The Wall Street Reform and Consumer Protection Act (the "Act"), was enacted into law on July 21, 2010. The Act includes various changes which will affect public companies and companies hoping to access the U.S. securities markets. Among other things, companies with overseas operations, particularly in the extractives industry, could face new Securities and Exchange Commission (the "SEC") disclosure requirements. In an effort to expand transparency and try to "name and shame" multinational companies whose activities could be seen as linked to conflict minerals or to corrupt governments abroad, Title 15 of the Act includes provisions which will require such companies to provide increased disclosure.

The Act requires the SEC to promulgate rules that will require additional disclosure in the circumstances outlined below. The rules that the Act requires the SEC to adopt will require additional annual disclosure, most likely in the annual reports that public companies with securities registered under the Securities Exchange Act of 1934 file with the SEC (Form 10-K for domestic companies and Form 20-F for non-U.S. companies which meet the definition of a "foreign private issuer"), under the following circumstances:

  • Section 1502 of the Act directs the SEC to require companies whose products contain cassiterite (tin ore), coltan, wolframite and gold to disclose annually whether they are sourcing these minerals from the Democratic Republic of Congo (DRC) or adjoining countries (Angola, the Republic of Congo (Brazzaville), the Central African Republic, the Sudan, Uganda, Rwanda, Burundi, Tanzania, and Zambia). In cases in which such minerals are being sourced from these countries, companies must submit to the SEC a report that describes the measures that the company has taken to exercise due diligence on the source and chain of custody of the minerals. This report must include an independent private sector audit conducted in accordance with standards established by the U.S. Comptroller General.
  • Section 1504 of the Act directs the SEC to require any company that is required to file an annual report with the SEC and which engages in the commercial development of oil, natural gas, or minerals to include in its annual report information relating to any payment that the company, any subsidiary, or any entity under the control of the company has made to a foreign government or the U.S. government for the purpose of the commercial development of oil, natural gas or minerals. The Act also states that the information required to be disclosed in the annual report must be provide in "interactive data format" and must include electronic "tags" that identify certain aspects of the payments.

The Act requires the SEC to adopt the necessary rules to carry out these mandates within the next 270 days. The Act stipulates that the disclosure to be required under such new rules will need to be provided with respect to the company's first full fiscal year beginning after the year in which the SEC promulgates the rules. Therefore, assuming the SEC promulgates new rules in 2011, as is likely, the new disclosure obligations would pertain to activities in 2012 (for calendar year companies), and the annual reports in respect of such companies would be filed in early 2013. Thus, while as a practical matter, the new disclosure would not need to be provided for some time, public companies may want to begin now to assess existing operations and activities that might trigger any such disclosure obligations and steps that might be taken to eliminate the need to make such disclosures in the future.

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