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Conflict Minerals

Pepper Hamilton LLP’s Conflict Minerals Group combines lawyers from the firm’s substantive practice areas to work together on behalf of clients affected by the U.S. Securities and Exchange Commission (SEC)’s conflict minerals rule, including manufacturers, suppliers, distributors, retailers and industry trade associations.

The SEC’s conflict minerals reporting rule requires public companies that are engaged in manufacturing to file annual reports describing the source of any tin, tungsten, tantalum and gold (3TGs) that is contained in their products. The rule applies directly to all U.S. and foreign companies engaged in manufacturing that file SEC reports, but it also indirectly affects a far larger number of companies that are suppliers to SEC filers.

The conflict minerals rule, as written, necessitates complex supply chain due diligence and, in many cases, independent audits, certifications and imposed SEC reporting obligations. Companies that use conflict minerals from specified countries in Central Africa in their manufacturing process have the heaviest compliance burden pursuant to the rule. Due to a 2015 federal court decision holding that certain provisions of the conflict minerals rule violated the First Amendment of the U.S. Constitution, the SEC has suspended application of the portions of the rule mandating detailed supply chain due diligence and a third party audit of a conflict minerals report. Nevertheless, all companies subject to the rules still need to undergo some degree of inquiry into their supply chains in order to be able to reach a reliable conclusion as to whether they have any reportable conflict minerals obligations.

Pepper Hamilton assists companies with the legal and investigative aspects of the reporting requirements. Our team includes lawyers with backgrounds in conflict minerals and supply chains, mining and minerals, SEC compliance, the Foreign Corrupt Practices Act and investigations experience.

Complying with the rule is no easy task. Sophisticated monitoring systems and due diligence efforts will take time to implement and manage. Many gray areas exist. Our group advises clients on the following:

  • counsel regarding the rule’s applicability
  • counsel regarding consequences of late filing or non-filing of Form SD, etc.
  • preparation of Form SD and conflict minerals reports, if required
  • advice with respect to determinations in gray areas
  • identifying existing industry-developed conflict minerals compliance programs, and, if necessary, facilitating cooperative industry efforts aimed at developing chain of custody information
  • assistance with supply chain leverage issues
  • assistance with formulation of conflict minerals policy statements and objectives
  • assistance with the creation and implementation of due diligence policies, programs and ongoing initiatives (internal support structure, supply chain assessments, supply chain mapping, risk response strategies and initiatives, reporting and tracking systems, supply chain background screening and internal training)
  • conducting internal and external investigations on any claim made through the grievance mechanism
  • conducting gap reviews, benchmarking, and/or compliance assessments on internal and external due diligence policies, programs and initiatives
  • advice on relationships between the conflict minerals program and implications under the Foreign Corrupt Practices Act, UK Anti-Bribery Act and other legal rules.

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