A letter has been sent to the US Securities and Exchange Commission (SEC) Chairman, Mary Schapiro, from six lawmakers in the US Senate arguing against the use the of the term ‘furnishing’ in draft conflict mineral guidelines.
Senator Patrick Leahy, who co-wrote the letter, argues that if companies are allowed to ‘furnish’ rather than ‘file’ disclosures on their use of the six identified ‘conflict minerals’, it could reduce the liability of a company under securities law that undermines the purpose of the Dodd-Frank Act.
The letter says ‘We are very concerned about the outlines of the final rule, in particular, that the Commission will approve a rule that contravenes Congress’ legislative intent’.
The congressional intent is to require companies to file annual reports describing due diligence measures taken to identify the source of the conflict minerals used in products and the chain of custody of those materials. The report should be audited by an independent auditor and should include:
• description of the products are aren’t Democratic Republic of Congo conflict-free,
• identification of the independent authors of the report,
• identification of the facilities used to process conflict minerals,
• the country of origin of the conflict minerals,
• your efforts to determine mine or location of the origin of the conflict minerals, and
• a certification statement.
The essential difference is that to ‘file’ a disclosure is the formal submission of a document (often in a specific format) to the SEC, for which a company would be liable under the Exchange Act if it was untrue/negligent etc. ‘Furnishing’ on the other hand is essentially providing information, through a press release for example, and this does not therefore carry the same level of legal obligation to be accurate as a SEC filing would.
Would the obligation to furnish rather than file conflict mineral information undermine the intentions of Section 1502 of the Dodd-Frank Act? Would a more simplified method of submitting conflict mineral information be welcome for the final guidelines? How would such a difference affect your business?
Source: Bloomberg Business Week
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