Conflict Minerals FAQs—Better Late Than Never
After much pleading from companies and lawyers everywhere, the SEC yesterday finally delivered itself of twelve FAQs regarding its conflict mineral rules. The FAQs chip away at some of the unanswered questions and ambiguities left over from the SEC’s adopting release. If your company finds itself anywhere near the gray area of conflict minerals compliance, it’s worth taking a quick look.
Because a full 24 hours have now passed, you are no doubt knee (neck?) deep in white papers and memos on the subject, so I’ll try not to add to the avalanche. In general, the FAQs apply common sense and reach conclusions you might have hoped for—it’s fair to say there are no huge surprises.
Here are a few interesting tidbits:
- The rule applies to voluntary filers, just like mandatory filers. (Q1)
- Companies must conduct a country of origin inquiry with respect to conflict minerals included in generic components contained in products it manufactures or contracts to manufacture. (Q5)
- In most cases, the rule does not apply to conflict minerals contained in packages or containers, even if they are necessary to preserve product usability or functionality. (Q6)
- The rule does not apply to conflict minerals in equipment that a company manufactures or contracts to manufacture and that is used for services provided by the company. (Q7)
- The rule does not apply to conflict minerals in tools, machines or other equipment that a company manufactures or contracts to manufacture to be used in the manufacture of products. (Q8)
- Failure to timely file a Form SD does not cause the company to lose Form S-3 eligibility. (Q12)
The FAQs also contain other technical information regarding subsidiaries, mining, logos and branding, and Form SD filing and content.
Most companies have already undertaken a preliminary assessment of their conflict minerals usage and compliance requirements. Unless yours came out squeaky clean (and even then, just to be safe), you should ask the leader of that undertaking take a quick look at these FAQs to be sure they don’t impact that assessment.
All the best,
Doug Harmon is the head of the Securities & Corporate Governance Group, author of Doug’s Note and founder of the Public Company Forum. For more than 30 years, Doug has represented domestic and international companies in a full array of securities compliance, corporate governance, capital markets and risk management matters, focusing primarily on mid-size public companies.