Conflict Minerals Rule Update: D.C. Circuit Court Denies Request for Stay

As most readers are likely aware, on April 14, 2014, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) dismissed a variety of challenges to the SEC’s conflict minerals rule, but found unconstitutional the rule’s requirement that issuers report, in a conflict minerals report to be filed with the SEC and posted on the issuer’s publicly available website, that any of their products have “not been found to be ‘DRC conflict free.’” Following the SEC’s partial stay of the aspects of the conflict minerals rule the court found to be unconstitutional,¹ the appellants in the litigation as to the rule’s validity petitioned the D.C. Circuit for an emergency stay of the entire rule. On May 14, 2014, the D.C. Circuit denied the emergency motion without explanation.²

As a result of this development, issuers subject to reporting obligations under the rule should be working on finalizing their Form SDs and any necessary conflict minerals reports. Issuers must file these forms and reports with the SEC by the June 2, 2014 filing deadline. Issuers should prepare their reports in accordance with the guidance provided in the recent statement (Statement) of the Director of the SEC’s Division of Corporation Finance (CorpFin)³ that indicated that the CorpFin staff expects that filed Form SDs and conflict minerals reports will comply with and address those portions of the rule that the D.C. Circuit upheld and that provided guidance on the disclosure to be provided in Form SDs and conflict minerals reports in light of the D.C. Circuit’s April decision.

As the D.C. Circuit’s April decision created many interpretive questions that the Statement did not fully answer, issuers should stay tuned to see if CorpFin issues further disclosure guidance as the filing deadline nears.

_{1. See SEC, Order Issuing Stay In the Matter of Exchange Act Rule 13p-1 and Form SD, Rel. No. 34-72079 (May 2, 2014), available at http:// www .sec.gov/rules/other/2014/34-72079.pdf. Only the requirement that issuers report in a conflict minerals report to be filed with the SEC and posted on the issuer’s publicly available website that any of their products have “not been found to be ‘DRC conflict free’” is stayed. Please see our client alert dated May 2, 2014, SEC Issues Partial Stay of Conflict Minerals Rule.}

_{2. Order, Nat’l Assoc. of Mfrs. v. SEC, No. 13-5252 (D.C. Cir. May 14, 2014).}

_{3. See Keith F. Higgins, Director, SEC Div. of Corp. Fin., Statement on the Effect of the Recent Court of Appeals Decision on the Conflict Minerals Rule (Apr. 29, 2014), available at www.sec.gov/News/PublicStmt/Detail/PublicStmt/1370541681994. Please see our client alert dated May 2, 2014, The Conflict Minerals Rule: Important Recent Developments, for a discussion of the guidance provided in the Statement.}