SEC Flash Report - April 2017

April 2017

Portion of Conflict Minerals Rule No Longer to be Enforced 

On April 3rd, a U.S. District Court 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.[1]  The SEC staff also issued updated[2] 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.  Acting Chairman 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. 

For questions related to matters discussed above, please contact:
Jeffrey Lenz
National Director, SEC Practice

Paula Hamric
National Assurance Partner

[1] 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 SEC Flash Report here for further details). 
[2] The updated guidance follows the SEC staff’s initial guidance issued in 2014 in light of the U.S. Court of Appeals ruling.  That guidance is described on page 5 of our 2014 SEC Year in Review letter, which is available here.