On November 16, 2007, the U.S. Securities and Exchange Commission issued a Concept Release seeking public comment on providing enhanced access to disclosures made by public companies about their dealings in or with countries that the U.S. Secretary of State has designated as a State Sponsor of Terrorism. This Concept Release is accessible at  http://www.sec.gov/rules/concept/2007/33-8860.pdf. The five nations currently designated as State Sponsors of Terrorism are Cuba, Iran, North Korea, Sudan and Syria.


Earlier this year, the SEC temporarily provided a web tool directing users to the portions of annual reports filed by public companies that described their business activities in any of the five designated countries. The web tool received significant activity and generated a large number of both positive and negative comments. The SEC ultimately suspended this web tool as a result of flaws, including (i) the inability to find a company’s most recent disclosure indicating it had discontinued operations in a particular county, and (ii) the inability to differentiate between benign activities, such as news reporting in or conducting an immaterial kind or amount of business with a designated country. In addition, some companies listed on the web tool were concerned that the mere listing resulted in reputational harm or negative publicity, even if a company’s activities were appropriate.


Because many state governments, universities, institutional investors and individual investors seek to avoid investing in a company that could be considered supporting a State Sponsor of Terrorism, the SEC has sought comment about mechanisms to provide investors with more accurate information about which public companies have business activities in countries recognized as sponsors of terrorism. By soliciting comments, the SEC hopes to learn whether it should require enhanced disclosure about business activities in countries that potentially sponsor terrorism and whether it should reinstate a modified version of its web tool to provide more accurate, up to date, and easily accessible information.

Specifically, the SEC has solicited comment on the sufficiency of the information public companies currently provide in their public filings about their business activities in countries designated as State Sponsors of Terrorism and whether this information is important to investors when investing their money. In addition, the SEC has solicited whether it should provide enhanced access to disclosures about activities in these countries through its web tool, and, if so, whether this enhanced access would place an undue emphasis on certain business activities; cause undue reputational harm to companies listed on the web tool or have other unintended consequences; and whether companies should be allowed to use “data tags” to designate what information the web tool would display. The SEC also has solicited comment on how it can improve the design and operation of the web tool potentially by broadening the universe of disclosure documents searched by the web tool to quarterly reports and current reports and by displaying the methodology used by the web tool to find the disclosure it displays, including displaying when the web tool was last updated.

The SEC comment period will close near the end of January 2008.