SEC Public Meeting on Conflict Minerals Final Rule

August 22, 2012

SEC Public Meeting on Conflict Minerals Final Rule
Wednesday, August 22, 2012

Who is covered?
  • Publically traded companies
  • Companies whose products contain conflict minerals and that are necessary to the functionality
  • No de minimus threshold
  • Conflict minerals used as catalysts are NOT covered (unless contained in the final product)
SEC not defining key terms (will include in guidance):

  • Necessary to functionality
    • Intentionally added
    • Conflict minerals contained in the final product
    • Does not include conflict minerals in the equipment used to manufacture a product
  • Reasonable country of origin
  • Manufacture
  • Contract to manufacture
    • Determined by the degree of influence over a final product
Reasonable country of origin inquiry

  • Based on facts and circumstances of individual companies
Due Diligence

  • International and nationally recognized standards are adequate to show due diligence. Only one to date is OECD
Unified reporting schedule

  • Information from the calendar year (Jan.-Dec.)
  • Reports due May 31 of each year. First report due May, 2014 for data from January 2013-December 2013
  • New form – Form SD to be used for disclosure of conflict minerals use
  • Reports are filed, not furnished
Recycled or scrap conflict minerals

  • Reasonable country of origin inquiry required to determine the source of conflict minerals
  • No CMR required if conflict minerals are determined to be from recycled or scrap sources; must disclose use of conflict minerals on new form SD
  • On Form SD, must describe efforts taken to determine source of conflict minerals
Phase-in/Indeterminate Category

  • Following a reasonable country of origin inquiry, companies may determine the source of their conflict minerals to be of an indeterminate category
  • Companies may report the source of their conflict minerals as indeterminate for 2 years. Small companies have 4 years (the SEC did not define a small company during the meeting)

  • Must be conducted by an independent, third-party auditor
  • Audit must be according to GAO “Yellow book” specifications according to either attestation or certification requirements
  • Audit objective is to determine that companies’ due diligence efforts are consistent with the due diligence process they referenced and that they actually performed the due diligence
Economic Analysis

  • Implementation costs will be “substantial”
  • SEC revised original cost estimate
  • $3-4 Billion in the first year
  • $206-309 Million annually