Tag Archives: Keith Higgins

SEC Director Keith Higgins May Have Settled the CY2015 Conflict Minerals IPSA Question

A new alert from the law firm Bryan Cave states that the question of whether an Independent Private Sector Audit (IPSA) will be required for all CY2015 filers of Conflict Minerals Reports (CMR).  The relevant text from the law firm’s alert:

At the PLI Securities Regulation Institute held last week, just days before the court’s ruling on the SEC’s petition for rehearing, Keith Higgins, Director of the SEC’s Division of Corporation Finance, stated that the April 2014 staff guidance would continue to apply during the pendency of the litigation and should be followed for conflict minerals reports to be filed in 2016. Mr. Higgins stated that timing issues would be taken into consideration by the SEC in connection with any changes, acknowledging the need for advance notice to issuers of a shift from existing guidance. Mr. Higgins addressed a question about the permissibility of an issuer labeling products as “DRC undeterminable” in reports to be filed in 2016. He stated that because the SEC is not requiring any label in connection with the rule, issuers may make their own decisions on using that label.

So it seems we have an answer.  Hopefully an official announcement or statement will be issued by the Staff very soon, otherwise issuers will have to be comfortable relying on unofficial and essentially undocumented comments made at a legal conference.  Not the most ideal way to communicate the Staff position on this important matter.  But then again, this is more information on the conflict minerals disclosure rule as a whole that we have had since September 2014 (13 months ago), when Higgins made other unofficial and essentially undocumented comments at a legal conference, also never formalized or communicated by the SEC.  Is this a trend, or just coincidence?

We will continue to monitor developments, although those may be as elusive as Big Foot.


You Better Watch Your Language…

As companies draft their CY2014 Conflict Minerals Reports (CMRs), a reasonable starting point is last year’s document.  And since the SEC’s April 29, 2014 stay of the mandate to use the wording “DRC Conflict Undeterminable”, “DRC Conflict Free” and “not having been found to be DRC Conflict Free” remains in effect, filers may also want to replicate the product determination language used for the CY2013 submittals.

While that may be tempting (and easy), we caution against doing so without a careful review.  Recall CorpFin Director Keith Higgins’ comments about the CY2013 filings:

Obviously, if you say your [product] is conflict-free, you have to provide an independent private sector audit, so nudging up close to that with some implied statement is probably not a good idea.

We have seen this in a few draft CY2014 CMRs, but it wasn’t done intentionally to imply a “DRC Conflict Free” determination.  Rather, the language was simply rather general and unintentionally conveyed a meaning noted by Higgins.  We actually see his point in some of the wording we’ve read.

So follow your mother’s advice – watch what you say.

As a post script, during our review of the CY2013 filings, we did find one issuer who claimed products as DRC Conflict Free without additional “undeterminable” products, and did not file an IPSA.  Another cautionary tale about the importance of making sure the CMR is thoroughly reviewed…