Conflict Mineral Disclosure Requirements

Published date01 November 2015
DOIhttp://doi.org/10.1002/jcaf.22114
Date01 November 2015
AuthorLeah Muriel
79
© 2015 Wiley Periodicals, Inc.
Published online in Wiley Online Library (wileyonlinelibrary.com).
DOI 10.1002/jcaf.22114
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Conflict Mineral Disclosure
Requirements
Leah Muriel
The Dodd‐Frank
Act was passed
in 2010 in
response to the recent
financial crisis in the
United States and
included a host of
items intended to
improve accountabil-
ity and transparency.
One item in this law
mandates additional
disclosures related
to conflict minerals,
specifically: tin, tan-
talum, tungsten, and
gold. The require-
ment arose from the
view that the “exploitation
and trade of conflict minerals
originating in the Democratic
Republic of the Congo (DRC)
is helping to finance conflict
characterized by extreme levels
of violence … and contributing
to an emergency humanitar-
ian situation” (Dodd‐Frank)
(U.S. House of Representa-
tives, 2010). The SEC adopted
this rule in August of 2012,
with the first disclosures filed
with the SEC in May 2014.
The rule applies to conflict
minerals from the Democratic
Republic of Congo and adjoin-
ing countries (i.e., the “covered
countries”).
WHICH COMPANIES DOES
THISREQUIREMENT APPLY
TO AND WHAT KIND OF
PRODUCTS/MATERIALS MUST
BE INVESTIGATED?
Companies are subject
to these disclosure require-
ments if they file reports with
the SEC under the Securities
Exchange Act of 1934 and the
minerals are “necessary to the
functionality or pro-
duction of a product
[either] manufac-
tured or contracted
to be manufactured
by the company.”1
A company is not
considered to be
“contracting to man-
ufacture” if it does
not have influence
over the manufactur-
ing of the product.
This would include
situations such as
the following: (1)
a company simply
attaches their brand
or logo to a generic product
manufactured by a third party
or (2) a company services a
product manufactured by a
third party. However, the SEC
has indicated that the level
of influence can be viewed as
a sliding scale ranging from
none to significant; therefore,
companies should assess their
level of influence, as it could
potentially put them within
the bounds of these disclosure
requirements. Packaging is
not considered to be part of
the product unless it is sold
Under the Dodd-Frank Act, U.S. publicly traded
companies are now required to provide disclosures
related to conflict minerals. These are specifically
the minerals of tin, tantalum, tungsten, and gold that
are obtained from the Democratic Republic of Congo
and adjoining countries. Although a portion of the
requirements were struck down and ruled as uncon-
stitutional, certain inquiry and other due diligence
measures are still required to be filed annually with
the Securities and Exchange Commission (SEC). In
addition, if a company voluntarily chooses to provide
certain additional information, it will trigger a require-
ment for an independent audit of the Conflict Miner-
als Report filed with the SEC. © 2015 Wiley Periodicals, Inc.
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