Form SD

Form SD (“Specialized Disclosure”) is used to capture specialized disclosure required by the implementation of Sections 1502 and 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). Rule 13p-1 of the Securities and Exchange Act of 1934 (the “Exchange Act”) implements the conflict mineral disclosure provisions of Section 1502 of Dodd-Frank, while Rule 13q-1 implements the extractive issuer disclosure provisions of Section 1504.

Rule 13p-1, Disclosure of Conflict Minerals

Filers reporting with the SEC under the Exchange Act — including domestic, foreign, and smaller reporting companies — will be required to file Form SD under Rule 13p-1, if applicable, beginning May 31, 2014 (for the 2013 calendar year) and annually on May 31 every year thereafter. Form SD will disclose the filer’s use of “Conflict Minerals”1 originating from the Democratic Republic of Congo (“DRC”) or an adjoining country2 (together with the DRC, the “Covered Countries”) provided the Conflict Minerals are “necessary to the functionality or production” of a product manufactured or contracted to be manufactured by the filer.

Rule 13q-1, Disclosure of Payments by Resource Extraction Issuers

Filers reporting with the SEC under the Exchange Act — including domestic, foreign, and smaller reporting companies — will be required to file Form SD under Rule 13q-1, if applicable, 150 days after the end of their fiscal year beginning with fiscal years ending after September 30, 2013. Form SD will disclose certain payments3 made to a foreign government (including subnational governments) or the U.S. government. Rule 13q-1 requires a resource extraction issuer to disclose payments made to governments on Form SD if the issuer is required to file an annual report with the SEC and engages in the “commercial development of oil, natural gas, or minerals”.

On July 2, 2013, the District Court for the District of Columbia vacated and remanded Rule 13q-1 to the SEC for further proceedings. The SEC has not yet indicated whether it intends to appeal the decision. Although the decision provides relief for public companies that were preparing to comply with the rule, the relief is likely only temporary. The SEC is still required by Dodd-Frank to adopt a payment disclosure rule, and the SEC may undertake new rulemaking to address the court’s concerns. Issuers that were subject to the invalidated rule should continue to prepare for implementation of an SEC rule required under Dodd-Frank, even though any new rulemaking will likely be somewhat different from the invalidated rule.

Filing Format

Disclosure under Rule 13q-1 (Resource Extraction) will be submitted as an exhibit to Form SD in XBRL format. The SEC does not require additional HTML or ASCII exhibits for reports under Rule 13q-1 because EDGAR will automatically render the XBRL submissions into a readable format. Disclosure under Rule 13p-1 (Conflict Minerals) will be submitted in HTML/ASCII format.

Our Form SD Solution

Offistra Inc. has developed software that automatically creates the XBRL component of Form SD from a completed MS Excel spreadsheet. Contact us to learn more about our solution.

Resources

1 Conflict Minerals are defined as columbite-tantalite (coltan), casserite, gold, wolframite, and derivatives initially limited to tantalum, tin, and tungsten.

2 Adjoining countries are those that share an internationally recognized border with the DRC, which presently includes Angola, Burundi, Central African Republic, the Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda, and Zambia.

3 Payments that are 1) made to further the “commercial development of oil, natural gas, or minerals”, 2) “not de minimis”, and 3) within the types of payments specified in the rules. The rules define commercial development of oil, natural gas, or minerals to include exploration, extraction, processing, and export, or the acquisition of a license for any such activity. The rules define “not de minimis” to mean any payment (whether a single payment or a series of related payments) that equals or exceeds $100,000 during the most recent fiscal year. The types of payments related to commercial development activities that need to be disclosed include taxes, royalties fees (including license fees), production entitlements, bonuses, dividends, and infrastructure improvements. See Rule 13q-1 for a complete summary.

 

The content of this page is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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