If ever there was an SEC rule that refused to slip quietly into the books, it’s conflict minerals disclosure. With the May 31st Form SD filing deadline fast approaching, three things are happening:

• Companies are focusing for the first time on the preparation, filing and posting of Form SD, the Conflict Minerals Report (CRM), if required, and a Conflict Minerals Policy
• The SEC issued several more FAQs
• The U.S. Court of Appeals held that certain (but not all) aspects of the statute and rule violate the First Amendment

Let’s take this one at a time.

Document Preparation, Filing and Posting

At the risk of rehashing what everyone already knows:

• Reporting companies must make certain disclosures if conflict minerals are necessary to the functionality or production of products that they manufacture or contract to manufacture
• Any such disclosures must be made on a new Form SD (which in certain cases must include a CRM as an exhibit) and on the company’s website
• The Form SD (and possible CRM) must be filed with the SEC annually by May 31st (actually, by June 2nd in 2014 since May 31st is a Saturday)

Companies required by the rule to conduct reasonable supply chain due diligence regarding their conflict minerals “country of origin” are also preparing and positing on their websites a Conflict Minerals Policy. These policies describe the company’s attitude toward the use of conflict minerals and its expectations of its suppliers in that regard. The need for a policy stems from SEC guidance stating that a company’s policy with respect to the sourcing of conflict minerals is a component of a reasonable country of origin inquiry.  The policy should be prepared and posted on the company’s website as soon as possible.

The New FAQs

Earlier this month, the SEC added nine new frequently asked questions to its previous twelve (all of which are here). The latest additions address such things as:

• The use of the term “DRC conflict free”
• Disclosures related to recycled or scrap sources
• When an independent private sector audit (IPSA) is required
• Standards related to and scope of an IPSA
• The period to be covered by company due diligence
• The description of the due diligence

Any company required to file a Form SD should review these FAQs carefully.

The Court of Appeals Decision

Just this week the United States Court of Appeals for the District of Columbia Circuit upheld most of the conflict minerals statute and SEC rule, but opined that certain aspects violate the First Amendment’s prohibition against compelled speech. (See National Association of Manufacturers, et. al. v. Securities and Exchange Commission.) In particularly vivid language, the Circuit Court held that the First Amendment prohibits compelling a company to “confess blood on its hands” by being forced to report that a product has not been found to be “DRC conflict free.” It remanded the case to the District Court for further proceedings “consistent with this opinion.”

So, what happens now? To allow time for the government to petition for rehearing, it appears that nothing can happen until June at the earliest, and perhaps substantially later. Of course, the SEC might take some sort of rule-related action in light of this decision prior to the May 31st filing deadline, but that is far from certain.

Therefore, any company required by the rule to file a Form SD has no choice but to plow ahead with that effort.