SEC Staff Guidance on Conflict Minerals and Resource Payments Disclosure: Guidance Addresses Various Questions, Including Application of Rules to Holding Companies and Service Providers, But Significant Issuer Judgment Will Continue to be Required; Clarifies That Form S-3 and F-3 Eligibility Is Not Impacted by Failure to Timely File Form SD

Sullivan & Cromwell LLP - June 3, 2013

On May 30, 2013, the staff of the Securities and Exchange Commission posted on its website two sets of frequently asked questions providing guidance on the SEC’s rules under Sections 13(p) and 13(q) of the Securities Exchange Act of 1934, which implement the conflict minerals and resource payments disclosure provisions of Sections 1502 and 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The conflict minerals rules impose due diligence and disclosure requirements and apply to any SEC reporting issuer that uses conflict minerals necessary to the functionality or production of a product that it manufactures or contracts to manufacture. The resource payments rules require issuers that engage in the commercial development of oil, natural gas or minerals to disclose detailed information relating to certain payments made to certain governments and governmental entities. These disclosures must be made annually on Form SD, the first of which is due in May 2014.

This new guidance addresses some basic questions about the rules, but a significant number of definitional and interpretive questions remain unanswered. For these questions, absent additional guidance, issuers will need to make reasonable judgments as to how to apply the rules to their particular circumstances, and should focus on developing disclosure controls and procedures that, responsive to the rules, are practical and consistent with practice in their industry as it develops.