March 29, 2020

March 29, 2020

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Securities and Exchange Commission (SEC) Directs Issuers to Comply with Parts of the Conflict Minerals Rule

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.

© 2020 Beveridge & Diamond PC


About this Author

Paul E. Hagen, Environmental Attorney, Beveridge Diamond Law Firm

Paul Hagen practices in the areas of U.S. and international environmental law. He counsels leading multinational corporations and trade associations on environmental compliance and market access requirements related to product design, supply chain management, and resource protection measures in the U.S. and in key markets worldwide. He also advises clients on the negotiation and implementation of regional and global environmental agreements, with a particular emphasis on treaties and related legislation impacting the chemicals, electronics, and pharmaceuticals sectors.

Lauren A. Hopkins, Environmental Attorney, Beveridge Diamond Law Firm

Lauren’s practice focuses primarily on global product stewardship, supply chain due diligence, and environmental advertising and marketing.

In particular, Lauren is well-versed in reporting requirements related to the use of conflict minerals in electronics, medical devices, and other consumer products.  She advises on issues including interpretation and implementation of the U.S. Securities and Exchange Commission’s conflict minerals rule, supply chain due diligence, and the preparation of conflict minerals disclosures.  She also assists clients with supplier outreach and engagement and coordination with industry groups on conflict minerals requirements.

K. Russell LaMotte, Environmental Law Attorney, Beveridge Diamond Law Firm

Mr. LaMotte helps multinational companies navigate international environmental regulatory regimes and multi-jurisdictional product compliance regulatory matters.  He served for over ten years as an international lawyer at the U.S. Department of State, representing the U.S. Government in designing, negotiating or implementing most of the major multilateral environmental and oceans agreements.  He also served as a clerk for the Hon. Judith Rogers, U.S. Court of Appeals for the D.C. Circuit.