The SEC has amended its conflict minerals reporting requirements after an appeals court struck down part of the rule.
Under the conflict minerals rule, issuers are required to attempt to determine whether the gold, tantalum, tin, and tungsten used in their products originated in mines operated by warlords in the Democratic Republic of the Congo (DRC) or its neighboring countries. Issuers also are required to report on their efforts to determine the origin of the minerals.
The U.S. Court of Appeals for the District of Columbia Circuit issued a decision on April 14 striking down part of the conflict minerals rule. The appeals court said requiring companies to report whether their own products are “DRC conflict free” violates First Amendment protections. The appeals court upheld other parts of the rule.
In response, Keith Higgins, the director of the SEC’s Division of Corporation Finance, said Tuesday in a prepared statement that no company will be required in its conflict minerals reporting to describe its products as “DRC conflict free,” “not been found to be DRC conflict free,” or “DRC conflict undeterminable.”
But companies whose products contain conflict minerals still will be required to file a Form SD describing their efforts to determine where those minerals originated. Companies that learn that their conflict minerals originated in the DRC or its neighboring countries will be required to file a conflict minerals report as an attachment to Form SD.
Companies filing conflict minerals reports will be required to disclose the facilities used to produce the conflict minerals, the country of origin of the minerals, and the company’s efforts to determine the mine or location of origin for the minerals.
Issuers that voluntarily elect to describe any of their products as “DRC conflict free” will be permitted to do so as long as they have obtained an independent private-sector audit as required by the rule.
Independent private-sector audits will only be required when a company voluntarily chooses to describe a product as “DRC conflict free.”
Higgins said the commission still expects companies that are required to file reports with the SEC to do so by the June 2 due date.
Higgins’s statement was released one day after two of the five SEC commissioners, Daniel Gallagher and Michael Piwowar, released a statement saying the SEC should issue a stay of its conflict minerals rule and impose no further regulatory obligations related to the rule until litigation surrounding the rule is completed.
But Higgins’s statement notes that the appeals court decision rejected other challenges to the rule and stated a First Amendment objection only to the “DRC conflict free” reporting requirement.
The appeals court remanded the case to district court for further litigation.
—Ken Tysiac (firstname.lastname@example.org) is a JofA senior editor.