On April 14, 2014, in a 2-1 decision, the District of Columbia Court of Appeals sided with the SEC and rejected all but one of the trade associations’ arguments. After discussing the legal test for its review of the First Amendment claim, the court concluded that portions of Section 1502 of the Dodd-Frank Act and of the SECs Conflict Minerals Rule violated the First Amendment when they required that reporting companies report to the SEC and state on their websites that any of their products have “not been found to be ‘DRC conflict free.’” The court remanded the case to the district court for further proceedings.
On April 7, 2014, the SEC's Division of Corporate Finance provided a second set of FAQs relating to the disclosure regarding the use of conflict minerals from the Democratic Republic of the Congo or adjoining countries (Covered Countries). Of the nine additional FAQs, most provide clarification about the Independent Private Sector Audit (IPSA). Based on these clarifications, the number of reporting companies that will be required to obtain an IPSA in this first year of reporting is fewer than originally believed. In addition, the effect of the guidance provided in several other FAQs is that it will be difficult for a company to claim in these first reports that any of its products is conflict-free.