One Month to Go: Conflict Minerals Disclosure Still Looms, Despite SEC Limited, Partial Stay

With one month remaining, affected issuers staring down the June 2, 2014 deadline for compliance with the SEC's conflict minerals disclosure guidelines have received a modest reprieve. Today, the SEC announced a stay for compliance with certain, limited portions of the conflict minerals disclosure rules in new Form SD under Section 13(p) of, and Rule 13p-1 under, the Securities Exchange Act of 1934 (the "Exchange Act"). Additionally, the SEC announced related guidance on April 29, 2014, prior to issuing the stay order. As a result, for the present time, issuers will not be required to describe themselves as "DRC conflict free" or not, and unless they identify themselves as "DRC conflict free," they can also delay an independent private sector audit (IPSA).

The partial stay and SEC guidance are in response to the recent decision by the U.S. Court of Appeals for the D.C. Circuit in National Association of Manufacturers, et al v. SEC, et al, No. 13-5252 (D.C. Cir. April 14, 2014), holding that certain elements of the SEC's conflict mineral disclosure rules under the Dodd-Frank Act "violate the First Amendment to the extent the statute and rule require regulated entities to report to the Commission and to state on their website that any of their products have 'not been found to be 'DRC conflict free.'"

Specifically, pending future instruction, the SEC partial stay, SEC guidance and D.C. Circuit opinion permit an affected issuer:

• to decline to identify its products on Form SD or in a related Conflict Minerals Report as (i) "DRC conflict free," (ii) having "not been found to be 'DRC conflict free,'" or (iii) "DRC conflict undeterminable" and
• to decline to obtain an independent private sector audit (IPSA), unless the issuer voluntarily elects to describe its products as "DRC conflict free" in its Conflict Minerals Report.

Despite this partial stay, the reporting deadline still looms for those issuers who are subject to conflict mineral disclosure obligations. Any issuer who files reports with the SEC pursuant to Sections 13(a) or 15(d) of the Exchange Act is affected by the conflict disclosure rules under Rule 13p-1 if such issuers has "conflict minerals that are necessary to the functionality or production of a product manufactured or contracted by that [issuer] to be manufactured." Affected issuers must file Form SD, and if applicable, a Conflict Minerals Report, by June 2, 2014 with all information other than that exempted by the partial stay and SEC guidance.

Today's announcement by the SEC does not specify when the SEC anticipates lifting the stay, only stating that it is "pending the completion of judicial review," and the SEC has cautioned that additional conflict minerals guidance may be forthcoming. We know that issuers struggling with these complex, new disclosure requirements appreciate any reporting relief they can get. For more assistance with analyzing your responsibilities under the conflict minerals disclosure rules, please contact your regular Crowell & Moring contact.

• Crowell & Moring's prior Conflict Mineral disclosure guidance is available here:
  • "SEC Releases Final Conflict Minerals Rules with Broad Implications for Certain Reporting Companies"
  • "D.C. District Court Affirms the SEC's Approach to Regulating Conflict Minerals"

• The SEC's May 2, 2014 order is available here.
• The SEC's April 29, 2014 guidance regarding the impact of the First Amendment issues on Form SD is available here.
• The SEC's FAQs on Conflict Mineral disclosure requirements generally are available here.