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Prepare for a snowstorm of law firm memos! Yesterday, the SEC finally issued two sets of FAQs – conflict minerals and resource extraction. Both are filled with helpful stuff, including this list pulled from a Cleary Gottlieb email:

Form SD Generally
– Voluntary filers must file Form SD with any applicable specialized disclosure.
– Failure to timely file Form SD will not cause an issuer to lose its eligibility to use short-form registration on Form S-3. (The FAQ does not mention Form F-3, used by foreign private issuers, but the reasoning would apply equally.)

Conflict Minerals
– The conflict minerals disclosure requirements apply to a reporting company and all of its consolidated subsidiaries.
– The packaging and container for a product are not considered to be part of the product, even if the packaging or container is necessary to preserve the usability of the product up to and following the product’s purchase. (Packaging and containers sold independently of the product are considered products in their own right.)
– If a company manufactures a product, there is no distinction in the required analysis and disclosure between the components that the issuer manufactures itself and “generic” components that the issuer purchases for inclusion in the product.
– Services are not products, and equipment that an issuer may manufacture or contract to manufacture to allow it to provide a service is not itself a product.
– Tools, machines and other equipment that an issuer manufactures or contracts to manufacture for use in the manufacture of other products are not themselves products, even if the issuer later sells them.
– Mining companies that engage only in activities customarily associated with mining, including processing and smelting, are not considered to be “manufacturing” the minerals they mine.
– Following an IPO, an issuer may begin providing conflict minerals disclosure for the first calendar year that begins no sooner than eight months after the effective date of the IPO registration statement.

Resource Extraction Payments
– A company that provides only services associated with exploration, extraction, processing and export of a resource will not generally be considered to be a resource extraction issuer.
– Transportation activities are generally not covered by the rule, unless the activities are directly related to the export of the resource.
– Penalties and fines related to resource extraction paid to government agencies are not reportable.
– Payments may not be reported on an accrual basis; they must be presented on a cash basis for the year in which they were made.
– If an issuer pays corporate level income tax on many different sources of income in a particular country, it need not segregate its tax payments to report the amount corresponding solely to resource extraction activities, although it may choose to do so. If the issuer presents information on an aggregate basis, it may disclose that the information includes payments made for purposes other than commercial development activities.

Conflict Minerals & Resource Extraction: Court Challenges Proceed on Accelerated Basis

As noted on NAM’s site, oral argument for the conflict minerals case is currently set for July 1st. As noted in this blog, Leonard Street’s Steve Quinlivan writes:

We previously noted that the challenge to the SEC’s conflict minerals rules was transferred from the Court of Appeals to the United States District Court for the District of Columbia. A scheduling order has been entered in the case which provides that the parties’ cross-motions for summary judgment will be decided on the basis of briefs transferred from the Court of Appeals. The Court also granted the parties’ request to expedite the cross motion for summary judgment.

We also noted that the Court of Appeals dismissed the challenge to the SEC’s resource extraction rules for lack of jurisdiction and that the case would proceed in the United States District Court for the District of Columbia. The District Court has likewise entered a scheduling order which provides that the plaintiffs’ motion for summary judgment will be decided on the briefs submitted by the parties to the Court of Appeals.

Big Jump in Anti-Pledging Policy Disclosures

In this blog, McGuire Woods’ William Tysse notes: According to this Wall Street Journal item, the number of companies disclosing anti-pledging policies so far this proxy season has increased to 107 from just 8 last year:

Proxy-advisory firm Institutional Shareholder Services said in November that it could begin looking at any hedging or pledging of company stock by executives as a “failure in risk oversight,” since a margin call could force executives to sell their stock at an inopportune time. ISS said it would consider whether companies disclosed an antipledging policy in their proxies, but could recommend that investors vote against corporate directors if there is “significant” pledging.

– Broc Romanek