In August 2012, the Securities and Exchange Commission (SEC) approved a new rule known as the Conflict Minerals Rule. It requires publicly traded companies that use so-called "conflict minerals" — tantalum, tin, tungsten and gold in their products to make public disclosure of the origin of those minerals as part of their regular financial disclosures to the SEC.
The Rule applies directly to public companies in many industries — technology, aerospace, automotive and consumer goods, to name a few. The purpose of the Rule is to encourage these companies to strengthen their controls over how and where they obtain those minerals, thereby reducing the funding of armed groups responsible for extreme violence in the Democratic Republic of Congo and adjoining countries. The Rule does not prohibit companies from obtaining conflict minerals from these countries.
The Rule provides a three-step process to help a company determine if it is subject to the disclosure requirement and, if so, what it must do to comply:
- Determine whether the Rule applies;
- Conduct a 'reasonable country of origin inquiry" (RCOI); and
- Conduct due diligence and file a Conflict Minerals Report.
When a company is required to file a Conflict Minerals Report, the Report must include a description of its due diligence on the source and chain of custody of its conflict minerals.
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