Following on the heels of Commissioners’ Gallagher and Piwowar’s joint statement calling for a stay of the conflict mineral rules pending final outcome of the National Association of Manufacturers legal challenge, Keith Higgins, Director of Corporation Finance, issued his own statement yesterday clarifying CorpFin’s position in light of the D.C. Circuit Court of Appeals recent ruling on the matter. In relevant part:
[T]he Division expects companies to file any reports required under Rule 13p-1 on or before the due date. The Form SD, and any related Conflict Minerals Report, should comply with and address those portions of Rule 13p-1 and Form SD that the Court upheld. Thus, 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. For those companies that are required to file a Conflict Minerals Report, the report should include a description of the due diligence that the company undertook. 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, it would not have to identify the products as “DRC conflict undeterminable” or “not found to be ‘DRC conflict free,”‘ but should disclose, for those products, 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.
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.” If a company voluntarily elects to describe any of its products as “DRC conflict free” in its Conflict Minerals Report, it would be permitted to do so provided it had obtained an independent private sector audit (IPSA) as required by the rule.* Pending further action, an IPSA will not be required unless a company voluntarily elects to describe a product as “DRC conflict free” in its Conflict Minerals Report.
*footnote omitted.
Update: May 5, 2014
On Friday the Commission issued an order formally staying those portions of Rule 13p-1 and Form SD which would require an issuer to disclose that any of its products have “not been found to be DRC conflict free”.
As a procedural matter, the Court of Appeals’ decision which found those portions Rule 13p-1 and Form SD to be in violation of an issuer’s First Amendment rights will not take effect until three days after the rule’s June 2, 2014 filing deadline. As such the Commission is staying those portions of the rule to avoid “the risk of First Amendment harm pending further proceedings”.
The Commission’s order, in a footnote, also denies the National Association of Manufacturers, et al., motion requesting a stay of the entire conflict mineral rule.
Update: May 6, 2014 May 7, 2014
The National Association of Manufacturers, U.S. Chamber of Commerce and Business Roundtable have filed an emergency motion in the U.S. Court of Appeals for the D.C. Circuit seeking a temporary stay of the entire conflict mineral rule until such time as the district court issues a decision on that portion of the related case which was remanded for further proceedings.
The requested return date is May 26, 2014 (one week prior to the conflict mineral rule’s filing deadline).
On May 7, 2014, the motion was granted. The SEC’s response brief is due on Friday and any reply by the National Association of Manufacturers by next Tuesday.
