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SEC Working to Issue DRC Conflict Minerals Disclosure Final Rule

Sources at the Securities and Exchange Commission state that they are “working to issue as soon as possible” the final rule that would change the disclosure and reporting requirements of certain issuers that file reports pursuant to the conflict mineral provisions of the Dodd-Frank Act1, when conflict minerals are necessary to their product line.

(Conflict minerals are defined as: (i) cassiterite, columbite-tantalite (coltan), gold, wolframite; or their derivatives; or (ii) any other mineral or its derivatives determined by the Secretary of State to be financing conflict in the Democratic Republic of the Congo or an adjoining country (collectively, DRC countries).)

Would Have to Disclose Whether or Not Conflict Minerals Originate in DRC Countries

As proposed, the rule would require any issuer for which conflict minerals are necessary to the functionality or production of a product manufactured or contracted to be manufactured by that issuer to disclose in its annual report and on its website whether or not its conflict minerals originated in DRC countries. If the issuer determines that its conflict minerals did originate in the DRC countries or is unable to conclude that they did not, that issuer would also be required to furnish a separate report that includes a description of the measures taken to exercise due diligence on the source and chain of custody of its conflict minerals, etc.

SEC proposed that the conflict minerals disclosure requirement for conflict minerals be divided into the following three steps:

(See ITT’s Online Archives 10122326 and 11020328 for summaries of SEC’s December 2010 proposed rule and extension of the comment period.)

Act Called for SEC to Issue Final Rule by April 15, 2011

The Dodd-Frank Act required the SEC to issue a final rule no later than 270 days after the date of enactment, or by April 15, 2011, but it did not meet this deadline. The SEC later said that it would issue the final rule by end of 2011, a goal that it also failed to meet.

SEC sources now state that they are working to issue the final rule “as soon as possible” but declined to give an estimated timeframe.

Separate from State’s Interim Guidance on Conflict Mineral Due Diligence

The SEC sources add that its proposed rule is separate from the interim guidance issued by the State Department in July 2011 encouraging companies to establish due diligence procedures before the SEC final rule is issued and to work on structuring their supply chain relations in order to encourage legitimate, conflict-free trade, including conflict-free minerals sourced from the DRC. (See ITT’s Online Archives 11072225 for summary of State’s July 2011 guidance on conflict mineral due diligence.)

1On July 21, 2010, the President signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111--203), which among other things amended the Securities Exchange Act of 1934 to impose new requirements on companies that use “conflict minerals.” It also provided new whistleblower rewards for securities violations, including violations of the FCPA. (See ITT's Online Archives 10072230 for summary of the law.)

SEC’s December 23, 2011 proposed rule available here.