Conflict Minerals & FCPA Whistleblower Rewards Bill Expected to Pass Congress Soon

The conference version of H.R. 4173¹, as well as the conferees’ Joint Explanatory Statement² contains the following trade-related provisions:

SEC Reporting Requirements for Companies Using “Conflict Minerals”

The conference version of H.R. 4173 contains a more expansive provision on conflict minerals than was passed by the Senate. (The House-passed version did not contain a conflict minerals provision.)

Conflict minerals. Such minerals are defined as columbite-tantalite (coltan), cassiterite, gold, wolframite, or their derivates or any other mineral or its derivatives determined the Secretary of State to be financing conflict in the Democratic Republic of the Congo (DRC) or an adjoining country.

The Secretary of State could add minerals to the list of conflict minerals as appropriate, and would publish an intent to declare a mineral as a conflict mineral in the Federal Register not later than one year before such declaration.

Annual report. The conference version would add a new subsection (p) to 15 USC 78 to require the Securities and Exchange Commission (SEC), not later than 270 days after enactment, to promulgate regulations requiring the annual disclosure to the SEC by all persons otherwise required to file with the SEC, for whom minerals originating in the DRC and adjoining countries are necessary to the functionality or production of a product manufactured by such person. This disclosure would take the form of a report which includes a description of:

Chain of custody. The measures taken to exercise due diligence on the source and chain of custody of such minerals, which shall include an independent private sector audit of such report; and

Description of conflict mineral used. The products manufactured or contracted to be manufactured that are not DRC conflict free, the entity that conducted the independent private sector audit, the facilities used to process the conflict minerals, the country of origin of the conflict minerals, etc. (DRC conflict free is defined as a product that does not contain conflict mineral that directly or indirectly finance or benefit armed groups in the DRC or an adjoining country.) (See bill for complete details on the report’s requirements.)

President could revise, terminate reporting requirements. The SEC would also be required to revise or temporarily waive the reporting requirements described above if the President transmits to the SEC a determination that such revision or waiver is in the national security interest of the U.S. (such a waiver would expire on a date not later than 2 years after the initial publication of such waiver).

In addition, these disclosure requirements would 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 enactment and, that no armed groups continue to be directly involved and benefitting from commercial activity involving conflict minerals.

Internet publication. The information provided in the report would have to be made available to the public on the Internet.

Strategy and map. The conference version would also require the Secretary of State to develop a strategy and map to address linkages between conflict minerals and armed groups, as well as certain reports (baseline and regular reports on the effectiveness of these measures in promoting peace and security in the DRC and adjoining countries), etc.

Whistleblower Rewards for Securities Violations Such as FCPA

The conference version reflects the Senate’s version of a provision to amend the Securities and Exchange Act of 1934 (15 USC 78a et seq.) to add a new section on the payment of whistleblower rewards for certain securities violations, such as the Foreign Corrupt Practices Act (FCPA)³.

This new section states that in any judicial or administrative action, brought by the SEC under the securities laws, such as the FCPA, or related action, that results in monetary sanctions exceeding $1 million, the SEC shall pay an award(s) to one or more whistleblowers who voluntarily provided original information to the SEC that led to the successful enforcement of the action, or related action, in an aggregate amount equal to not less than 10% and not more than 30%, in total, of what has been collected of the monetary sanctions imposed in the action or related actions.

(The House had passed a similar provision which would have made the payment of whistleblower awards optional and would not have set a minimum level for whistleblower awards.)

House Provision to Expand FTC Authority Not Included in Conference Version

The conference version of H.R. 4173 does not contain a provision in the House’s original bill which would have expanded Federal Trade Commission (FTC) authority.

That provision (Section 4901) would have removed checks from FTC rulemaking authority and eliminated current provisions requiring coordination with the Justice Department.

¹Also termed the Conference Report for H.R. 4173.

²The Joint Statement explains the effect of the accompanying conference report.

³The FCPA was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. The FCPA also requires companies whose securities are listed in the U.S. to meet the FCPA’s accounting provisions. These accounting provisions, which were designed to operate in tandem with the anti-bribery provisions of the FCPA, require corporations covered by the accounting provisions to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls.

(See ITT’s Online Archives or 07/01/10 news, 10070127, for previous BP summary on the House passage of the conference version of H.R. 4173.

See ITT’s Online Archives or 06/23/10 news, 10062361, for BP summary of the House- and Senate-passed versions of H.R. 4173.)