SEC Provides Interpretive Guidance on Conflict Minerals Reporting

On April 29, 2014, the SEC’s Division of Corporation Finance issued interpretive guidance on the conflict minerals rules in response to the April 14, 2014 ruling of the U.S. Court of Appeals for the District of Columbia. The ruling, which largely upheld the conflict minerals rules, concluded that the requirement that public companies report to the SEC and the public whether any of their products are “DRC conflict free,” or have “not been found to be ‘DRC conflict free,’” violates the First Amendment right to free speech. The ruling created uncertainty regarding the reporting requirements for public companies, whose first reports on Form SD are due by June 2, 2014. The full text of the SEC’s guidance is available here.

Consistent with the Court’s ruling, the guidance advises that companies are still required to file a Form SD and any required Conflict Minerals Report pursuant to Exchange Act Rule 13p-1 on or before the due date of June 2, 2014.

With the exception of disclosing whether their products are “DRC conflict free,” the Form SD “should comply with and address those portions of Rule 13p-1 and Form SD that the Court upheld.” Pursuant to the guidance:

  • Most significantly, no company is required to describe its products as “DRC conflict free,” having “not been found to be ‘DRC conflict free,’” or “DRC conflict undeterminable;”
  • Companies that do not need to file a Conflict Minerals Report should disclose their reasonable country of origin inquiry and briefly describe the inquiry they undertook;
  • Companies that are required to file a Conflict Minerals Report should include a description of the due diligence that the company undertook and should disclose 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, if the company has products that fall within the scope of Items 1.01(c)(2) or 1.01(c)(2)(i) of Form SD; and
  • An independent private sector audit will not be required unless a company voluntarily elects to describe a product as “DRC conflict free” in its Conflict Minerals Report.

The Division noted that it would consider whether to provide additional guidance prior to June 2, 2014, but that companies could contact the Office of Rulemaking in the Division of Corporation Finance at (202) 551-3430 with any questions about conflict minerals reporting.

Topics:  Conflict Mineral Rules, First Amendment, Reporting Requirements, SEC

Published In: General Business Updates, Constitutional Law 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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