SEC Acting Chairman Michael Piwowar and the SEC Division of Corporation Finance Staff both issued statements today (April 7, 2017) on the conflict minerals rule in light of the final Court action in NAM v. SEC.
The statements from both Staff and Acting Chairman Piwowar clarify that the Commission does not intend to recommend enforcement against any issuer that does not file a CMR or conduct due diligence of its smelters/refiners. The statements do not amend the language of the rule itself to eliminate the CMR and due diligence requirement – they only clarify that no enforcement action will be taken if an issuer triggers the CMR/due diligence mandate, but files only the basic Form SD.
Reuters reported that the only other currently-sitting Commissioner, Kara Stein, took issue with Piwowar’s unilateral action :
The move sparked backlash from SEC Democratic Commissioner Kara Stein, who accused Piwowar of acting beyond his authority to gut the meat of a rule mandated by Congress, adopted by the SEC and reviewed by the courts.
“It is unprecedented for one commissioner, acting alone and without official notice and comment, to engage in de facto rulemaking,” she said. “It represents a troubling attack not only on the Commission process, but also on the restraints of government power.”
We will continue to monitor new developments and keep you informed. In the meantime, please do not hesitate to contact us with any questions.
CFSI recently added a Vendor Member category for service providers, which we think is a positive development and provides significant benefit. However, there are limits to who is allowed to use the CFSI information/data and it is possible that the data is leaking beyond these limits.
CFSI provided this in response to a recent inquiry from Elm on the matter:
Along with CFSI Company Members, Vendor Members have access to member-only tools and resources. Pursuant to the non-disclosure agreement (AECI) between the EICC and each CFSI member, CFSI vendor members cannot disclose, publish or disseminate CFSI’s information to non-CFSI members and CFSI vendor members agree to use CFSI’s data for the benefit of the CFSI. CFSI vendor members cannot share CFSI data with clients that are not CFSI-members or use CFSI data to provide services to non-CFSI members.
We don’t believe Vendor Members would intentionally disseminate CFSI data in an unauthorized manner, but errors can occur. Elm thinks it is appropriate for non-CFSI members to explore the source(s) of the country of origin data they use and report to ensure they are not using CFSI data inappropriately.
If you have any questions, contact Leah Butler at the CFSI at lbutler@EICCOALITION.org
Yesterday, the European Commission announced that a “political understanding” was reached on the European conflict minerals law. As we understand it, this means that the relevant political entities have agreed upon high level legal principles for the conflict minerals requirements for covered businesses in Europe. The technical and implementation details are to be developed in the future.
Video announcements are available here and here. The most substantive information in the first video is presented at 13:30 – 14:50 and 16:50 – 19:50. In the second video, substantive information is presented at 10:22 – 11:20 and 13:30 – 19:22. We distilled this down to the following points we were able to extract:
- Due diligence and disclosure are mandatory, not voluntary, for the covered supply chain actors
- Due diligence is based on OECD, but is limited to 3TG at this time
- It is global in scope, covering conflict-affected areas, not just DRC and adjoining countries as is Dodd-Frank
- Requires due diligence for upstream actors, including smelters/refiners
- Due diligence is also mandatory for importers of ores and processed metals, but manufacturers are not covered
- Covers 95% of relevant European importers of ores and processed metals
- Specific guidelines are to be developed for companies with more than 500 employees
- Requires public disclosure by covered downstream actors, which will include a registry/database
- A clause exists for the EU/EC to review/renegotiate the law in the future relative to covered downstream actors
- Includes some form of on-going monitoring, possibly audits
- Several exemptions have been agreed upon, including recycled materials, existing stocks of materials and by-products from processing. The details are to be worked out in additional trialogue technical negotiations
As we know more, we will continue to post updates. Feel free to contact us with any questions.
Several filers of last year’s conflict minerals disclosures reported the Central Bank of the DPR Korea (North Korea) as a supplier of gold within their supply chain. Long standing trade sanctions prohibit US companies from engaging in business activities with North Korea. Although later determined to be an error, this event highlighted a major weakness in issuers’ internal conflict minerals information review processes.
As a result, Elm has joined with Source Intelligence to offer a unique and unparalleled service for supporting conflict minerals smelter/refiner due diligence reviews. Elm clients now have exclusive stand-alone access to the Source Intelligence smelter/refiner verification processes and results without a full IT platform subscription or implementation. This broadens the existing relationship between Elm and Source Intelligence through which comprehensive bundled services have been provided in the past to a range of clients.
The new Department of Commerce list of global smelters/refiners listing almost 50% more facilities than the current CFSI Conflict Minerals Common Reporting Template (CMRT), combined with the aftershocks of the DPRK revelation, have raised the bar for what will be expected of issuers in verifying smelter/refiner information. The Elm/Source Intelligence offering provides a unique blend of leading consulting expertise and data verification processes.
See the press release or contact us for more information.