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SEC PROPOSES SPECIALIZED DISCLOSURE OF USE OF CONFLICT MINERALS UNDER DODD-FRANK
ACT

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Text of
Chairman's statement


FOR IMMEDIATE RELEASE
2010-245

Washington, D.C., Dec. 15, 2010 — The Securities and Exchange Commission today
voted unanimously to propose measures, as mandated by the Dodd-Frank Act, which
would require new disclosures by reporting issuers concerning conflict minerals
that originated in the Democratic Republic of the Congo or an adjoining country.

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ADDITIONAL MATERIALS

 * SEC Rule Proposal Extending the Comment Period to March 2, 2011
 * SEC Rule Proposal
 * Submit Comments
 * Read Comments

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Specifically, companies would be required to disclose annually whether they use
“conflict minerals” that are “necessary to the functionality or production” of a
product that they either manufacture or contract to be manufactured that
originate from the Democratic Republic of the Congo or adjoining countries. The
conflict minerals are cassiterite, columbite-tantalite, gold, wolframite or
their derivatives. These minerals are essential to many products — from jewelry
to cell phones to jet engines.

“In adopting this statute, Congress expressed its hope that the reporting
requirements of the securities laws will help to curb the violence in the
eastern Democratic Republic of the Congo,” said SEC Chairman Mary L. Schapiro.
“Because expertise about these events does not reside within the SEC, we have
drafted these proposed rules carefully to follow the direction of Congress and
look forward to the additional insights and perspective from public comments.”

Public comments on the proposed rules should be received by the Commission by
Jan. 31, 2011.

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FACT SHEET


REQUIREMENTS OF THE PROPOSED RULES

APPLICATION OF THE RULES

The proposed rules would apply to an issuer if:

 * The issuer files reports with the Commission under the Exchange Act.
    
 * Conflict minerals (generally tantalum, tin, gold, or tungsten) are “necessary
   to the functionality or production” of a product manufactured or contracted
   to be manufactured by the issuer.

An issuer would be considered to be “contracting to manufacture” a product if:

 * It has any influence over the product’s manufacturing.
    
 * If it offers a generic product under its own brand name or a separate brand
   name, regardless of whether the issuer has any influence over the
   manufacturing specifications of the product, provided the issuer has
   contracted to have the product manufactured specifically for itself.

The requirements would apply equally to domestic and foreign issuers and to
smaller reporting companies.

DETERMINING WHETHER CONFLICT MINERALS ORIGINATED IN DRC COUNTRIES AND RESULTING
DISCLOSURE

Under the proposed rules, the reporting issuer would be required to disclose in
its annual reports whether its conflict minerals originated in the DRC
countries. This disclosure would be based on a reasonable country of origin
inquiry.

If an issuer concludes that its conflict minerals did not originate in the DRC
countries, the issuer would disclose this determination and the reasonable
country of origin inquiry process it used in reaching this determination.

The issuer also would be required to:

 * Make the disclosure regarding this determination available on its Internet
   website.
    
 * Provide the Internet address of that site.
    
 * Maintain records demonstrating that its conflict minerals did not originate
   in the DRC countries.

If the issuer concludes that its conflict minerals did originate in the DRC
countries, or is unable to conclude that its conflict minerals did not originate
in the DRC countries, the issuer would:

 * Disclose this conclusion.
    
 * Note that the Conflict Minerals Report is furnished as an exhibit to the
   annual report.
    
 * Furnish the Conflict Minerals Report.
    
 * Make available the Conflict Minerals Report on its Internet website.
    
 * Disclose that the Conflict Minerals Report is posted on its Internet website.
    
 * Provide the Internet address of that site.

CONFLICT MINERALS REPORT

Under the proposed rule, the Conflict Minerals Report would include a
description of the measures the issuer had taken to exercise due diligence on
the source and chain of custody of its conflict minerals, including a certified
independent private sector audit of the Conflict Minerals Report that identifies
the auditor and is furnished as part of the Conflict Minerals Report.

Further, the issuer would be required to include in the Conflict Minerals
Report:

 * A description of its products manufactured or contracted to be manufactured
   containing conflict minerals that are not “DRC conflict free” as defined in
   the rules
    
 * The facilities used to process those conflict minerals.
    
 * Those conflict minerals’ country of origin.
    
 * The efforts to determine the mine or location of origin with the greatest
   possible specificity.

Issuers would be required to disclose the due diligence they used in making
their determinations, such as whether they used any nationally or
internationally recognized standards or guidance for due diligence.

RECYCLED OR SCRAP SOURCES

If an issuer’s conflict minerals are derived from recycled or scrap sources
rather than from mined sources, the issuer would be permitted to file a Conflict
Minerals Report stating that their conflict minerals were obtained from recycled
or scrap sources and providing the basis on which they believe their conflict
minerals are recycled or scrap. Issuers would be required to exercise due
diligence in determining that their conflict minerals were recycled or scrap.
The Conflict Minerals Report would be subject to the independent private sector
audit requirement.


WHAT’S NEXT?

The Commission is seeking public comments on the proposed rules that should be
received by Jan. 31, 2011. The Commission will review the comments it receives
and consider those comments in determining whether to adopt the proposed rules.

 

http://www.sec.gov/news/press/2010/2010-245.htm


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MODIFIED: 12/15/2010