Mid-size public companies have had a particularly difficult time getting their arms around the SEC’s conflicts minerals rules. Compliance requires that companies first devise a customized review and evaluation process, which many companies haven’t had the time or resources to do.
The temptation has been to consider the rule briefly, speculate that “everything’s probably okay,” and then relegate the issue to the back burner. Common procrastination rationales go something like:
- The initial reporting deadline (May 31, 2014) is a long way off,
- I'll wait for the SEC to provide guidance on what the rule really means, or
- I heard that the rule is going to be vacated in court, just like the resource extraction rule was.
Well, none of those excuses fly any more.
- May 31st is closer than you think. If you haven’t already made significant progress with your compliance review, then you’re already short on time to complete it, implement necessary procedures and prepare any required reports.
- The SEC issued its guidance back in May (see this Doug’s Note), and while its FAQs were helpful, they did not change much.
- Last week, the U.S. District Court for the District of Columbia ruled against the closely followed law suit brought by the National Association of Manufacturers that sought to vacate the rule (click here). Although it is likely that the ruling will be appealed, it would be unwise to wait for that decision in hopes of it being reversed.
So, the conflicts minerals rule remains alive and kicking, as originally adopted. If you haven’t already done so, it’s time (maybe past time) to gear up for compliance by:
- Determining definitively whether your company uses conflicts minerals in a manner that subjects you to the rule,
- Mapping your supply chain, communicating with your suppliers, creating supplier certifications and adjusting supply agreements, as necessary,
- Drafting and implementing internal compliance policies and procedures, and
- Preparing any reports that may need to be filed by May 31, 2014.
Since this is one of those issues that tends to get pushed aside by other more pressing and less opaque matters, I may mention it again from time to time, even at the risk of being a pest. A lot remains to be done in a short amount of time.