A federal appeals court this week denied an emergency request by business groups to delay the June 2 deadline requiring companies to file a conflict-minerals disclosure report (Form SD) if their products contain minerals from conflict-ridden Democratic Republic of Congo (DRC).
This comes on the heels of an April decision by the U.S. Court of Appeals for the District of Columbia Circuit that limits some of the requirements of the conflict minerals rule on First Amendment grounds.
In National Association of Manufacturers, et al. v. SEC, et al., three business groups challenged the conflict minerals rule, claiming it violates their free speech rights by essentially forcing them to condemn their own products.
While the court left the majority of the Securities and Exchange Commission’s (SEC) rule untouched, it did strike down parts of the regulation — mandated by the Dodd-Frank Act — that require publicly traded companies to disclose to investors whether their products contain any tantalum, tin, gold or tungsten from mines in war-torn DRC.
Pursuant to the court's ruling, no company is required to describe its products in its disclosures to the SEC — or on its website — as "DRC conflict free," having "not been found to be 'DRC conflict free'" or "DRC conflict undeterminable."
The court's April 14, 2014 decision has no impact on whether or not issuers are obligated to conduct due diligence, a reasonable country of origin inquiry or file a Form SD or Conflict Minerals Report (CMR). Thus, companies that are not required to file a CMR should disclose and briefly describe their reasonable country of origin inquiry. For those companies required to file a CMR, the report should include a description of the due diligence conducted.
It should be noted that if a company voluntarily elects to describe any of its products as "DRC conflict free" in its CMR, it must obtain an Independent Private Sector Audit (IPSA), as required by the rule.
Many companies — even those not required to report conflict minerals under Dodd-Frank — are opting to stay their original course of action. Regardless of the court ruling, there is overwhelming public opinion in favor of transparency and ethical sourcing of products.
Companies should review the updated guidance prior to the June 2 deadline.