On Friday, the SEC and Amnesty International each filed petitions seeking a rehearing en banc of the August 2015 panel opinion of the U.S. Court of Appeals for the District of Columbia Circuit regarding the conflict minerals rules. The August 2015 panel decision reaffirmed the April 2014 decision, which concluded that the requirement that public companies report to the SEC and the public whether any of their products are “DRC conflict free,” or have “not been found to be ‘DRC conflict free,’” violates the First Amendment right to free speech.
In its petition, the SEC stated that it believed an en banc rehearing is warranted because the August panel opinion conflicts with both Supreme Court precedent as well as the recent en banc decision in American Meat Institute v. U.S. Department of Agriculture, which upheld country-of-origin labelling requirements for meat products.
While the future of the litigation is uncertain, these petitions do not impact the current guidance issued by the SEC’s Division of Corporation Finance in response to the April 2014 decision. As a reminder, that guidance provides:
- No company is required to describe its products as “DRC conflict free,” having “not been found to be ‘DRC conflict free,’” or “DRC conflict undeterminable;” and
- An independent private sector audit will not be required unless a company voluntarily elects to describe a product as “DRC conflict free” in its Conflict Minerals Report.
Given the current status of the litigation, it seems unlikely that this guidance will change for the 2015 reporting period. As a result, we do not expect that companies will be required to obtain independent private sector audits for the filings due in 2016 unless a company voluntarily elects to describe a product as “DRC conflict free.”