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SEC Issues Guidance on New Iran Disclosure Requirements

December 5, 2012

On December 4, 2012, the U.S. Securities and Exchange Commission (the “SEC”) published Compliance and Disclosure Interpretations (“CDIs”) related to the new disclosure requirements contained in the Iran Threat Reduction and Syria Human Rights Act of 2012 (the “ITRA”). The ITRA added Section 13(r) to the Securities Exchange Act of 1934 (the “Exchange Act”) to oblige SEC reporting companies to disclose certain Iran related activities, particularly investments or transactions relating to the Iranian petroleum, petrochemical or marine transport sectors, in their quarterly and annual reports. See our September 5, 2012 memorandum New Law Requires Issuers to Disclose Certain Iran-Related Transactions, for further information about this new disclosure requirement. See our September 12, 2012 memorandum, United States Enacts Further Sanctions on Iran and Syria: the Iran Threat Reduction and Syria Human Rights Act of 2012, for more information about the ITRA generally.

The full text of the new CDIs, numbers 147.01 through 147.07 of the Exchange Act CDIs, is available here. Among other things, the new CDIs confirm that:

  • The mandatory Iran disclosures will be required in all quarterly and annual Exchange Act reports due on or after February 6, 2013, even if the reporting company files the report before February 6, 2013. In other words, a calendar year company cannot avoid compliance with this new disclosure requirement by filing its 2012 Form 10-K early.
  • A company’s annual report for the fiscal year ended December 31, 2012 must disclose any activities with Iran that are covered by the statute if the activities took place between January 1, 2012 and December 31, 2012, even though ITRA was not enacted until August 10, 2012.
  • New Section 13(r)(1)(D)(iii) of the Exchange Act, which 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, refers to a U.S. Federal department or agency. A company may not omit disclosure on the basis that the transaction was authorized by a non-U.S. federal department or agency.
  • The term “affiliate” as used in Section 13(r) is as defined in Exchange Act Rule 12b-2.
  • A company that did not engage in any of the Iran-related activities specified in Section 13(r) during the period covered by the report, and is therefore not subject to the new disclosure requirements, does not need to state this in its annual or quarterly reports.

Although the CDIs provide clarity on a few aspects of the ITRA, the application of the statute is highly fact specific and many ambiguities remain.  We have asked the relevant governmental agencies to provide guidance on the yet unresolved questions and will continue to do so. We urge you to contact us to discuss the application of the ITRA to your company.

If you have questions regarding this publication, please call any of the lawyers listed below or your regular Davis Polk contact.

Michael Kaplan 212 450 4111 michael.kaplan@davispolk.com
Jeanine P. McGuinness 202 962 7150 jeanine.mcguinness@davispolk.com
John B. Reynolds, III 202 962 7143 john.reynolds@davispolk.com
Richard D. Truesdell, Jr. 212 450 4674 richard.truesdell@davispolk.com
Janice Brunner 212 450 4211 janice.brunner@davispolk.com
Susan K. Hutner 202 962 7190 susan.hutner@davispolk.com

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