Beveridge & Diamond
 

SEC Directs Issuers to Comply with Parts of the Conflict Minerals Rule

Beveridge & Diamond, P.C., April 30, 2014

On April 29, 2014, the Securities and Exchange Commission (“SEC”) issued a statement directing issuers to file any reports required under Rule 13p-1 on or before the June 2, 2014 deadline based on those parts of the Conflict Minerals Rule that were upheld by the D.C. Circuit.  The statement was issued notwithstanding a Joint Statement issued by two of the five SEC Commissioners urging a complete stay of the Rule pending the final outcome of the litigation and a motion to stay the Rule filed with the SEC by industry parties (National Association of Manufacturers, U.S. Chamber of Commerce, and Business Roundtable).  Perhaps most notably, the SEC’s April 29 statement clarifies that issuers are not required to describe any products as “DRC conflict undeterminable,” an issue that was not expressly addressed in the D.C. Circuit’s decision.

The full statement is available here.

Key Implications for Issuers

  • The SEC expects issuers to file on or before the June 2, 2014 deadline.
  • No issuer is required to describe its products as “DRC conflict free,” having “not been found to be ‘DRC conflict free,’” or “DRC conflict undeterminable.”
  • If an issuer voluntarily elects to describe any of its products as “DRC conflict free” in its Conflict Minerals Report, it must obtain an independent private sector audit (“IPSA”) as required by the Rule.  Otherwise, an IPSA will not be required.
  • If an issuer has products that fall within the scope of Items 1.01(c)(2) or 1.01(c)(2)(i) of Form SD (i.e., products that would have been described as “DRC conflict undeterminable” or “not found to be ‘DRC conflict free’”), the issuer must still disclose for those products:
    • the facilities used to process the conflict minerals;
    • the country of origin of the minerals; and
    • the efforts to determine the mine or location of origin.

Next Steps

Because the earliest date on which the D.C. Circuit Court’s mandate could issue is June 5, 2014, several days after the filing deadline, it is unlikely that the pending litigation will further impact any reporting requirements before the deadline.  Similarly, both recent congressional testimony from SEC Chair Mary Jo White indicating that the SEC intends to continue implementation of the rule, as well as the SEC’s issuance of the April 29 statement, suggests that the Commission is unlikely to grant a discretionary stay of the Rule’s requirements in response to the motion filed by the industry petitioners.  Issuers should therefore review their reports in light of the new clarifications from the SEC regarding product descriptions and should prepare to file these reports on time.

The April 29 statement indicated that the SEC Division of Corporate Finance will consider the need to provide additional guidance in advance of the filing due date.

For a summary of the D.C. Circuit Court’s ruling in April, click here.

For More Information

Beveridge & Diamond’s global supply chains practice provides strategic counseling and compliance advice on environmental requirements across the full life-cycle of products, including the sourcing of raw materials such as conflict minerals. The Firm regularly advises clients on the investigation and disclosure requirements under the U.S. Securities and Exchange Commission’s Conflict Minerals Rule. If you have questions or need additional information on the developments highlighted in this update, please contact Paul Hagen (202-789-6022, phagen@bdlaw.com), Russell LaMotte (202-789-6080, rlamotte@bdlaw.com) or Lauren Hopkins (415-262-4013, lhopkins@bdlaw.com). 

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