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WASHINGTON (Reuters) – Thousands of companies could be forced to reveal the source of metals and ores they use under a proposed U.S. rule aimed at cutting the flow of money to armed rebels in the Democratic Republic of Congo.

The U.S. Securities and Exchange Commission proposed on Wednesday that companies annually reveal whether they are sourcing tantalum, tin, gold and tungsten from the war-torn region.

That means companies such as Hewlett-Packard and Research in Motion Ltd, which rely on the metals to make their electronic gadgets and laptops, could be subject to the new rule. The SEC estimates 6,000 companies could be affected.

"The idea is to cut off funding for the armed rebels in the Democratic Republic of Congo who are getting money from the sale of these minerals to fund these activities," said Darren Fenwick, a senior manager at Enough Project, an organization aimed at ending genocide and crimes against humanity.

"It is going to create transparency in the supply chain process. It will force consumers to make a choice," he said.

Much of Congo's metals and ores come from its troubled east, where fighting between government forces and rebel groups has displaced more than 1.4 million people.

The SEC rule is required by the Dodd-Frank legislation that was enacted in July to reform Wall Street and chiefly aimed at plugging regulatory gaps after the worst financial crisis since the Great Depression.

The "conflict mineral" provision was put into the bill by a number of senators, including Dick Durbin, who has said he witnessed first-hand atrocities of horrific and inhumane proportions.

Under the SEC's proposal, a company would have to disclose the source of the conflict mineral if that mineral is needed to make the product work. Likewise, a company would be subject to the rule if it contracts a manufacturer that uses the mineral for the product.

The electronics industry relies on tantalum for its ability to store and release an electrical charge and is used in power-storing processes in devices like smart phones and laptop computers.

SEC commissioners had no comment on the proposal and voted unanimously to seek public input, due by the end of January.

The SEC also unanimously voted to require mining companies to disclose mine safety information and proposed rules that would force companies to disclose payments to government in developing oil, natural gas or minerals.

The types of payments required to be disclosed include royalties, bonuses and taxes.

DERIVATIVE RULE EXEMPTION

At the same meeting, the SEC largely followed the chief U.S. futures regulator's proposal to exempt certain companies from new derivatives rules.

So-called "end users," companies such as Ford Motor Co that use derivatives to manage their risk, are trying to make sure that they will not have to set aside extra capital in order to use the financial instruments.

Under the SEC and Commodity Futures Trading Commission's plan, an end-user would be exempt if the deal is not speculative and one side of the trade is a nonfinancial entity.

The company would need to prove to regulators that it had the financial support needed for the derivative deal such as written third-party guarantee or credit line.

Regulators won new powers to police the estimated $600 trillion over-the-counter derivatives market under Dodd-Frank after insurer AIG's pile of risky credit swaps unsettled financial markets. The SEC will police about a tenth of the market, while the CFTC will supervise the rest.

The exemptions would apply deal by deal and not be a blanket exemption for a company. The SEC sought comment on whether additional exemptions were needed for small banks, savings associations, farm credit system institutions and credit unions with total assets under $10 billion.

Most derivatives, private contracts between two parties, will be forced onto trading venues and through clearinghouses. The trading venues, also known as swap execution facilities, will help make the market more transparent. The clearinghouses are expected to help mitigate risk if one party defaults.

(Reporting by Rachelle Younglai; Editing by Richard Chang, Dave Zimmerman and Tim Dobbyn)

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WASHINGTON – Federal regulators on Wednesday proposed new reporting requirements for public companies that operate mines, pull oil or gas out of the ground or use certain minerals from Africa in their products.

The Securities and Exchange Commission voted to propose the new rules under the financial overhaul law enacted in July. The regulators' goal is to make companies engaged in potentially controversial activities more accountable about them to shareholders.

In the case of companies that use so-called "conflict" minerals from Congo and neighboring countries in electronics and other products, the idea is that stricter reporting requirements would help curb the widespread violence in Congo, where minerals are produced in mines controlled by rebel groups. The goal is to cut off funds to the rebels.

Public companies that operate mines would be required to provide information in periodic SEC reports on health and safety violations as well as any notices from the U.S. Labor Department indicating that a mine has a pattern of violating health or safety standards.

Companies that produce oil, natural gas or minerals would be required to detail in an annual report all payments related to commercial development that were made to the U.S. or a foreign government. They would include taxes, royalties and licensing fees.

The information would have to be provided in an interactive data format, with electronic tags.

An increasing number of companies have been charged by the SEC and the Justice Department in recent years with violating the Foreign Corrupt Practices Act, which prohibits bribery of foreign government officials or company executives to secure or retain business.

And companies that use "conflict" minerals from the Congo and neighboring countries in their products would have to file each year a report including a description of the research the company did to trace the minerals back to their sources. Descriptions of the manufactured products and the factories that processed the minerals would have to be included.

Conflict minerals are defined as gold, cassiterite, wolframite and columbite-tantalite, also called coltan. Cassiterite and coltan are used to make cell phones, computers and other electronics. Wolframite is used in metal seals and other components.

The United Nations has imposed sanctions on armed rebel groups in Congo, who are accused of committing widespread rape, murder and other violence in the course of their illicit minerals trafficking.

"Congress was concerned that the exploitation and trade of conflict minerals originating in (Congo) is helping to finance conflict that is characterized by extreme levels of violence, particularly sexual- and gender-based violence, and is contributing to an emergency humanitarian situation," SEC Chairman Mary Schapiro said before the vote.

The SEC opened the proposed rules to public comment until Jan. 31. They could be formally adopted sometime after that possibly with changes.

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