What you need to know:

Public companies are required to submit their conflict minerals filings by June 2nd.  SEC guidance issued after a recent federal appeals court decision has effectively eliminated the characterizations of products and the audit requirement, but it did not eliminate the need to file for those companies subject to the rule.

What you need to do:

With less than a month to go until the filing deadline, companies should be well along in the drafting process to allow time for double checking compliance, finalizing internal approvals, and avoiding logistical issues that could arise as a large volume of companies file during the final days.

June 2nd is the deadline for public companies to file an initial Form SD and, if required, a Conflict Minerals Report with the SEC pursuant to Rule 13p-1 under the Securities Exchange Act of 1934, which was promulgated by the SEC as required by the “conflict minerals” provisions of the Dodd-Frank Act.  Recently, a federal appeals court overturned a portion of the rule, and there have been subsequent statements by the SEC regarding the court decision and the current status of the conflict minerals filing requirements. 

With the deadline fast approaching, companies will need to address a number of issues to ensure compliance.  Below is a list of tips to consider in preparing for the first filing of a Form SD and/or Conflict Minerals Report:

  • You still need to file.  The recent court decision and related SEC guidance do not change the fact that companies will still need to file a Form SD no later than June 2nd if the conflict minerals rules apply to them.  However, as a result of the court decision and related SEC guidance, companies will not be required to characterize their products using the SEC rule’s categories – “DRC conflict free,” “not to have been found to be DRC conflict free” or “DRC conflict undeterminable.”  Also, an independent private sector audit will be required only if a company voluntarily describes a product as “DRC conflict free.”
  • Drafting the Conflict Minerals Report (as opposed to the Form SD) may be a logical starting point.  For many companies, most of the substantive disclosure will be located in the Conflict Minerals Report, and, to the extent disclosure is required in the body of the Form SD itself in addition to the Conflict Minerals Report, you may choose to incorporate by reference from the Conflict Minerals Report.
  • In describing your“reasonable country of origin inquiry,”there is no “one size fits all” approach.  You should consider including disclosure about the method used to contact your suppliers, the number and percentage of suppliers contacted and responding, the nature of the information received and what, if any, follow-up you pursued with responders and non-responders. 
  • The SEC has indicated that companies have latitude in the level of detail they provide about products in Conflict Minerals Reports.  You can describe products based on your own facts and circumstances, such as using categories commonly understood in your industry, and you do not have to include such details as product or model numbers.
  • In addition to describing your products in the Conflict Minerals Report, you are also required to describe the facilities used to process the minerals and the country of origin of the minerals, if those facts are known.  In instances where companies do not have adequate information to provide these descriptions, they should consider saying so and providing a brief explanation of why.
  • Consider including “safe harbor” language, particularly if you elect to include any forward-looking statements, such as future plans to adopt a conflict minerals policy, implement contractual provisions, implement practices designed to improve supply chain information rights and make changes to your sourcing strategy for suppliers.
  • Be sure to allow sufficient time for any internal approvals (e.g., Disclosure Committee, Audit Committee) that may be required by your internal disclosure controls and procedures. 
  • Prepare to post your Conflict Minerals Report on your website as required by Form SD.  The rule does not require a specific location for the posting, and practice will vary.  You could consider posting the report on your investor relations page, in your corporate governance area or with your sustainability report.
  • It is expected that a large number of public companies will be making these filings in the final days before the deadline.  As such, you should ensure filing logistics (e.g., providing documents to financial printers) are taken care of a few days in advance of the deadline.
  • Consider adopting a policy or making other changes to your processes (e.g., increased communications with suppliers, utilizing a due diligence framework) and describe such actions in the process improvements section of next year’s Conflict Minerals Report.

 

Topics:  Conflict Mineral Rules, Dodd-Frank, Filing Deadlines, Filing Requirements, Form SD, SEC, Securities Exchange Act

Published In: General Business Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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