By Beth A. Schneider and Kristen Sullivan, Deloitte & Touche LLP

Transcription

1 March 27, 2014 Vlume 21, Issue 7 Heads Up In This Issue: Intrductin Backgrund n the SEC Cnflict Minerals Rule Reprting Under the SEC Cnflict Minerals Rule General Instructins Scenari-Specific Disclsure Requirements Requirements fr an IPSA Cnclusin Appendix A Sample Frm SD and CMR Appendix B Summary f SEC Cnflict Minerals Reprting Requirements by Scenari May 31, 2014, the filing deadline fr the initial filings f Frm SD, is appraching, yet there is much uncertainty regarding what Frm SD and, if applicable, the accmpanying CMR shuld lk like. Navigating Reprting Requirements fr Frm SD and Cnflict Minerals Reprts By Beth A. Schneider and Kristen Sullivan, Delitte & Tuche LLP Intrductin In August 2012, the SEC released its rule n cnflict minerals (the SEC rule ) in accrdance with Sectin 1502 f the Ddd-Frank Wall Street Refrm and Cnsumer Prtectin Act (the Ddd-Frank Act ). The SEC rule requires registrants with cnflict minerals that are necessary t the functinality r prductin f their prducts t reprt annually n Frm SD (which stands fr special disclsures ) fr each calendar year cmmencing with In certain situatins, a registrant may be t include, as an exhibit t its Frm SD, a Cnflict Minerals Reprt (CMR), which prvides expanded disclsures. May 31, 2014, 1 the filing deadline fr the initial filings f Frm SD, is appraching, yet there is much uncertainty regarding what Frm SD and, if applicable, the accmpanying CMR shuld lk like. The instructins t Frm SD prvide the skeletal framewrk fr preparatin f Frm SD and a CMR. The SEC rule als requires that an independent private sectr audit (IPSA) be btained in certain situatins and the Frm SD instructins als prvide infrmatin as t what is t be included in a CMR when an IPSA is. This Heads Up explres the disclsures that a registrant is t include in Frm SD and the accmpanying CMR n the basis f pssible scenaris that the registrant might encunter. This publicatin als includes an analysis f whether an IPSA is in each scenari. Further, Appendix A f this Heads Up prvides a sample Frm SD and a descriptin f ptential cntent fr tw f the scenaris, while Appendix B f this Heads Up includes a table summarizing the requirements fr each scenari. Backgrund n the SEC Cnflict Minerals Rule Sectin 1502 f the Ddd-Frank Act the SEC t prmulgate rules under the Securities Exchange Act f 1934 whereby registrants with necessary cnflict minerals 2 must annually disclse certain infrmatin regarding the surcing f such minerals. Because the mining f certain minerals in the Demcratic Republic f the Cng (DRC) and adjining cuntries was attributed t funding activities f vilence in this regin, this sectin f the Ddd-Frank Act was aimed at mre respnsible surcing by U.S. registrants. Cnflict minerals are currently identified as clumbite-tantalite (cltan), cassiterite, gld, wlframite, r their derivatives, which are limited t tantalum, tin, and tungsten, unless the Secretary f State determines that additinal derivatives are financing cnflict in the [DRC] r an adjining cuntry. 3 1 Given that the filing date falls n a Saturday, registrants will have until June 2, That is, cnflict minerals that are necessary t the functinality r prductin f their prducts. 3 See the definitins sectin f the instructins t Frm SD fr the cmplete definitin f cnflict minerals, which ntes that the Secretary f State may expand the listing.

2 The SEC rule requires registrants with necessary cnflict minerals t perfrm a reasnable cuntry f rigin inquiry (RCOI) t determine whether such minerals may have riginated in the DRC r an adjining cuntry. If s, the registrant then perfrms due diligence measures t ascertain whether such minerals were frm surces that funded armed grups. The SEC rule requires registrants t design their due diligence framewrk in accrdance with a natinally r internatinally recgnized due diligence framewrk. The framewrk that many registrants are expected t use is the OECD Due Diligence Guidance fr Respnsible Supply Chains f Minerals frm Cnflict-Affected and High-Risk Areas, Secnd Editin, which is published by the Organisatin f Ecnmic C-Operatin and Develpment (the OECD ). Temprary Transitin Perid The nature f the disclsures that a registrant mst likely will need t prvide abut cnflict minerals may vary accrding t hw many steps f the SEC s stepped prcess the registrant is t cmplete. Given the challenges fr registrants and their suppliers in adpting the requirements f the SEC rule and the difficulties they encunter in btaining infrmatin they may need frm cmpanies thrughut the supply chain t determine whether a registrant s prducts are DRC cnflict free, 4 the SEC has permitted a temprary perid in which registrants may reprt that certain prducts are DRC cnflict undeterminable. We refer t this perid herein as the temprary transitin perid, which, fr cmpanies ther than smaller reprting cmpanies, is the tw years after the issuance f the SEC rule (namely, the 2013 and 2014 reprting years) and fr smaller reprting cmpanies is fur years. The SEC rule als specified certain exceptins t the requirement fr an IPSA during the temprary transitin perid, discussed later in this Heads Up. Reprting Under the SEC Cnflict Minerals Rule Page 33 f the SEC rule presents a flwchart summarizing the stepped prcess fr determining whether a registrant is t file Frm SD and, if s, whether a CMR is. The nature f the disclsures that a registrant mst likely will need t prvide abut cnflict minerals may vary accrding t hw many steps f the SEC s stepped prcess the registrant is t cmplete. With each successive step, additinal disclsure requirements kick in and, ultimately, the need fr an IPSA. Thus, a registrant s individual facts and circumstances establish whether the registrant is t file Frm SD with r withut a CMR (which, if, is included as an exhibit t Frm SD), the specific disclsures that must be included in Frm SD and the accmpanying CMR, and whether an IPSA is. A registrant may find itself in ne f five scenaris in which it culd file Frm SD. These scenaris, which are labeled belw as Scenaris A thrugh E t make it easier fr readers t navigate the disclsure requirements, differ with respect t the utcme f a registrant s determinatin regarding the surcing f its necessary cnflict minerals as it cmpletes the SEC stepped prcess. The five scenaris are as fllws: On the basis f its RCOI results, the registrant is t file a Frm SD but nt a CMR (Scenari A) A registrant is in Scenari A if as a result f perfrming RCOI, the registrant: Has cncluded that its necessary cnflict minerals: Did nt riginate in the DRC r an adjining cuntry. Came frm recycled r scrap surces. Has n reasn t believe that its necessary cnflict minerals may have riginated in the DRC r an adjining cuntry. Reasnably believes that its necessary cnflict minerals came frm recycled r scrap surces. 4 The SEC defines DRC cnflict free as des nt cntain cnflict minerals necessary t the functinality r prductin f that prduct that directly r indirectly finance r benefit armed grups as defined in [the SEC rule] in the [DRC] r an adjining cuntry. The SEC rule als specifies that cnflict minerals that the registrant btains frm recycled r scrap surces are cnsidered DRC cnflict free. 2

3 Registrants that are unable t determine the surcing f their necessary cnflict minerals may classify them as DRC cnflict undeterminable during the temprary transitin perid prvided by the SEC. On the basis f its due diligence results, the registrant is t file a Frm SD but nt a CMR (Scenari B) A registrant is in Scenari B if as a result f perfrming due diligence n the surce and chain f custdy 5 f its cnflict minerals, the registrant: Has determined that its necessary cnflict minerals: Did nt riginate in the DRC r an adjining cuntry. Came frm recycled r scrap surces. The registrant is t file bth a Frm SD and a CMR but is nt t btain an IPSA because the surcing is undeterminable (i.e., the surcing is DRC cnflict undeterminable ) (Scenari C) A registrant is in Scenari C if as a result f perfrming due diligence n the surce and chain f custdy f its necessary cnflict minerals, the registrant: Was unable t determine whether r nt its necessary cnflict minerals: Originated in the DRC r an adjining cuntry. Came frm recycled r scrap surces. Determined that sme f its necessary cnflict minerals riginated in the DRC r an adjining cuntry but was unable t determine whether such minerals came frm surces that directly r indirectly financed r benefited armed grups, as this term is defined in the SEC rule. 6 Under the SEC rule, this scenari is nly applicable during the temprary transitin perid. A registrant that is still unable t determine the surcing after this time is likely t be in Scenari D. The registrant is t file a Frm SD with a CMR as well as an IPSA reprt because surcing fr ne r mre prducts has nt been fund t be DRC cnflict free (Scenari D) A registrant is in Scenari D if as a result f perfrming due diligence n the surce and chain f custdy f its necessary cnflict minerals, the registrant has determined that it has ne r mre prducts cntaining necessary cnflict minerals that have nt been fund t be DRC cnflict free. Althugh cnsidered an unlikely ccurrence during the temprary transitin perid, if a registrant determines that sme surcing f its necessary cnflict minerals may have directly r indirectly benefited armed grups even thugh the registrant is unable t make a determinatin fr ther surcing, it appears that the IPSA requirement may be triggered (see Requirements fr an IPSA sectin belw). Hwever, because views may vary regarding the applicability f the SEC rule s exceptins t btaining an audit 7 in different situatins during the temprary transitin perid, it is imprtant fr registrants t discuss such determinatins with their SEC cunsel. Regardless, after the temprary transitin perid, registrants that are still unable t determine the surcing f their necessary cnflict minerals mst likely will be t describe such prducts as having nt been fund t be DRC cnflict free and t btain an IPSA. The registrant is t file a Frm SD with a CMR as well as an IPSA reprt because prducts are surced frm the regin but are therwise DRC cnflict free (Scenari E) A registrant is in Scenari E if the registrant has ne r mre prducts with necessary cnflict minerals that have been surced frm the DRC r an adjining cuntry and are nt frm recycled r scrap surces but that are therwise fund t be DRC cnflict free (e.g., surcing frm a smelter that has been certified as DRC cnflict free under recgnized certificatin prtcls). 5 A registrant may have perfrmed due diligence measures because it had reasn t believe, after perfrming RCOI, that sme f its necessary cnflict minerals may have riginated in the DRC r an adjining cuntry and did nt cme frm recycled r scrap surces. In sme cases, the registrant might subsequently cnclude that its necessary cnflict minerals did nt cme frm the DRC r an adjining cuntry after all. 6 The term armed grup is defined in Item 1.01(d)(2) in the Frm SD instructins (page 352 f the SEC rule). 7 See Item 1.01(c)(1)(iv) in the instructins t Frm SD (pages f the SEC rule) fr the audit exceptins. 3

4 The SEC rule s disclsure requirements related t each f these scenaris are explred in mre depth belw. Because the disclsures will ultimately depend n a registrant s individual facts and circumstances, registrants shuld cnsult their SEC cunsel in determining the apprpriate disclsures t prvide. General Instructins The SEC has published instructins fr Frm SD that prvide an illustratin f the cver page and signature sectin. The instructins als identify certain cntent requirements and a heading. Sme initial versins f bth Frm SD and the CMR that varius rganizatins have been drafting as they attempt t navigate the SEC rule and Frm SD instructins appear t cntain sme incnsistencies with the instructins; accrdingly, it seems wrthwhile t analyze the requirements and discuss the ptential latitude that may be apprpriate with respect t the structure f Frm SD and the CMR. The SEC instructins fr Frm SD prvide an illustratin f the cver page and signature sectin and identify certain cntent requirements and headings. General Instructin D f Frm SD states that [t]he reprt [Frm SD] shall cntain the number and captin f the applicable item 8 (emphasis added). Accrdingly, we expect t see the fllwing items appearing in Frm SDs (althugh sme early drafts seem t be missing them): Item 1.01 Cnflict Minerals Disclsure and Reprt. Item 2.01 Exhibits. The Frm SD instructins als include tw distinct sectins, under which the abve items appear: Sectin 1 Cnflict Minerals Disclsure. Sectin 2 Exhibits. Althugh the instructins d nt explicitly mentin the use f such sectin numbering, it might further imprve the readability f a registrant s Frm SD. Scenari-Specific Disclsure Requirements This sectin identifies the specific disclsure requirements that apply t each f the scenaris abve, alng with views n hw a registrant might address certain disclsure requirements. Scenari A and Scenari B Reprting Registrant Determined That It Is Nt Surcing Frm the DRC r an Adjining Cuntry Frm SD A registrant in Scenari A r B (as defined abve) is t include in the bdy f Frm SD a separate heading, Cnflict Minerals Disclsure, under which the registrant is t disclse certain matters pertaining t its RCOI r due diligence. The fllwing table summarizes these requirements: Scenari A B Frm SD Sectin 1 Cnflict Minerals Disclsure (heading) helpful helpful Item 1.01 Cnflict Minerals Disclsure and Reprt (heading) Cnflict Minerals Disclsure (heading) Determinatin disclsure RCOI descriptin 8 See page 345 f the SEC rule. 4

5 Scenari A B Frm SD (cntinued) RCOI and due diligence descriptin RCOI results RCOI and due diligence results Reference t CMR Link t website Sectin 2 Exhibits Item 2.01 Exhibits (heading) Exhibit 1.01 Cnflict Minerals Reprt The Frm SD instructins d nt require registrants t prvide ther disclsures abut RCOI r due diligence in the main bdy f Frm SD when filing a CMR. The determinatin disclsure fr Scenari A is the registrant s cnclusin that its necessary cnflict minerals did nt riginate in the DRC r an adjining cuntry r came frm recycled r scrap surces; that it has n reasn t believe that its necessary cnflict minerals may have riginated in the DRC r an adjining cuntry; r that it reasnably believes that its necessary cnflict minerals did cme frm recycled r scrap surces. The determinatin disclsure fr Scenari B is the registrant s cnclusin that its necessary cnflict minerals did nt riginate in the DRC r an adjining cuntry r did cme frm recycled r scrap surces. Nte that the difference between the disclsures in Scenari A and thse in Scenari B is that in Scenari B, an entity is t include disclsures regarding the perfrmance f bth RCOI and due diligence tgether with the related results. CMR and IPSA Applicability In Scenaris A and B, because nne f the registrant s necessary cnflict minerals were fund t have cme frm the DRC r an adjining cuntry, neither a CMR nr an IPSA is. Scenari C Reprting Prducts That Are DRC Cnflict Undeterminable Frm SD When a registrant is t file a CMR (referred t as Exhibit 1.01), the main bdy f Frm SD is t include a separate heading, Cnflict Minerals Disclsure (as in Scenaris A and B). Hwever, in Scenari C, the disclsures under the heading are as fllws: Disclsure that the registrant has filed a CMR. Link t the registrant s website where the CMR is publicly available. Nte that the Frm SD instructins d nt require registrants t prvide ther disclsures abut RCOI r due diligence in the main bdy f Frm SD when filing a CMR. On the basis f General Instructin D t Frm SD, we als expect t see Item 2.01 listed in the main bdy f Frm SD, with Exhibit 1.01 listed underneath as an exhibit that is filed with Frm SD (see General Instructins sectin abve). CMR and IPSA Applicability Althugh the SEC instructins are silent regarding the placement f the CMR when a CMR is, it is likely t fllw the signature page f Frm SD, be titled accrdingly 5

6 as the Cnflict Minerals Reprt, and be labeled as Exhibit 1.01 at the tp. The Frm SD instructins state that the CMR must include the fllwing infrmatin: (1) Due Diligence The registrant is t: Include a descriptin f the measures the registrant has taken t exercise due diligence n the surce and chain f custdy f thse cnflict minerals. 9 The SEC rule describes certain steps as RCOI and thers as due diligence; hwever, in practice, sme registrants might nt distinguish between RCOI and due diligence in perfrming the measures. We believe that sme registrants als may nt try t distinguish between them in the descriptin f their measures. Disclse the steps it has taken r will take, if any, since the end f the perid cvered in its mst recent prir CMR t mitigate the risk that its necessary cnflict minerals benefit armed grups, including any steps t imprve its due diligence. 10 The SEC rule describes certain steps as RCOI and thers as due diligence; hwever, in practice, sme registrants might nt distinguish between RCOI and due diligence in perfrming the measures r in their descriptins. Fr the May 31, 2014, filing date, there mst likely will have been n prir CMRs filed; accrdingly, disclsures related t the secnd bulleted item are nt likely t be until the secnd year (and fllwing years fr smaller reprting cmpanies) during which the DRC cnflict undeterminable classificatin is permitted. Hwever, n the basis f infrmatin exchanged in different frums, sme registrants appear t be cnsidering disclsing, in the initial filing, measures that they plan t take in the future regardless f whether such disclsures are. (2) Prduct Descriptin Fr prducts that are classified as DRC cnflict undeterminable, the registrant is t include the fllwing: Descriptin f thse prducts. The facilities used t prcess the necessary cnflict minerals in thse prducts, if knwn. The cuntry f rigin f the necessary cnflict minerals in thse prducts, if knwn. The effrts t determine the mine r lcatin f rigin with the greatest pssible specificity. 11 A registrant may btain its necessary cnflict minerals frm a number f different facilities fr a given prduct, sme frm a cnflict-free surce and thers frm an unknwn surce. The Cnflict-Free Surcing Initiative has created examples f disclsures related t the secnd and third requirements abve, which can help registrants deal with sme f the cmplexities f prducts that are DRC cnflict undeterminable. Further, nte that the Frm SD instructins state that a registrant is nt t prvide the abve prduct descriptin infrmatin if the necessary cnflict minerals in its prduct are slely frm recycled r scrap surces because thse prducts are cnsidered DRC cnflict free. Similarly, we expect that registrants will mst likely nt prvide in-depth disclsures regarding ther prducts that they have cncluded are DRC cnflict free; hwever, sme registrants might prvide general disclsures identifying certain prducts r a percentage f prducts as DRC cnflict free. Because an IPSA is nt when a registrant is permitted t reprt as DRC cnflict undeterminable, there are n disclsure requirements pertaining t an IPSA in the Frm SD r accmpanying CMR. 9 Text is derived frm Item 1.01(c)(1) f the Frm SD instructins. 10 Text is derived frm Item 1.01(c)(1)(iii) f the Frm SD instructins. 11 Text is derived frm Item 1.01(c)(2)(i) f the Frm SD instructins. 6

7 Scenari D Reprting One r Mre Prducts Have Nt Been Fund t Be DRC Cnflict Free If a registrant is still unable t determine, after the expiratin f the temprary transitin perid, whether sme f its prducts are DRC cnflict free, such prducts are t be described as having nt been fund t be DRC cnflict free. 12 Frm SD When a registrant is t file a CMR (referred t as Exhibit 1.01), the main bdy f Frm SD is t include a separate heading, Cnflict Minerals Disclsure (as in Scenaris A and B). Hwever, in Scenari D, the disclsures under the heading are as fllws: Disclsure that the registrant has filed a CMR. Link t the registrant s website where the CMR is publicly available. Nte that the Frm SD instructins d nt require registrants t prvide ther disclsures abut RCOI r due diligence in the main bdy f Frm SD when filing a CMR. When a CMR is, the CMR is likely t fllw the signature page, be titled accrdingly as the Cnflict Minerals Reprt, and be labeled as Exhibit 1.01 at the tp. On the basis f General Instructin D t Frm SD, we als expect t see Item 2.01 listed in the main bdy f Frm SD, with Exhibit 1.01 listed underneath as an exhibit that is filed with Frm SD. CMR and IPSA Applicability As stated earlier, althugh the SEC instructins are silent regarding the placement f the CMR when a CMR is, the CMR is likely t fllw the signature page, be titled accrdingly as the Cnflict Minerals Reprt, and be labeled as Exhibit 1.01 at the tp. The Frm SD instructins state that the CMR must include the fllwing infrmatin when prducts have nt been fund t be DRC cnflict free: (1) Due Diligence The registrant is t include: A descriptin f the measures the registrant has taken t exercise due diligence n the surce and chain f custdy f thse cnflict minerals. 13 The SEC rule describes certain steps as RCOI and thers as due diligence; hwever, in practice, sme registrants might nt distinguish between RCOI and due diligence in perfrming the measures. We believe that sme registrants als may nt try t distinguish between them in the descriptin f their measures. Because an IPSA is in this scenari, the fllwing matters pertaining t the IPSA: Include a statement that the registrant has btained an IPSA. Identify the IPSA auditr if the auditr in nt identified in the IPSA reprt. Prvide the IPSA reprt. 14 We expect that IPSA reprts likely will identify the auditr (the rganizatin that perfrmed the IPSA) 15 and that the registrant therefre will nt need t identify the auditr in the CMR. Given that the prduct descriptin (see belw) is part f the CMR, we expect that the IPSA reprt might appear at the end f the CMR after the registrant s disclsures. 12 See Instructin 2 t Item 1.01 in the Frm SD instructins (page 354 f the SEC rule). 13 Text is derived frm Item 1.01(c)(1) f the Frm SD instructins. 14 Text is derived frm Item 1.01(c)(1)(ii)(B) (C) f the Frm SD instructins. 15 The Attestatin Standards specifically require the examinatin reprt t include the manual r printed signature f the practitiner s firm. Althugh the Perfrmance Audit standards are silent n this matter, such audit reprts are likely t cntain the identity f the auditr in sme manner. 7

8 The Cnflict-Free Surcing Initiative gives examples f certain disclsures abut prduct descriptins that can help registrants deal with sme f the cmplexities f prviding disclsures abut prducts that are DRC cnflict undeterminable. (2) Prduct Descriptin The registrant is t include: Fr prducts that have nt been fund t be DRC cnflict free: A descriptin f thse prducts. The facilities used t prcess the necessary cnflict minerals in thse prducts. The cuntry f rigin f the necessary cnflict minerals. The effrts t determine the mine r lcatin f rigin with the greatest pssible specificity. 16 Fr prducts that are DRC cnflict undeterminable: A descriptin f thse prducts. The facilities used t prcess the necessary cnflict minerals in thse prducts, if knwn. The cuntry f rigin f the necessary cnflict minerals in thse prducts, if knwn. The effrts t determine the mine r lcatin f rigin with the greatest pssible specificity. 17 Nte that a registrant might have sme prducts that have nt been fund t be DRC cnflict free and thers that have been classified as DRC cnflict undeterminable. Thus, such a registrant culd include tw separate classificatins in the prduct descriptin sectin f the CMR during the temprary transitin perid. After the temprary transitin perid, a registrant wuld describe prducts whse cnflict minerals status is still undeterminable as having nt been fund t be DRC cnflict free. The Cnflict-Free Surcing Initiative gives examples f certain disclsures abut prduct descriptins that can help registrants deal with sme f the cmplexities f prviding disclsures pertaining t prducts that are DRC cnflict undeterminable. These examples als may be useful t registrants that are preparing disclsures abut prducts that have nt been fund t be DRC cnflict free. As in Scenari C, a registrant is nt t prvide the abve prduct descriptin infrmatin fr a prduct if the necessary cnflict minerals in its prduct are slely frm recycled r scrap surces because thse prducts are cnsidered DRC cnflict free. Similarly, we expect that registrants likely will nt prvide in-depth disclsures abut prducts that they have cncluded are DRC cnflict free; hwever, sme registrants might prvide general disclsures that identify certain prducts r a percentage f prducts as DRC cnflict free. Scenari E Reprting Surcing Frm the DRC r an Adjining Cuntry Is DRC Cnflict Free Registrants are t file Frm SD and a CMR and t btain an IPSA when they have surced frm the DRC r an adjining cuntry even if they have determined that such cnflict minerals did nt directly r indirectly benefit armed grups (e.g., frm certified cnflict-free smelters). The disclsure discussin in this sectin assumes that the registrant has cncluded that all f its prducts cntaining necessary cnflict minerals are DRC cnflict free. Hwever, if the registrant als has ne r mre ther prducts whse cnflict-free status is undeterminable, the registrant is likely t apply a cmbinatin f the disclsure requirements frm Scenaris C and E. Althugh sme prducts might be described as DRC cnflict undeterminable, we expect that the IPSA requirement culd be triggered because f the surcing frm the DRC r an adjining cuntry. 16 Text is derived frm Item 1.01(c)(2) f the Frm SD instructins. 17 Text is derived frm Item 1.01(c)(2)(i) f the Frm SD instructins. 8

9 Frm SD The main bdy f Frm SD cntains a separate heading, Cnflict Minerals Disclsure (as in Scenaris C and D), under which a registrant is t include the fllwing disclsures: Disclsure that the registrant has filed a CMR. Link t the registrant s website where the CMR is publicly available. Nte that the Frm SD instructins d nt require a registrant t prvide ther disclsures abut RCOI r due diligence in the main bdy f Frm SD when filing a CMR. On the basis f General Instructin D, we als expect t see Item 2.01 listed in the main bdy f Frm SD, with Exhibit 1.01 listed underneath as an exhibit that is filed with Frm SD. The Frm SD instructins d nt include specific disclsure requirements fr prducts that have been fund t be DRC cnflict free. CMR As stated earlier, althugh the SEC instructins are silent regarding the placement f the CMR, the CMR is likely t fllw the signature page, be titled accrdingly as the Cnflict Minerals Reprt, and be labeled as Exhibit 1.01 at the tp. The Frm SD instructins state that the CMR must include the fllwing infrmatin: (1) Due Diligence The registrant is t include: A descriptin f the measures the registrant has taken t exercise due diligence n the surce and chain f custdy f thse cnflict minerals. 18 As stated earlier, the SEC rule describes certain steps as RCOI and thers as due diligence; hwever, in practice, sme registrants might nt distinguish between RCOI and due diligence in perfrming the measures. We believe that sme registrants als may nt try t distinguish between them in the descriptin f their measures. This descriptin may include measures describing what was btained t frm the registrant s cnflict-free cnclusin (e.g., certificatins f smelters). Because an IPSA is in this scenari, the fllwing matters pertaining t the IPSA: Include a statement that the registrant has btained an IPSA. Identify the IPSA auditr if the auditr in nt identified in the IPSA reprt. Prvide the IPSA reprt. 19 We expect that IPSA reprts likely will identify the auditr (the rganizatin that perfrmed the IPSA) and that the registrant therefre will nt need t identify the auditr in the CMR. Accrdingly, please make this a secnd paragraph (see immediately preceding bx fr the style. Althugh disclsures regarding prduct descriptins d nt appear t be fr registrants in Scenari E (see Prduct Descriptin sectin belw), if the registrant vluntarily includes disclsures under this heading, it wuld be part f the CMR. We expect that, in such circumstances, the IPSA reprt wuld appear at the end f the CMR after the registrant s disclsures ( and vluntary). (2) Prduct Descriptin The Frm SD instructins d nt include specific disclsure requirements fr prducts that have been fund t be DRC cnflict free. 18 Text is derived frm Item 1.01(c)(1) f the Frm SD instructins. 19 Text is derived frm Item 1.01(c)(1)(ii)(B) (C) f the Frm SD instructins. 9

10 Althugh the Frm SD instructins d nt include specific disclsure requirements fr prducts that have been fund t be DRC cnflict free, a registrant in Scenari E might vluntarily disclse that its prducts cntaining necessary cnflict minerals have been determined t be DRC cnflict free. Illustrative Example f Frm SD and CMR Given that a number f registrants have been struggling with creating the Frm SD and CMR, we ffer sme thughts n frm and cntent fr reprting under Scenari C r D (based n the instructins t Frm SD) in the illustrative example in Appendix A f this Heads Up. As the first filing date appraches and varius rganizatins share prpsed reprting practices, we expect cnflict minerals reprting practices t evlve, and as Frm SD submissins becme available, leading practices will emerge. In additin, the SEC might prvide further clarificatin t help registrants implement the reprting requirements f the SEC rule. Requirements fr an IPSA The table belw summarizes when an IPSA might be under the varius scenaris described abve. As with the disclsure requirements, registrants shuld cnsult their SEC cunsel in determining whether an IPSA is in their specific situatin. Registrants shuld cnsult their SEC cunsel in determining whether an IPSA is in their specific situatin. Determinatin f Cnflict Minerals Status On the basis f RCOI, prducts have been classified as DRC cnflict free because n surcing is frm the DRC r an adjining cuntry (Scenari A) On the basis f RCOI and due diligence measures, prducts have been classified as DRC cnflict free because n surcing is frm the DRC r an adjining cuntry (Scenari B) On the basis f RCOI and due diligence measures, prducts are nly classified as DRC cnflict undeterminable (Scenari C) Sme prducts have been classified as DRC cnflict undeterminable and ther prducts have nt been fund t be DRC cnflict free (cmbinatin f Scenaris C and D) (This cmbinatin is nly pssible during the temprary transitin perid, after which registrants are under the SEC rule t describe such prducts as having nt been fund t be DRC cnflict free (Scenari D)) Sme prducts are DRC cnflict undeterminable and thers are fund t cntain cnflict minerals surced frm the DRC r an adjining cuntry but therwise DRC cnflict free (cmbinatin f Scenaris C and E) Sme prducts have nt been fund t be DRC cnflict free (Scenari D) Sme prducts have nt been fund t be DRC cnflict free while ther prducts have been determined t be surced frm the DRC r an adjining cuntry but are therwise DRC cnflict free (cmbinatin f Scenaris D and E) Surcing frm the DRC r an adjining cuntry but is DRC cnflict free (Scenari E) IPSA Required? N N Nt during temprary transitin perid Yes, because the entity determined that the surcing fr certain prducts may have benefited armed grups Yes, because the entity determined that it was surcing frm the DRC r an adjining cuntry fr sme prducts even thugh such surcing was DRC cnflict free Yes Yes Yes Cnclusin It is apparent frm this analysis and the summary table in Appendix B f this Heads Up that the cntent f Frm SDs and any accmpanying CMRs may vary significantly frm registrant t registrant, particularly if the Frm SD f a registrant in Scenari A is cmpared with that f a registrant in Scenari E r the Frm SD r CMR f a registrant in Scenari C r D is cmpared with that f a registrant in Scenari B, wh wuld nt 10

11 have a CMR. Als, there currently appears t be sme cnfusin regarding whether an IPSA is triggered during the temprary transitin perid if a registrant has different determinatins fr different prducts (e.g., DRC cnflict undeterminable fr sme prducts but DRC cnflict free fr thers). Accrdingly, each registrant shuld cnsider its specific facts and circumstances, including (1) the utcme f its RCOI and, if applicable, due diligence measures in determining the disclsures fr its situatin and (2) fr determining whether an IPSA is. Given the cmplexities f the SEC rule and reprting requirements, registrants shuld cnsult their SEC cunsel as part f this prcess. 11

12 Appendix A Sample Frm SD and CMR The sample Frm SD belw illustrates hw the abve disclsures fr Scenaris C and D might be captured in Frm SD and the accmpanying CMR fllwing the Frm SD instructins f the SEC rule. The matters r sectins that a registrant is likely t cmplete are in italics. The SEC rule des nt require specific sectin headings in the CMR; hwever, such headings have been included fr structural purpses. Given that the disclsures may depend n a registrant s facts and circumstances, registrants are encuraged t wrk with their SEC cunsel in develping their wn Frm SDs and CMRs. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washingtn, D.C FORM SD SPECIALIZED DISCLOSURE REPORT (Exact name f the registrant as specified in its charter) (State r ther jurisdictin f incrpratin r rganizatin) (Cmmissin File Number) (IRS Emplyer Identificatin N.) (Address f principal executive ffices) (Zip cde) (Name and telephne number, including area cde, f the persn t cntact in cnnectin with this reprt.) Check the apprpriate bx t indicate the rule pursuant t which this frm is being filed, and prvide the perid t which the infrmatin in this frm applies: Rule 13p-1 under the Securities Exchange Act (17 CFR p-1) fr the reprting perid frm January 1 t December 31,. Sectin 1 Cnflict Minerals Disclsure Item 1.01 Cnflict Minerals Disclsure and Reprt Item 1.01 instructins require this heading Cnflict Minerals Disclsure Item 1.01 instructins require this heading The registrant is t disclse that it has filed a CMR and prvide the link t its Internet website where the CMR is publicly available. Example: The Cnflict Minerals Reprt fr the calendar year ended December 31, 2013 filed herewith as Exhibit 1.01, is available at [link t the registrant s website where the CMR is publicly available]. Sectin 2 Exhibits Item 2.01 Exhibits Item 1.01 instructins require this heading when a CMR reprt is filed Exhibit 1.01 Cnflict Minerals Reprt SIGNATURES Pursuant t the requirements f the Securities Exchange Act f 1934, the registrant has duly caused this reprt t be signed n its behalf by the duly authrized undersigned. (Registrant) By (Signature and Title) (Date) Registrants are t print name and title f the registrant s signing executive fficer under his r her signature. 12

13 Cnflict Minerals Reprt Exhibit 1.01 The registrant is t file this reprt with Frm SD unless it has determined that its necessary cnflict minerals (1) came frm recycled r scrap surces r (2) did nt riginate in the DRC r an adjining cuntry. Specific sectin headings are nt ; hwever, are included fr structural purpses. [The registrant might include an intrductin sectin (with r withut a heading) t include matters such as the fllwing: A descriptin f the cmpany and why it is filing the CMR (fr example, because it believes that, r is unable t determine whether, certain prducts that the registrant cntracts t manufacture cntain necessary cnflict minerals that riginated in the DRC r an adjining cuntry) Which cnflict minerals are cnsidered necessary t the functinality r prductin f such prducts A descriptin f certain aspects f RCOI that it perfrmed A descriptin f its cnflict minerals plicy]. Part I. Due Diligence [The registrant might prvide intrductry infrmatin; fr example, that the registrant has perfrmed due diligence n the surce and chain f custdy f the cnflict minerals that are included in its prducts and fr which, based n its RCOI, the registrant has reasn t believe may have riginated in the DRC r an adjining cuntry and may nt have cme frm recycled r scrap surces.] Design f Due Diligence This heading is nt ; hwever, the registrant might cnsider including it (r smething similar) t prvide mre clarity n the tpics included in the CMR. [The registrant might include an assertin in the CMR that its due diligence cnfrms t/is cnsistent with a natinally r internatinally recgnized due diligence framewrk that it used (e.g., the OECD Due Diligence Guidance fr Respnsible Supply Chains f Minerals frm Cnflict-Affected and High-Risk Areas (Secnd Editin)).] Due Diligence Measures Perfrmed This heading is nt ; hwever, the registrant might cnsider including it (r smething similar) t prvide mre clarity n the tpics included in the CMR and s that the auditrs may apprpriately reference what their IPSA cvered. [The registrant is t include in the CMR the descriptin f the measures it has taken t exercise due diligence n the surce and chain f custdy f the cnflict minerals. Sme measures might be identified as part f the registrant s perfrmance f RCOI and included in a different sectin f the CMR (fr example, the cnflict minerals plicy might be included in an intrductry sectin). The descriptin f the measures undertaken might include the fllwing (nt limited t): A. The registrant s adpted cnflict minerals plicy (gverning the supply chain f cnflict minerals frm the DRC r an adjining cuntry), and hw the plicy is cmmunicated t relevant emplyees and suppliers. B. The rganizatin f the registrant s internal management team supprting supply chain due diligence, including the structure, cmmunicatin prcess and reprting respnsibilities. C. The registrant s system f cntrls and transparency ver its cnflict mineral supply chain. D. The registrant s prcess related t identificatin and assessment f risk in the supply chain. E. Representatins received frm the registrant s suppliers r prcessing facilities, including DRC cnflict-free designatins frm a recgnized industry grup, independent audits f a prcessing facility s supply chain, r ther certificatins r audits. F. Supprting dcumentatin received frm suppliers r prcessing facilities regarding whether the cnflict minerals finance r benefit armed grups in the DRC r an adjining cuntry. G. The registrant s prcess t manage risks identified in the supply chain, including measurable risk mitigatin measures.] 13

14 Independent Private Sectr Audit [If an IPSA is, the registrant is t include a statement in the CMR that it btained an independent private sectr audit f the CMR and prvide the audit reprt prepared by the auditr in accrdance with standards established by the Cmptrller General f the United States. The registrant is als t identify the independent private sectr auditr f the reprt if the auditr is nt identified in the audit reprt.] [The registrant might nte that the audit reprt is prvided alng with the CMR; hwever, this is nt.] Risk Mitigatin/Future Due Diligence Measures [Year 2 reprts (and subsequent years fr smaller reprting cmpanies) during the temprary transitin perid: If the registrant manufactures prducts r cntracts fr prducts t be manufactured that are identified as DRC cnflict undeterminable, the registrant is t disclse the steps it has taken r intends t take since the end f the perid cvered in the mst recent prir CMR t mitigate the risk that its necessary cnflict minerals are benefitting armed grups in the DRC r an adjining cuntry, including any steps t imprve its due diligence.] [Regardless f whether it is r nt, registrants might wish t describe measures that they plan t take in the future.] [If the registrant manufactures prducts r cntracts fr prducts t be manufactured that have nt been fund t be DRC cnflict free, the registrant might describe the steps it has taken r intends t take in the future t reduce the risk that its necessary cnflict minerals are benefitting armed grups in the DRC r an adjining cuntry.] Part II. Prduct Descriptin Nt Fund t Be DRC Cnflict Free [The registrant might explain the cntext fr the results f its due diligence described in Part I t prvide backgrund infrmatin relating t the determinatin that its prducts have nt been fund t be DRC cnflict free.] [The registrant is t describe: the prducts that have nt been fund t be DRC cnflict free the facilities (i.e., the smelter r refinery thrugh which the registrant s minerals passed) used t prcess the necessary cnflict minerals in thse prducts the cuntry f rigin f the necessary cnflict minerals in thse prducts the effrts t determine the mine r lcatin f rigin with the greatest pssible specificity.] DRC Cnflict Undeterminable [The registrant is t describe: the prducts determined t be DRC cnflict undeterminable This heading is nt ; hwever, the registrant might cnsider including it t separate disclsures related t the IPSA frm the due diligence measures abve. the facilities used t prcess the necessary cnflict minerals in thse prducts, if knwn the cuntry f rigin f the necessary cnflict minerals in thse prducts, if knwn This heading is nt ; hwever, the registrant might cnsider including it (r smething similar) t separate disclsures related t the risk mitigatin r future due diligence measures frm the disclsures abve. The DRC cnflict undeterminable reprting alternative is permitted fr the 2013 and 2014 reprting years (cvering reprts filed by May 31, 2014 and May 31, 2015), r, fr smaller reprting cmpanies, fr the 2013 thrugh 2016 reprting years. Fllwing the expiratin f the applicable perid during which the DRC cnflict undeterminable categry may be used, the registrant will be t describe prducts as nt having been fund t be DRC cnflict free if it is unable t determine the rigin f the cnflict minerals in thse prducts. the effrts t determine the mine r lcatin f rigin with the greatest pssible specificity.] Reprt n Independent Private Sectr Audit, when, might appear fllwing the CMR. 14

15 Appendix B Summary f the SEC Cnflict Minerals Reprting Requirements by Scenari The fllwing table summarizes the reprting requirements by the scenaris identified in this Heads Up: Scenari A B C D E Frm SD Sectin 1 Cnflict Minerals Disclsure (heading) helpful helpful helpful helpful helpful Item 1.01 Cnflict Minerals Disclsure and Reprt (heading) Cnflict Minerals Disclsure (heading) Determinatin disclsure RCOI descriptin RCOI and due diligence descriptin RCOI results RCOI and due diligence results Reference t CMR Link t website Sectin 2 Exhibits (heading) helpful helpful helpful Item 2.01 Exhibits (heading) Exhibit 1.01 Cnflict Minerals Reprt CMR Due Diligence (heading) helpful helpful helpful Descriptin f due diligence measures taken Steps taken/t be taken since prir CMR (yr.2) Statement re: btained an IPSA Prduct Descriptin (heading) helpful helpful Descriptin f prducts nt fund t be DRC cnflict free r that are DRC cnflict undeterminable Facilities used t prcess the necessary cnflict if knwn minerals in thse prducts Cuntry f rigin f the necessary cnflict minerals if knwn in thse prducts Effrts t determine the mine r lcatin f rigin with the greatest pssible specificity IPSA reprt 15

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