Conflict Minerals Report No Longer Required? Wait — Not So Fast

Apr 10, 2017 | Dynda A. Thomas
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Those hoping for updated SEC guidance that would relieve or reduce companies’ conflict minerals diligence and disclosure obligations for calendar year 2016 got only a fraction of what they wanted. Last Friday, April 7, 2017, the SEC's Acting Chair Michael Piwowar issued a statement that said “it is difficult to conceive of a circumstance that would counsel in favor of enforcing” the requirements that companies file a Conflict Minerals Report or (if required) provide an independent private sector audit (IPSA) relating to its due diligence.

On the same day, the SEC Division of Corporation Finance issued a statement that it would not recommend enforcement if a company files only a Form SD describing its reasonable country of origin inquiry and whether any of its conflict minerals originate (or may originate) from a covered country.  The SEC Staff went on to warn that its statement was subject to further action by the Commission, was related to enforcement action only, and was not a statement of a legal conclusion. This statement is very different from the April 2014 SEC Statement, which provided affirmative guidance and told companies what they should do and what the SEC expected to see in the filings.

Importantly, the statements by the Acting Chair and the SEC Staff did not alter companies’ obligations to determine whether they are subject to the conflict minerals rule, to undertake a reasonable country of origin inquiry, or to file the Form SD.  And, the statements did not change the important existing guidance that a reporting company does not have to obtain an IPSA as long as it does not claim that any product is “DRC conflict-free.”