On 31 January 2017, SEC Acting Chairman Michael S. Piwowar issued a statement directing the SEC's staff to consider whether the 2014 guidance on the conflict minerals rule is still appropriate and if any relief of the rule is appropriate. The current conflict minerals rule requires companies that manufacture or contract to manufacture products containing tantalum, tin, tungsten or gold to conduct due diligence on their supply chains regarding such minerals in order to provide greater transparency on responsible sourcing.
Acting Chairman Piwowar noted that the conflict minerals rule may have had the unintended consequence of provoking a de facto boycott of minerals from portions of Africa, given the cost to companies of complying with the supply chain due diligence and disclosure requirements, and he questioned whether the rule has had any effect in reducing the influence of armed groups or in easing human suffering in the Democratic Republic of the Congo and surrounding areas.
On 3 April 2017, final judgment was entered in litigation regarding the conflict minerals rule that has worked its way through the US federal courts over the last couple of years. In light of these developments, on 7 April 2017, the SEC issued a statement expressing its determination that it will not pursue enforcement action against companies that do not comply with the requirement to undertake due diligence and prepare and file a conflict minerals report.
Pending further action by the SEC, and notwithstanding the SEC's updated position on enforcement action, we expect that most companies will continue to comply with the conflict minerals rule for calendar year 2016. Companies are required to file their conflict minerals disclosure for 2016 on Form SD by 31 May 2017. Interested parties were invited to submit comments on the conflict minerals rule, including the SEC's 2014 guidance, by 17 March 2017.
For further details on the statement comments, please consult the SEC's public statement at:
https://www.sec.gov/news/statement/reconsideration-of-conflict-minerals-rule-implementation.html
The comment letters submitted in response to this request for comment are published on the SEC's website. See:
https://www.sec.gov/comments/statement-013117/statement013117.htm
The updated statement by the SEC Division of Corporation Finance on the effect of the Court of Appeals decision on the conflict minerals rule is available at:
Our related client publication is available at: http://www.shearman.com/en/newsinsights/publications/2017/02/changing-of-guard-sec-reconsiders-conflict-rule
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
