as amended by
this Act, is amended by adding at the end the following new
subsection:
[``(p) Disclosures Relating to Conflict Minerals Originating
in the Democratic Republic of the Congo.--
[``(1) Regulations.--
[``(A) In general.--Not later than 270 days
after the date of the enactment of this
subsection, the Commission shall promulgate
regulations requiring any person described in
paragraph (2) to disclose annually, beginning
with the person's first full fiscal year that
begins after the date of promulgation of such
regulations, whether conflict minerals that are
necessary as described in paragraph (2)(B), in
the year for which such reporting is required,
did originate in the Democratic Republic of the
Congo or an adjoining country and, in cases in
which such conflict minerals did originate in
any such country, submit to the Commission a
report that includes, with respect to the
period covered by the report--
[``(i) a description of the measures
taken by the person to exercise due
diligence on the source and chain of
custody of such minerals, which
measures shall include an independent
private sector audit of such report
submitted through the Commission that
is conducted in accordance with
standards established by the
Comptroller General of the United
States, in accordance with rules
promulgated by the Commission, in
consultation with the Secretary of
State; and
[``(ii) a description of the products
manufactured or contracted to be
manufactured that are not DRC conflict
free (`DRC conflict free' is defined to
mean the products that do not contain
minerals that directly or indirectly
finance or benefit armed groups in the
Democratic Republic of the Congo or an
adjoining country), the entity that
conducted the independent private
sector audit in accordance with clause
(i), the facilities used to process the
conflict minerals, the country of
origin of the conflict minerals, and
the efforts to determine the mine or
location of origin with the greatest
possible specificity.
[``(B) Certification.--The person submitting
a report under subparagraph (A) shall certify
the audit described in clause (i) of such
subparagraph that is included in such report.
Such a certified audit shall constitute a
critical component of due diligence in
establishing the source and chain of custody of
such minerals.
[``(C) Unreliable determination.--If a report
required to be submitted by a person under
subparagraph (A) relies on a determination of
an independent private sector audit, as
described under subparagraph (A)(i), or other
due diligence processes previously determined
by the Commission to be unreliable, the report
shall not satisfy the requirements of the
regulations promulgated under subparagraph
(A)(i).
[``(D) DRC conflict free.--For purposes of
this paragraph, a product may be labeled as
`DRC conflict free' if the product does not
contain conflict minerals that directly or
indirectly finance or benefit armed groups in
the Democratic Republic of the Congo or an
adjoining country.
[``(E) Information available to the public.--
Each person described under paragraph (2) shall
make available to the public on the Internet
website of such person the information
disclosed by such person under subparagraph
(A).
[``(2) Person described.--A person is described in
this paragraph if--
[``(A) the person is required to file reports
with the Commission pursuant to paragraph
(1)(A); and
[``(B) conflict minerals are necessary to the
functionality or production of a product
manufactured by such person.
[``(3) Revisions and waivers.--The Commission shall
revise or temporarily waive the requirements described
in paragraph (1) if the President transmits to the
Commission a determination that--
[``(A) such revision or waiver is in the
national security interest of the United States
and the President includes the reasons
therefor; and
[``(B) establishes a date, not later than 2
years after the initial publication of such
exemption, on which such exemption shall
expire.
[``(4) Termination of disclosure requirements.--The
requirements of paragraph (1) shall terminate on the
date on which the President determines and certifies to
the appropriate congressional committees, but in no
case earlier than the date that is one day after the
end of the 5-year period beginning on the date of the
enactment of this subsection, that no armed groups
continue to be directly involved and benefitting from
commercial activity involving conflict minerals.
[``(5) Definitions.--For purposes of this subsection,
the terms `adjoining country', `appropriate
congressional committees', `armed group', and `conflict
mineral' have the meaning given those terms under
section 1502 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act.''.
[(c) Strategy and Map to Address Linkages Between Conflict
Minerals and Armed Groups.--
[(1) Strategy.--
[(A) In general.--Not later than 180 days
after the date of the enactment of this Act,
the Secretary of State, in consultation with
the Administrator of the United States Agency
for International Development, shall submit to
the appropriate congressional committees a
strategy to address the linkages between human
rights abuses, armed groups, mining of conflict
minerals, and commercial products.
[(B) Contents.--The strategy required by
subparagraph (A) shall include the following:
[(i) A plan to promote peace and
security in the Democratic Republic of
the Congo by supporting efforts of the
Government of the Democratic Republic
of the Congo, including the Ministry of
Mines and other relevant agencies,
adjoining countries, and the
international community, in particular
the United Nations Group of Experts on
the Democratic Republic of Congo, to--
[(I) monitor and stop
commercial activities involving
the natural resources of the
Democratic Republic of the
Congo that contribute to the
activities of armed groups and
human rights violations in the
Democratic Republic of the
Congo; and
[(II) develop stronger
governance and economic
institutions that can
facilitate and improve
transparency in the cross-
border trade involving the
natural resources of the
Democratic Republic of the
Congo to reduce exploitation by
armed groups and promote local
and regional development.
[(ii) A plan to provide guidance to
commercial entities seeking to exercise
due diligence on and formalize the
origin and chain of custody of conflict
minerals used in their products and on
their suppliers to ensure that conflict
minerals used in the products of such
suppliers do not directly or indirectly
finance armed conflict or result in
labor or human rights violations.
[(iii) A description of punitive
measures that could be taken against
individuals or entities whose
commercial activities are supporting
armed groups and human rights
violations in the Democratic Republic
of the Congo.
[(2) Map.--
[(A) In general.--Not later than 180 days
after the date of the enactment of this Act,
the Secretary of State shall, in accordance
with the recommendation of the United Nations
Group of Experts on the Democratic Republic of
the Congo in their December 2008 report--
[(i) produce a map of mineral-rich
zones, trade routes, and areas under
the control of armed groups in the
Democratic Republic of the Congo and
adjoining countries based on data from
multiple sources, including--
[(I) the United Nations Group
of Experts on the Democratic
Republic of the Congo;
[(II) the Government of the
Democratic Republic of the
Congo, the governments of
adjoining countries, and the
governments of other Member
States of the United Nations;
and
[(III) local and
international nongovernmental
organizations;
[(ii) make such map available to the
public; and
[(iii) provide to the appropriate
congressional committees an explanatory
note describing the sources of
information from which such map is
based and the identification, where
possible, of the armed groups or other
forces in control of the mines
depicted.
[(B) Designation.--The map required under
subparagraph (A) shall be known as the
``Conflict Minerals Map'', and mines located in
areas under the control of armed groups in the
Democratic Republic of the Congo and adjoining
countries, as depicted on such Conflict
Minerals Map, shall be known as ``Conflict Zone
Mines''.
[(C) Updates.--The Secretary of State shall
update the map required under subparagraph (A)
not less frequently than once every 180 days
until the date on which the disclosure
requirements under paragraph (1) of section
13(p) of the Securities Exchange Act of 1934,
as added by subsection (b), terminate in
accordance with the provisions of paragraph (4)
of such section 13(p).
[(D) Publication in federal register.--The
Secretary of State shall add minerals to the
list of minerals in the definition of conflict
minerals under section 1502, as appropriate.
The Secretary shall publish in the Federal
Register notice of intent to declare a mineral
as a conflict mineral included in such
definition not later than one year before such
declaration.
[(d) Reports.--
[(1) Baseline report.--Not later than 1 year after
the date of the enactment of this Act and annually
thereafter through 2020, in 2022, and in 2024, the
Comptroller General of the United States shall submit
to appropriate congressional committees a report that
includes an assessment of the rate of sexual- and
gender-based violence in war-torn areas of the
Democratic Republic of the Congo and adjoining
countries.
[(2) Regular report on effectiveness.--Not later than
2 years after the date of the enactment of this Act and
annually thereafter through 2020, in 2022, and in 2024,
the Comptroller General of the United States shall
submit to the appropriate congressional committees a
report that includes the following:
[(A) An assessment of the effectiveness of
section 13(p) of the Securities Exchange Act of
1934, as added by subsection (b), in promoting
peace and security in the Democratic Republic
of the Congo and adjoining countries.
[(B) A description of issues encountered by
the Securities and Exchange Commission in
carrying out the provisions of such section
13(p).
[(C)(i) A general review of persons described
in clause (ii) and whether information is
publicly available about--
[(I) the use of conflict
minerals by such persons; and
[(II) whether such conflict
minerals originate from the
Democratic Republic of the
Congo or an adjoining country.
[(ii) A person is described in this
clause if--
[(I) the person is not
required to file reports with
the Securities and Exchange
Commission pursuant to section
13(p)(1)(A) of the Securities
Exchange Act of 1934, as added
by subsection (b); and
[(II) conflict minerals are
necessary to the functionality
or production of a product
manufactured by such person.
[(3) Report on private sector auditing.--Not later
than 30 months after the date of the enactment of this
Act, and annually thereafter, the Secretary of Commerce
shall submit to the appropriate congressional
committees a report that includes the following:
[(A) An assessment of the accuracy of the
independent private sector audits and other due
diligence processes described under section
13(p) of the Securities Exchange Act of 1934.
[(B) Recommendations for the processes used
to carry out such audits, including ways to--
[(i) improve the accuracy of such
audits; and
[(ii) establish standards of best
practices.
[(C) A listing of all known conflict mineral
processing facilities worldwide.
[(e) Definitions.--For purposes of this section:
[(1) Adjoining country.--The term ``adjoining
country'', with respect to the Democratic Republic of
the Congo, means a country that shares an
internationally recognized border with the Democratic
Republic of the Congo.
[(2) Appropriate congressional committees.--The term
``appropriate congressional committees'' means--
[(A) the Committee on Appropriations, the
Committee on Foreign Affairs, the Committee on
Ways and Means, and the Committee on Financial
Services of the House of Representatives; and
[(B) the Committee on Appropriations, the
Committee on Foreign Relations, the Committee
on Finance, and the Committee on Banking,
Housing, and Urban Affairs of the Senate.
[(3) Armed group.--The term ``armed group'' means an
armed group that is identified as perpetrators of
serious human rights abuses in the annual Country
Reports on Human Rights Practices under sections 116(d)
and 502B(b) of the Foreign Assistance Act of 1961 (22
U.S.C. 2151n(d) and 2304(b)) relating to the Democratic
Republic of the Congo or an adjoining country.
[(4) Conflict mineral.--The term ``conflict mineral''
means--
[(A) columbite-tantalite (coltan),
cassiterite, gold, wolframite, or their
derivatives; or
[(B) any other mineral or its derivatives
determined by the Secretary of State to be
financing conflict in the Democratic Republic
of the Congo or an adjoining country.
[(5) Under the control of armed groups.--The term
``under the control of armed groups'' means areas
within the Democratic Republic of the Congo or
adjoining countries in which armed groups--
[(A) physically control mines or force labor
of civilians to mine, transport, or sell
conflict minerals;
[(B) tax, extort, or control any part of
trade routes for conflict minerals, including
the entire trade route from a Conflict Zone
Mine to the point of export from the Democratic
Republic of the Congo or an adjoining country;
or
[(C) tax, extort, or control trading
facilities, in whole or in part, including the
point of export from the Democratic Republic of
the Congo or an adjoining country.]
* * * * * * *
MINORITY VIEWS
For decades, the exploitation and trade in conflict
minerals in the Democratic Republic of the Congo (``DRC'') by
armed groups and military units has helped finance conflict in
eastern DRC that is characterized by extreme levels of
violence, mass killings, and horrific sexual violence,
including rape, mutilation, and sexual slavery. Recognizing
that breaking the link between armed groups and illegal mining
profits was essential to broader reform efforts in the DRC, in
2010, Congress adopted Section 1502 of the Dodd Frank Wall
Street Reform and Consumer Protection Act (Dodd-Frank) in order
to help disrupt a major source of revenue for the armed groups
and military units responsible for such atrocities.
Section 1502 requires companies listed on U.S. exchanges
that use ``conflict minerals''' (tin, tungsten, tantalum, and
gold) from the DRC and its nine neighboring countries to carry
out checks on their supply chains--known as due diligence-- to
determine if their purchases are fueling conflict in the DRC,
and to publicly report their findings.
Despite repeated Republican efforts to weaken and eliminate
the conflict minerals rule, Section 1502 has been sustained by
evidence showing that the rule is having a demonstrative,
positive impact on the ground.
In October 2011, the Coordinator of the U.N. Group of
Experts on the DRC wrote to the Securities and Exchange
Commission (SEC) to discuss the findings of the U.N. Group of
Experts over the previous year. He stated that Section 1502
``has had a massive and welcome impact so far, requiring chain
participants all over the world to take due diligence and
conflict financing seriously. This should not and must not be
thrown away or weakened.'' Commenting on the effectiveness of
due diligence efforts, the letter concludes, ``Retreat now will
confuse all players in the market, unfairly and unwisely
diminishing the efforts of those who are implementing due
diligence, and playing into the hands of the cynical and those
with other agendas who have thus far refused to implement due
diligence in the hope that it will simply go away.''
Indeed, the Conflict Mineral Rule in Section 1502 has
spurred intense efforts to operationalize and expand regional,
national, and industry due diligence systems. For example, a
regional mineral certification system and mining validation
program run by the International Conference on the Great Lakes
Region--the regional body comprising twelve African states,
including the DRC--has validated 420 mines as conflict-free in
the eastern DRC as of April 2017. Also, private sector-led
responsible sourcing programs are expanding, such as the ``bag
and tag'' traceability and due diligence program run by the
International Tin Supply Chain Initiative--which expanded its
coverage of mining sites in eastern DRC, with 496 active sites
covered in the first quarter of 2017 compared with 322 in
December 2015.
Understandably, many businesses have seen the benefits of
the Conflict Minerals Rule. KEMET electronics, a leading global
supplier of electronics components, cited Section 1502 and the
corresponding SEC Rule as a reason for its decision to invest
in the DRC and the surrounding region. In his November 2015
testimony before the Subcommittee on Monetary Policy and Trade,
KEMET's CEO said, ``The Dodd-Frank Act has certainly helped
companies like KEMET to again, after decades of absence, be
able to embrace the DRC, allowing us to develop a competitive
and secure supply chain, improving both our competitiveness and
the life of the people in the village.''
Moreover, despite repeated industry claims that
implementation costs would be prohibitive, company compliance
over the past three years paints a different picture. The cost
of conflict minerals reporting requirements have been
substantially lower than expected--in fact, up to 75% less than
the initial SEC estimate, in part because innovative tools and
processes have been developed that streamline compliance, many
of which have been made available to issuers and suppliers at
no cost.
Increased scrutiny of certain mines and mineral trading
routes has created opportunities for transparent and conflict-
free sourcing from eastern DRC, and in some areas, conflict-
free mining is now happening in large volume. For example, the
North Kivu province, the most conflict-mineral-rich province in
the DRC, reported record-high conflict-free export numbers for
both tin and tantalum in 2016.
In its May 2016 report, the UN Group of Experts on the DRC
noted that ``the traceability system for tin, tantalum and
tungsten is becoming increasingly embedded in the country's
mining governance.'' Together, these efforts have opened up
opportunities for `conflict-free' trading from the DRC and have
helped ensure that U.S. and other international companies buy
minerals from the region in a responsible way.
Repealing 1502 now would only serve to fuel the conflict in
and around the DRC by emboldening warlords, increasing the rate
of violence and rape throughout the region, and further
destabilize Central African countries. In a March 13, 2017
letter to the SEC, the Congolese Minister of Mines expressed
the concern of the DRC government that repealing Section 1502
of Dodd-Frank would entail ``a high probability of re-emerging
risks that will jeopardize the DRC stability, and, in turn, the
U.S. security interests,'' including the risk of an upsurge in
the activities of non-State armed groups, as well as a
weakening of policies that promote good business practices of
responsible mineral sourcing.
In February 2017, the International Conference of the Great
Lakes Region--a conference of 12 member states from Sub-Saharan
Africa--released a statement warning that a repeal of section
1502 of Dodd-Frank would contribute to a surge in unrest,
including a ``generalized proliferation of terrorist groups,
trans-boundary money laundering and illicit financial flows''
in the region.
As part of a broader regional and international effort, a
responsible minerals trade will help lay a sustainable
foundation for greater security and economic opportunity in the
DRC region. We believe it is a serious mistake to give up on
efforts that are already showing positive impacts and revert to
a brutal status quo ante. For these reasons we strongly oppose
H.R. 4248.
Maxine Waters.
Michael E. Capuano.
Vicente Gonzalez.
Daniel T. Kildee.
Stephen F. Lynch.
Nydia M. Velazquez.
Joyce Beatty.
Carolyn B. Maloney.
Keith Ellison.
Al Green.
Wm. Lacy Clay.
Ruben J. Kihuen.
[all]
