Two members of the Securities and Exchange Commission want to scrap a controversial “conflict minerals” rule in the aftermath of a successful legal challenge. In a joint statement, Commissioners Michael Piwowar and Daniel Gallagher, the SEC's two appointed Republicans, wrote that: “A full stay is essential because the district court could (and, in our view, should) determine that the entire rule is invalid.”

The rule, stemming from the Dodd-Frank Act, imposes reporting requirements upon companies that may use minerals mind in the Democratic Republic of the Congo, and the surrounding region, that may help finance violent militias. Those first reports are due on June 2.

The rule was challenged by the National Association of Manufacturers and U.S. Chamber of Commerce and on April 14, 2014, the D.C. Circuit decided that requiring issuers to describe certain of their products as not DRC conflict free violated the First Amendment. The court remanded the case to the district court to determine how much of the rule is therefore unconstitutional.

“We believe that the entirety of the rule should be stayed, and no further regulatory obligations should be imposed, pending the outcome of this litigation,” Piwowar and Gallagher wrote. “Indeed, a stay should have been granted when the litigation commenced in 2012.”

Among their statements:

“First, the First Amendment concerns permeate all the required disclosures, not just the listing of products that have not been determined to be DRC conflict free… A limited modification to our rule eliminating the requirement to declare certain products as ‘not DRC conflict free' would fail to fully address the First Amendment violation. For example, the fact that an issuer would still be required to include a description of its due diligence procedures in its reports would suggest that the issuer may have “blood on its hands” for its products since it is sourcing certain minerals from the DRC.”

“Even assuming that the due diligence disclosures standing alone do not implicate First Amendment concerns, we believe that the ‘name and shame' approach is at the heart of not only the Commission's rule, but of Section 1502 of the Dodd-Frank Act itself. The disclosures about the due diligence process are not themselves sufficient to achieve the benefits that Congress sought to advance. Rather, it is the listing of products—the apotheosis of the diligence process—that is central to the rule. Thus, disclosures about the due diligence process should not be seen as severable from the unconstitutional scarlet letter of not DRC conflict free.”

“Marching ahead with some portion of the rule that might ultimately be invalidated is a waste of the Commission's time and resources—far too much of which have been spent on this rule already—and a waste of vast sums of shareholder money. A full stay of the effective and compliance dates of the conflict minerals rule would not fix the damage this rule has already caused, but it would at least stanch some of the bleeding.”

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