Court Upholds SEC Conflict Minerals Rule – First Reports Due in Less Than A Year

“[The] rule […] will require about 6,000 publicly traded companies to report whether their products contain four so-called conflict minerals from the Democratic Republic of the Congo, where warlords use proceeds from the mineral sales to finance murder, rape and torture.” (The National Law Journal)

On July 23, 2013, a federal court rejected a challenge to the Securities and Exchange Commission’s “conflict minerals” rule.

The lawsuit was started by the U.S. Chamber of Commerce, the Business Roundtable, and the National Association of Manufacturers, who claimed that compliance would be too costly and that the rule violated companies’ First Amendment free speech rights.

For your reference, three takeaways for public companies:

1. The first reports are due in ten months:

“… issuers who file reports under Section 13(a) or Section 15(d) of the Exchange Act, including companies that file annual reports with the Commission on Form 10-K, Form 20-F or Form 40-F, must comply with the Conflict Minerals Rule for the year ending December 31, 2013 by filing their conflict minerals disclosure, if required, on new Form SD by May 31, 2014.” (Shearman & Sterling)

2. Any further challenges are not likely to succeed before the filing deadline:

“While the decision does not necessarily settle the issue, it appears increasingly likely that there will not be judicial relief between now and the end of 2013 or even the deadline for filing the first Form SD, which is May 31, 2014 with respect to calendar year 2013. Accordingly, we recommend that companies continue the process of gathering the information necessary to comply with these new disclosure requirements.” (Foley & Lardner)

3. It’s crucial to get the first report right:

“Given that the SEC will scrutinize the process followed by SEC-reporting companies, and that multiple third parties in the supply chain may rely upon a company’s findings, it will be especially critical to take an approach that the SEC and customers will view as reasonable and in good faith.” (K&L Gates LLP)

The updates:

Related reading:

Find additional updates on the SEC’s Conflict Minerals Rule at JD Supra Law News>>