On April 29, Keith Higgins, the Director of the Securities and Exchange Commission’s Division of Corporation Finance, issued a public statement offering guidance on companies’ compliance with the conflict minerals rule in light of the recent decision by the US Court of Appeals for the District of Columbia Circuit. As discussed previously in the Corporate and Financial Weekly Digest edition of April 18, 2014, on April 14 the US Court of Appeals for the District of Columbia Circuit issued an opinion which reversed, in part, the prior decision of the US District Court for the District of Columbia that had upheld the conflict minerals rule and remanded the case back to the District Court for further proceedings. Specifically, the court found that, to the extent that the conflict minerals rule requires a company to disclose that any of its products “have not been found to be ‘DRC conflict free,’” such portion of the rule violates the First Amendment’s prohibition against compelled speech. The court’s decision raised significant questions about compliance with the conflict minerals rule, and there was speculation that the SEC might voluntarily stay the application of the rule until the courts reach a final decision.In the statement released by Mr. Higgins, he advised companies that they are expected to file any reports required by the conflict minerals rule on or before the scheduled due date and comply with those portions of the rule that were upheld by the court. A company is not, however, required to characterize its products as “DRC conflict free,” having “not been found to be ‘DRC conflict free,’” or “DRC conflict undeterminable.” Although no longer required to do so, a company may voluntarily elect to label a product as “DRC conflict free” in its conflict minerals report, provided that the company has obtained an independent private sector audit as required by the rule.
The public statement is available here.