SEC Staff Provides Guidance On Conflict Mineral And Resource Extraction Disclosure Requirements

On May 30, 2013, the staff (the "Staff") of the U.S. Securities and Exchange Commission (the "SEC") published Frequently Asked Questions ("FAQs") regarding certain disclosures required under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act").1 The new FAQs provide important guidance to issuers regarding disclosures they may be required to make in connection with products containing conflict minerals and certain payments made by resource extraction issuers.

BACKGROUND

Title XV of the Dodd-Frank Act, entitled "Miscellaneous Provisions," contains these "specialized corporate disclosure" provisions, which include:

Conflict Minerals. Section 1502 of the Dodd-Frank Act requires issuers to disclose annually whether any "conflict minerals" that are "necessary to the functionality or production" of a product of the issuer originated in the Democratic Republic of the Congo or an adjoining country and, if so, to provide a report describing, among other matters, the measures taken to exercise due diligence on the source and chain of custody of those minerals. This disclosure must include an independent private sector audit of the report that is certified by the issuer. Resource Extraction Payments. Section 1504 of the Dodd-Frank Act requires issuers engaged in the commercial development of oil, natural gas, or minerals to disclose, in an annual report, certain payments made to the United States or a foreign government. In August 2012, the SEC adopted final rules establishing the process by which issuers provide the disclosures required by the specialized corporate disclosure provisions.2 Pursuant to these rules, issuers are required to provide such disclosures using the newly promulgated Form SD. Disclosures made pursuant to the Conflict Minerals Rule are included under Item 1.01 of Form SD, while disclosures under the Resource Extraction Rule are included under Item 2.01 of Form SD.

Since the adoption of the new rules, issuers have raised a variety of questions with the Staff regarding the scope of the specialized corporate disclosure requirements. In the FAQs, the Staff has attempted to respond to several of the most common inquiries.

CONFLICT MINERALS GUIDANCE

The Conflict Minerals FAQs provide guidance regarding the disclosure requirements under the Conflict Minerals Rule, including:

Types of Issuers Covered. The Conflict Minerals Rule applies to all issuers that file reports with the SEC under Exchange Act...