Consultation on Conflict Minerals disclosure
The Securities and Exchange Commission (SEC) has announced a public consultation, running until the end of January around the proposed rule implementing annual reporting requirements regarding conflict minerals in manufactured products.
These are required under Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
There are several elements within the proposed rules where the SEC is seeking public opinion:
- SEC proposes no definition of when a conflict mineral is “necessary to the functionality or production of a product”
- Companies stating that they do not use minerals from the Congo must briefly describe the process they applied to arrive at this conclusion and maintain appropriate business records
- Companies who use such materials or who are not sure would have to provide a Conflict Mineral Report as part of their annual report, including a certified private sector audit
- SEC proposes the need for due diligence when making supply chain determinations but does not provide guidance on what constitutes due diligence
- SEC proposes different treatment of conflict minerals from recycled or scrap sources than for mined sources
- SEC estimates a total increase in the paperwork burden for all affected companies to be over 150,000 hours of personnel time plus in the region of $70 million for external professional services. In addition each private sector audit could cost around $25,000
- Disclosure requirements apply to all companies that file reports with the SEC under the Act including domestic companies, foreign private companies, with no exemptions for SME’s
- SEC proposes no definition of “manufacturer” although requirements will not apply to retailers who sell third party products
The SEC seeks public comments on the above and others.