D.C. Circuit Refuses to Stay SEC's Conflict Mineral Deadline: Deadline to File Still Set for June 2

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On May 14, 2014, the D.C. Court of Appeals rejected an emergency motion by business groups to delay the June 2, 2014 due date for companies to file disclosures about their use of certain minerals tied to armed factions in war-ridden Democratic Republic of the Congo (“DRC”) and neighboring countries. This requirement, proposed by the Securities and Exchange Commission (“SEC”) in 2012 under the Dodd-Frank Act, requires companies to investigate whether they use such “conflict minerals,” including gold, tin, tantalum, and tungsten, in their products and to issue public reports identifying their findings.

The motion to stay the rule, filed on April 29, 2014 by the National Association of Manufacturers, Business Roundtable, and the U.S. Chamber of Commerce (the “Appellants”), asked the Court to stay the rule or at least the filing deadline following the Court’s April 14, 2014 decision in which the Court found that the rule unconstitutionally compelled speech in requiring companies to disclose to the SEC and on their website that their products are not “DRC conflict free.” The rest of the rule was upheld.

Following the Court’s decision, Keith Higgins, director of the SEC’s Division of Corporation Finance, issued a statement saying that companies will still need to file their first reports by the June 2 due date and address those portions of the rule that the court upheld. In this regard, Mr. Higgins noted that while companies would not be required to identify their products as “DRC conflict-free,” “DRC conflict undeterminable” or “not found to be ‘DRC conflict free,’” they should disclose, for those products, “the facilities used to produce the conflict minerals, the country of origin of the minerals and the efforts to determine the mine or location of origin.”

In an emergency motion to stay the rule, the Appellants argued that the unconstitutional portion of the rule cannot be severed from the rest of the rule, stating, “The rule’s compelled confessions, which have been declared unconstitutional, constitute the entire basis for the rule, imposing astronomical costs on affected companies.” As such, the Appellants asserted that a stay would avoid “forcing companies to implement interim procedures for filing truncated reports under unilateral staff guidance that is subject to change at any time.”

In a brief per curiam order that did not detail its reasoning, the Court rejected the Appellants’ arguments and denied the emergency motion to stay. As a result, public companies that manufacture (or contract to manufacture) products containing conflict minerals that are necessary to a product’s functionality or production processes are still required to file a Form SD “Specialized Disclosure Report” and, in certain circumstances a Conflict Minerals Report, by the June 2nd deadline.

Topics:  Conflict Mineral Rules, Deadlines, Manufacturers, NAM, SEC

Published In: Administrative Agency Updates, International Trade 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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