Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

A bill that has passed both houses of Congress and is now waiting for the President’s signature imposes new reporting requirements on companies required to file quarterly and annual reports under Section 13(a) of the Securities Exchange Act of 1934.  The Iran Threat Reduction and Syria Human Rights Act of 2012 (the “Act”) requires new disclosure in the event that a company knowingly:

  • Engaged in certain conduct described in the Iran Sanctions Act of 1996 or certain conduct described in the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010;
  • Engaged in transactions or dealings with “blocked” persons pursuant to Executive Order No. 13224 (relating to blocking property and prohibiting transactions with persons who commit, threaten to commit, or support terrorism);
  • Engaged in transactions or dealings with “blocked” persons pursuant to Executive Order No. 13382 (relating to blocking of property of weapons of mass destruction proliferators and their supporters); or
  • Engaged in transactions or dealings with any person identified with the government of Iran pursuant to 31 C.F.R. 560.304.

The disclosure of any of these prohibited activities in the applicable 10-Q or 10-K must consist of  “a detailed description of such activity” including the nature and extent of the activity, the gross revenues and net profits attributable to the activity, and whether the issuer or an affiliate of the issuer intends to continue the activity.

Besides including this additional disclosure in the 10-Q or 10-K, the issuer must also separately report to the SEC that it has filed a 10-Q or 10-K containing disclosure required by the Act.  This separate report to the SEC must also contain the same disclosure required in the 10-Q or 10-K.

The reports to the SEC will be posted for the public on the SEC’s website, and will be forwarded to the President and select Congressional committees.  Upon receipt of a report from the SEC, the President will initiate an investigation into whether sanctions against the issuer are appropriate (note also that the scope of activities that can give rise to sanctions under the Iran Sanctions Act of 1996 are expanded and broadened by the Act).  The investigation must be concluded with a final decision on sanctions not later than 180 days after the investigation is initiated.

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