Pursuant to Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), the Securities and Exchange Commission (SEC) finalized its major rulemaking on conflict minerals, standardizing reporting requirements for producers of goods containing conflict minerals. The primary minerals defined as “conflict minerals” under the law include gold, tin, tantalum and tungsten.
The rule was finalized in August 2012 and will become effective on May 31, 2014. The implementation process was expected to require a considerable overhaul of compliance programs, reporting and due diligence, impacting approximately 6,000 SEC issuers and 275,000 suppliers of issuers. As of last summer, surveys reveal that nearly half of all covered entities were still collecting information for future reporting and/or determining how to apply the rule to their individual production.
Recent industry litigation has questioned the constitutionality of the SEC’s rule. On April 14, 2014, the District of Columbia (DC) Circuit Court ruled on National Association of Manufacturers et al. v. SEC, finding that the rule’s requirement for companies to publicly disclose whether or not products are “conflict free” violated the First Amendment. Despite the decision, the SEC issued a statement confirming the original effective date in May and the reporting deadline of June 2, 2014.
In the appeal of National Association of Manufacturers et al. v. SEC, the National Association of Manufacturers, United States (US) Chamber of Commerce and the Business Roundtable requested a delay of the reporting deadline, but the DC Court of Appeals refused the request. With the appeal resolved and the implementation deadlines fast approaching, issuers will have to prepare to meet all of the rule’s requirements, except those areas struck down by the original lawsuit.
- PwC Conflict Minerals Survey – http://www.pwc.com/en_US/us/audit-assurance-services/publications/assets/pwc-conflict-minerals-preparedness-survey.pdf
- SEC final rule – http://www.sec.gov/rules/final/2012/34-67716.pdf
- SEC fact sheet – http://www.sec.gov/News/Article/Detail/Article/1365171562058#.U3QwRlxqtuY
- SEC statement on National Association of Manufacturers et al. v. SEC – http://www.sec.gov/News/PublicStmt/Detail/PublicStmt/1370541681994#.U3QwZ1xqtuY
- Press coverage: