Conflict Mineral Disclosure Requirements

• Published date: 01 November 2015
• DOI: http://doi.org/10.1002/jcaf.22114
• Date: 01 November 2015
• Author: Leah Muriel

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© 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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