Portion of Conflict Minerals Rule No Longer to be Enforced
A U.S. District Court has entered a final judgment in the ongoing lawsuit related to the SEC’s conflict minerals rule. The final judgment upholds a U.S. Court of Appeals decision that a portion of the conflict minerals rule infringes upon a company’s constitutional right of free speech. More specifically, the courts determined that the requirement for a company to describe its products as “having not been found to be ‘DRC conflict free’” violates the company’s constitutional rights. The Commission now needs to determine how to address the Court’s decision.
In light of the final judgment, Acting Chairman Piwowar issued a statement directing the SEC staff to begin work on a recommendation for the Commission. Piwowar’s statement also directs the staff to consider feedback received from his invitation to comment on the conflict minerals rule in January (refer to our article here for further detail).
The SEC staff also issued updated guidance on how a company should comply with aspects of the conflict minerals rule not affected by the Court’s decision. The guidance clarifies that the SEC staff will not enforce compliance with Item 1.01(c) of Form SD, the specialized disclosure form used for conflict minerals reporting. Item 1.01(c) requires companies to conduct due diligence on the source and chain of custody of conflict minerals. Piwowar expressed support for this guidance in his statement, explaining that the primary purpose of the work required by Item 1.01(c) is to make a disclosure which has since been found to be unconstitutional.
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