Conflict Minerals : Form SD Submissions
Form SD Submission Deadline - May 31, 2023
Form SD is short for Specialized Disclosure Report. It is a document required by the SEC under Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The regulation came into effect in 2013. The regulation focuses on two key areas: conflict minerals and human rights.
The law addresses the issue of conflict minerals as deemed by the US congress to be tin, tantalum, tungsten, and gold (3TG) sourced from the Democratic Republic of the Congo (DRC) and the nine surrounding countries. Often, the profits from these minerals are used to supply rebel factions with weapons. Many times we see forced labor as part of the mining process and worse, human rights abuses.
It is mandatory for a company's Form SD to be filed by May 31 for each calendar year.
Reporting
Any company that is publicly traded on the US stock exchange, that files a yearly 10K form with the SEC and whose actions are pursuant to the Exchange Act Sections 13(a) or 15(d) is required to submit a Form SD yearly; and in addition, if the conflict minerals used in a company's products are “necessary to the functionality or production” manufactured by the company or contracted by the company to be manufactured, then a Form SD must be submitted.
Tools and Guidance
Many tools and guidelines have been developed over the years. Most companies start with reviewing the OECD guidelines for sourcing from conflicted areas. The following methods can also be implemented to collect, manage, and analyze the data needed for Form SD reporting.
Reasonable Country of Origin - Companies must conduct a thorough inquiry into their supply chains to determine the presence of conflict minerals originating from the covered countries. This includes contacting suppliers and obtaining information about the origin of the minerals.
Documented due Diligence - If the RCOI reveals that the conflict minerals originated from the covered countries, companies must exercise due diligence in determining the source and chain of custody of those minerals. This may involve third-party audits, certifications, and the development of policies to address identified risks.
Conflict Minerals Report (CMR) - Companies must produce and submit a CMR as an exhibit to their Form SD if conflict minerals are discovered to be present and required for the manufacturing of a product. The CMR describes the methods taken to reduce any risks discovered, the products that include the conflict minerals,and the due diligence carried out.
Independent Private Sector Audit (IPSA) - An IPSA may be required in some circumstances to evaluate the company's due diligence procedures. This provides an additional degree of assurance and guarantees the truthfulness and dependability of the information supplied.
There are many scenarios for determining the level of documentation your company must submit to the SEC as a public company. Most companies will file only a Form SD. However there are scenarios where additional documentation like a CMR or an IPSA is required in order to explain the use of 3TG that is recycled, scrap metal, or when the origin cannot be determined.
Positive Reinforcement
Meeting regulatory obligations is critical to your company's success. Having additional incentives to promote ethical sourcing, increase investor confidence, and strengthen your company's brand recognition by building safer products and ethical supply chains makes your company shine. The Form SD is the first US legislative tool for enabling companies to understand the meaning of bringing a product to market. All production starts with sourcing, safe worker conditions, and human rights. By being transparent, your company gains trust from investors and customers. This builds a company's reputation and brand as one that is concerned with social and environmental responsibility. Keep up the great work!
Learn how your company might be impacted by the SEC's Conflict Minerals regulation. We can help you collect data, analyze the risk, and implement programs and processes that make sure your company meets all the requirements. Call today!
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