On December 4, 2012, the U.S. Securities and Exchange Commission released Compliance and Disclosure Interpretations (the “SEC Guidance”) relating to the new disclosure requirements set forth in the Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRA”). As we reported in our client alert titled, “House Resolution 1905”, dated August 13, 2012, the ITRA added Section 13(r) to the Securities Exchange Act of 1934 (the “Exchange Act”) to require companies filing quarterly and annual reports with the SEC to disclose in those reports certain Iran-related activities, such as investments or transactions relating to Iran’s petroleum and petrochemical industry.
First, the SEC Guidance clarifies certain questions regarding the February 6, 2013 date. Disclosures must be made in any periodic report with a due date on or after February 6, 2013; a company cannot avoid compliance by filing its Form 10-K early. The SEC Guidance also states a company’s annual report for the fiscal year ended December 31, 2012 must disclose all activities that took place during the fiscal year, even though ITRA was not signed into law until August 10, 2012.
Second, the SEC Guidance clarifies certain open questions regarding the obligations of issuers. An issuer’s disclosure obligations include activities of “any affiliate of the issuer,” using the definition of affiliate as set forth in Section 12b-2 of the Exchange Act (“a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.”). The SEC Guidance further explains that if an issuer and its affiliates have not engaged in activities that must be disclosed pursuant to Section 13(r) of the Exchange Act, the issuer need not include a statement to that effect in its periodic filings.
Third, the SEC Guidance clarifies an exception to the disclosure requirements. Section 13(r)(1)(D)(iii) of the Exchange Act requires disclosure of transactions with the Government of Iran (including any entities it owns or controls) unless the transaction was specifically authorized by “Federal department or agency.” The SEC Guidance explains that this refers to a U.S. Federal department or agency. Such authorization includes, but is not limited to, specific and general licenses issued by the Office of Foreign Asset Control (“OFAC”). Disclosure many not be omitted on the basis that the transaction was authorized by a foreign department or agency, but such authorization should be explained to give additional context.
Finally, the SEC Guidance reminds issuers that any disclosures made pursuant to Section 13(r) of the Exchange Act will become public upon filing through the SEC’s EDGAR system.
If you have any questions or concerns about U.S. sanctions against Iran generally, or the disclosure requirements of Section 13(r) of the Exchange Act specifically, please contact one of the attorneys listed below.
