August 19, 2015

Conflict Minerals: SEC Loses 1st Amendment Rehearing

Below is news from Hunton & Williams’ Scott Kimpel (also see this Cooley blog):

Yesterday, the DC Circuit Court of Appeals finally issued its opinion on rehearing in NAM v. SEC and, by a 2-1 vote, reaffirmed its earlier decision that the SEC’s conflict minerals rules violate the First Amendment to the extent they require companies to describe their products as not being “conflict free.” The DC Circuit first issued its ruling in April 2014, but parts of the opinion were called into question by a subsequent DC Circuit opinion in American Meat Institute v. Department of Agriculture. Yesterday’s opinion reconsidered the earlier holding in light of American Meat.

The Corp Fin Staff has been rumored to be waiting for this ruling before it issues any further interpretive guidance on the conflict mineral rules. One area where guidance would be helpful concerns the interplay between the DC Circuit opinions and the rule’s two-year transition provisions, which – but for the DC Circuit’s ruling – would otherwise cease to apply to Forms SD filed in 2016. A recent Wall Street Journal article posited that issuers would have to begin obtaining third party audits over their conflict minerals reports in 2016, but the court’s holding calls this conclusion into question because the audit requirement is premised on the same constitutionally infirm language the court struck down. Corp Fin Director Keith Higgins issued a statement in April 2014 indicating that 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.”

Is Director Higgins’s statement still valid? Should issuers make any other changes to conflict minerals reporting in the future? The Staff may now feel empowered to answer these questions. The next Form SD is due May 31, 2016.

Pay Ratio Rules Published in the Federal Register

Yesterday, the SEC’s pay ratio rules were published in the Federal Register – so they have an effective date of October 19, 2015. That’s not the compliance date however…

In the wake of the pay ratio rules being adopted, you need to get a handle on what to do now – as there are tasks you should be accomplishing way ahead of your disclosure obligation. Tune into our “Pay Ratio Workshop” next Tuesday, August 25th – an audio-only event (whose archive will be up immediately if you can’t attend live). Register Now!

Here’s a list of the nine panels that will span over four hours of practical instruction on Tuesday:

– “Overview: The Final Rules”
– “Getting Ready for Compliance: Sampling & Other Data Issues”
– “Streamlining Your Compliance Efforts”
– “Board Presentations: What To Tell Boards Now”
– “Disclosure: Handling the Transition Period”
– “Parsing Model Disclosures: US-Only Workforces”
– “Parsing Model Disclosures: Global Workforces”
– “Parsing a Recent Pay Ratio Disclosure”
– “How to Handle PR & Employee Fallout”

Why the SEC’s Pre-Existing Relationship Test is the Mirror Image of California’s

Here’s a blog by Keith Bishop comparing one of the new CDIs to California’s limited offering exemption…

Check out this Bloomberg article entitled “SEC Allows Tweets for Startups Raising Money”…

– Broc Romanek