On August 10, 2012, the Iran Threat Reduction and Syria Human Rights Act of 2012 (the “Act”) was signed into law. The Act expands U.S. sanctions against Iran and Syria and subjects U.S. companies to liability for Iran-related sanctionable activities conducted by their foreign subsidiaries . In addition, the Act amended the Securities Exchange Act of 1934 to impose new disclosure obligations on SEC reporting issuers for their annual and quarterly filings made after February 6, 2013. This corporate update focuses on these disclosure requirements.

The text of the Act is available by clicking here.

Subject Issuers and Affiliates

All issuers required to file annual or quarterly reports pursuant to Section 13 of the Exchange Act are subject to the new disclosure obligations, including smaller reporting issuers and foreign private issuers. Issuers must disclose information about Iran-related activities in their annual and quarterly reports filed with the Securities and Exchange Commission after February 6, 2013. Foreign private issuers filing annual reports on Form 20-F or Form 40-F will only need to include the disclosure in those annual filings. For an issuer with a calendar year-end, this reporting obligation will be required beginning with its next annual report on Form 10-K, 20-F or 40-F.

The issuer must disclose specified activities knowingly conducted by itself or its affiliates. The Act does not define “affiliate,” but the staff of the SEC has informally stated that Exchange Act Rule 12b-2 definition of “affiliate” applies. Under that Rule, an “affiliate” is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the issuer. This definition is commonly interpreted to include directors and executive officers, subsidiaries and entities controlled by the issuer, and controlling shareholders, if the shareholder has the power to direct or cause the direction of the management and policies of the issuer as a result of its shareholdings, by contract or otherwise. Affiliate status is a facts-and-circumstances determination.

In order to satisfy the new disclosure obligations, as well as an issuer’s disclosure controls and procedures, issuers will be required to make inquires of their affiliates regarding reportable activities.

Reportable Activities

The Act requires an issuer to disclose in its annual and quarterly reports whether, during the period covered by the report, it or any of its affiliates knowingly engaged in any of the following:

  • Activities described in Section 5(a) or 5(b) of the Iran Sanctions Act of 1996, including:
    • Directly and significantly contributing to the enhancement of Iran’s ability to develop petroleum resources (i.e., petroleum, refined petroleum products, oil or liquefied natural gas, natural gas resources, oil or liquefied gas tankers and products used to construct or maintain pipelines used to transport oil or liquefied natural gas) through investments in excess of specified amounts; 
    • Selling, leasing or providing goods, services, technology, information, or support, in excess of specified amounts, which directly or substantially contribute to the maintenance or expansion of Iran’s domestic production of refined petroleum products; 
    • Selling or providing to Iran refined petroleum products in excess of specified amounts;
    • Selling, leasing or providing goods, services, technology, information, or support, including the provision of financing, shipping, insurance or reinsurance, in excess of specified amounts, that directly or substantially contribute to Iran’s ability to import refined petroleum products; 
    • Engaging in activities that would contribute to Iran’s ability to acquire or develop weapons of mass destruction (“WMDs”); or 
    • Participating in a joint venture with the Government of Iran and certain other persons and entities involving the mining, production or transportation of uranium. 
  • Activities by foreign financial institutions that: (i) facilitate efforts by the Government of Iran and related persons and entities to acquire or develop WMDs or support terrorism; (ii) facilitate activities of persons subject to financial sanctions under certain United Nations Security Council Resolutions; (iii) participate in money laundering or facilitate efforts by Iranian financial institutions to carry out such activities; and (iv) facilitate transactions or provide financial services for certain persons and entities, including Iran’s Revolutionary Guard Corps, whose property or property interests are blocked under the International Emergency Economic Powers Act (“IEEPA”); 
  • Transactions by persons owned or controlled by a domestic financial institution with or benefiting Iran’s Revolutionary Guard Corps or any of its agents or affiliates whose property or property interests are blocked under IEEPA; 
  • Activities that support Iran’s acquisition or use of goods or technologies that are likely to be used to commit human rights abuses against the Iranian people or to restrict, disrupt or monitor the free flow of information; or 
  • Transactions or dealings with specified persons who commit, threaten to commit, or support terrorism or who are WMD proliferators and their supporters; or the Government of Iran, any entity owned or controlled directly or indirectly by the Government of Iran, or any person acting or purporting to act on behalf of either of the foregoing, without the specific authorization of a U.S. Government agency.

Disclosure of these activities is required even if the activities are not prohibited or sanctionable with respect to the person engaging in them.

Manner of Reporting

If an issuer or its affiliates knowingly engage in any reportable activities during the period covered by an annual or quarterly SEC report, the issuer must provide a detailed description of the activity in the report, including the nature and extent of the activity, gross revenues and net profit attributable to the activity, and whether the issuer or affiliate intends to continue the activity. The SEC is not expected to provide guidance as to the preferred location or format of the disclosure in the report.

If any activities are disclosed in the issuer’s annual or quarterly reports, the issuer must also file a separate notice regarding the activity with the SEC, and the SEC must then post that information on its website. The SEC has indicated that it will provide guidance as to the form of the notice and manner of its submission. Further, upon receipt of a notice, the SEC is required to forward the issuer’s periodic report to the President of the United States, the Senate Committees on Foreign Relations and Banking, Housing and Urban Affairs, and the House of Representatives Committees on Foreign Affairs and Financial Services. The President is required to initiate an investigation into the reported activity and make a determination within 180 days of initiating the investigation as to whether sanctions should be imposed on the issuer.


The Act’s disclosure provisions are the latest Congressional effort to promote foreign policy goals by imposing potentially costly disclosure requirements on SEC-reporting companies. Although investigation and compliance costs relating to these new requirements are likely to be substantially more limited than those involved under the Dodd-Frank conflict minerals and resource-extraction government payments provisions, issuers must now put in place additional disclosure controls aimed at surfacing reportable activities among potentially far-ranging networks of affiliates, and consider updating their codes of conduct and other relevant internal policies to require prompt disclosure by those affiliates of such activities in the future.