As the SEC conflict minerals filing deadline closes in, companies are carefully assessing what to say in their Form SDs and conflict minerals reports, especially in light of the recent statement from the Commission about enforcement of the filings. Certainly, part of the internal deliberations concern how – or whether – to describe product determinations. If a company voluntarily chooses to use the words “DRC Conflict Free” in its Conflict Minerals Report, then an Independent Private Sector Audit (IPSA) is required.
But did you know that the words “DRC Conflict Free” can be used without triggering an IPSA?
Without going into the painful explanatory details, issuers who file only a Form SD can use the specific determination wording in the Form SD without needing an IPSA. As SEC stated in FAQ #19,
An issuer is only required to obtain an IPSA of its Conflict Minerals Report and not of the disclosures contained in the body of its Form SD.
The basic rationale is that when the RCOI results indicate there is no reason to believe that necessary conflict minerals did or may have originated from a covered country, only a Form SD is required and additional due diligence is not necessary. Therefore, a Form SD-only filing means that products are “DRC Conflict Free” by virtue of the absence of materials from a Covered Country.
But be careful – this only applies to Form SD language. We also caution against claiming DRC Conflict Free in a Form SD that includes the CMR exhibit – but the CMR doesn’t mirror the Form SD.
We are happy to answer any questions you may have. Feel free to give us a call.