On August 22, 2012, the US Securities and Exchange Commission (“SEC”) adopted final rules requiring all issuers that file reports with the SEC to disclose supply chain and sourcing information on several minerals and metals, termed “conflict minerals”, contained in products that the issuers manufacture or contract to manufacture in each calendar year, beginning on January 1, 2013. This information must be disclosed in a new Form SD filed no later than May 31 of the following year. On the same date, the SEC also adopted final rules requiring resource extraction issuers to disclose information relating to their payments made to a foreign government or the US Federal Government on or after October 1, 2013 for the purpose of the commercial development of oil, natural gas or minerals. Disclosures of government payments must be filed with the SEC on Form SD within 150 days of an issuer’s fiscal year-end (i.e., before May 31 for calendar year reporting companies). Both of these new SEC rules apply broadly and include domestic companies and foreign private issuers (including smaller reporting companies).
The SEC estimates that the rules regarding conflict minerals will apply to approximately 6,000 issuers out of approximately 14,600 total issuers. Further, the SEC has estimated an initial cost of US$3 billion to US$4 billion to implement the conflict minerals rules and an annual ongoing cost of US$207 million to US$609 million. This amounts to an average of US$500,000 per affected issuer in the first year alone. In contrast, a number of years ago when the SEC adopted internal controls reporting requirements, it estimated implementation costs of only US$91,000 per issuer.4 Companies that believe they have no connection with “conflict minerals” may well find that the new rules apply to them.
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