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From Securities Regulation Daily, May 2, 2014

SEC issues limited stay of conflict minerals reporting requirements

By Matthew Garza, J.D.

The SEC issued an order staying the compliance date for portions of the conflict minerals disclosure requirements. The order denied a motion for a stay of the entire rule, but delayed the effective date of the portion of the rule invalidated by the U.S. Court of Appeals for the District of Columbia in National Association of Manufacturers, et al. v. SEC. The court found that a requirement that issuers disclose that their products were found to be “DRC conflict free” violated the First Amendment. The Commission stated that staying the portions of the rule affected by the court’s decision avoids the risk of First Amendment harm, but allowing the rest of the rule to take effect on June 2 “furthers the public’s interest in having issuers comply with the remainder of the rule, which was mandated by Congress and upheld by the Court of Appeals.”

Background. The Dodd-Frank Act added Section 13(p) to the Exchange Act, requiring companies that use certain conflict minerals in their products, specified as columbite-tantalite (coltan), cassiterite, gold, wolframite or their derivatives, limited to tantalum, tin, and tungsten, to disclose annually whether the minerals originated in the Democratic Republic of the Congo or a neighboring country. If the minerals originated in any of these countries, a specialized disclosure report on new Form SD must be submitted that includes a description of the products manufactured and the measures taken to exercise due diligence on the source and chain of custody of the minerals. The SEC adopted Rule 13p-1 and Form SD in Release 34-67716 on August 22, 2012 to implement Exchange Act Section 13(p).

The stay order specified that the Court of Appeals withheld the issuance of its mandate until seven days after disposition of any petition for rehearing or petition for rehearing en banc, expected to be no earlier than June 5, 2014. The first reports are due to be filed on June 2, 2014. The SEC stay order will terminate after completion of the court’s review. The order directs issuers to the guidance released by the SEC staff on April 29 for further details regarding compliance.

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