New Iran-related disclosure requirements for public companies will soon take effect for annual and quarterly reports, and the SEC staff recently issued guidance on these disclosures.
Our previous client advisory on the Iran Threat Reduction and Syria Human Rights Act of 2012 (the “Sanctions Act”)1 highlighted new disclosure requirements imposed on public reporting companies, including foreign private issuers. They must disclose all sanctioned, Iran-related activities in annual and quarterly reports filed with the Securities and Exchange Commission (“SEC”). Such activities involve, among other things, investments and other transactions that enhance the development or commercialization of Iran’s petroleum resources, enhance Iran’s ability to develop or acquire weapons of mass destruction or other military capabilities, facilitate activities of persons subject to sanctions by the United Nations Security Council, or benefit Iran’s Revolutionary Guard or other persons whose assets have been blocked by the United States. These new disclosures must be provided first in Forms 10-K and 10-Q required to be filed after February 6, 2013.
In anticipation of the disclosure requirements coming into effect, the staff of the SEC Division of Corporation Finance recently issued guidance on the new law in its Compliance and Disclosure Interpretations.2 The staff’s guidance generally confirms that:
- All annual and quarterly reports required to be filed after February 6, 2013, must include the new disclosures, regardless of when the report actually is filed. Filing a report early will not avoid compliance.
- Annual reports for calendar 2012 must include disclosure for activities that occurred during the entire period covered by the report, even those that occurred prior to enactment of the Sanctions Act on August 10, 2012. However, no statement affirming compliance is required if the reporting company and its affiliates did not engage in the covered activities during the reporting period.
- The new disclosures cover activities by a reporting company and its “affiliates,” which includes any person or entity that directly or indirectly controls, is controlled by, or is under common control with the reporting company.
- Disclosure is required for all covered activities unless an activity was specifically authorized by a U.S. federal department or agency. Authorization by a foreign governmental authority alone does not preclude disclosure, but may be noted to provide additional context to the disclosure.
The staff also reminded issuers that these disclosures will become public upon filing of the report in the EDGAR system.
Every reporting company should continue to enhance its disclosure controls and procedures to ensure that any covered activities are properly disclosed in future SEC reports.