On Wednesday, the Securities and Exchange Commission (SEC) adopted a little-known section (and there are many) of the Dodd–Frank financial regulation bill that will end up doing the most harm to the people in the Congo that it purports to help.

The Wall Street Reform and Consumer Protection Act, Title XV, Section 1502, requires private companies (of any size) to disclose whether any “conflict minerals” that are necessary to the functionality or production of a product have “originated in the Democratic Republic of the Congo or an adjoining country.” The law imposes what seem to be onerous and expensive due diligence reporting requirements on those private companies, including the establishment of a “chain of custody of those minerals” that must be independently audited.

Gee, that sounds simple, right? Not really.

As The Wall Street Journal opined in July, this “conflict minerals” provision is a case study of “regulatory mission creep.” Where have we heard that before? Actually, it turns out that a great many efforts by do-gooders and nanny-state scolds seeking to impose Corporate Social Responsibility (CSR) on the world’s “greedy” private sector end up with similarly negative outcomes. Good for bureaucrats, nongovernmental organizations (NGOs), and other enablers. Bad for real people.

Now that the rule has been adopted, it could end up benefitting foreign competitors of U.S. companies. And Section 1502 will have a negative impact on investments in mining for minerals throughout Africa, while sending a chilling signal to potential investors that similar rules could be imposed on other countries in the future.

Before the rule was adopted yesterday by the SEC, its advocates pushed hard for support from high-tech users of rare earth and precious metals, such as computer manufacturers and automakers. But even some center-left NGOs that can normally be counted on to support many such intrusive CSR measures (such as the Center for Global Development) are seeing that Section 1502 may be well intentioned but is going about it all wrong, noting that it will do “little to improve the security situation or the daily lives of most Congolese.”

Section 1502 was adopted despite a report last year by the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness that noted the SEC’s initial estimated “cost of implementation would be approximately $71 million, an amount calculated without reference to competitive burdens or compliance costs that would be borne by upstream companies not directly covered by the rule, but whose products are used by companies that would be subject to the rule.”

Indeed, the SEC revised those figures upward this week, saying on Wednesday that “it would cost companies a total of $3 billion to $4 billion upfront, plus more than $200 million a year.”

While some large retailers (Wal-Mart, Target) won exemption from the rule, the problems with Section 1502 remain. This sort of over-regulation decreases competitiveness and creates barriers to entry—hurting smaller companies with more limited resources.

As the WSJ noted, the SEC has “badly underestimated the compliance costs for some small businesses,” with the actual cost to business ranging from $9 billion to $16 billion.

Research Assistant Ryan Olson of Heritage’s Center for International Trade and Economics assisted in preparing this report.