The SEC Issues New Exchange Act C&DIs: Business Activities Related to Iran

The Iran Threat Reduction and Syria Human Rights Act of 2012 (the “Act”), which was enacted on August 10, 2012, amended the Securities Exchange Act of 1934 to add new Section 13(r), requiring reporting companies to disclose certain business activities related to Iran in periodic reports filed with the Securities and Exchange Commission after February 6, 2013.

Yesterday the Division of Corporation Finance issued seven new Compliance and Disclosure Interpretations related to Section 13(r). In summary:

• If an issuer’s annual report is required to be filed after the Act’s February 6, 2013 effective date, the report must include disclosure of Iran-related business activities pursuant to Section 13(r) even if the issuer files the report early (on or before the February 6, 2013 effective date).

• If an issuer’s annual report is required to be filed after the Act’s February 6, 2013 effective date, the report must include disclosure of Iran-related business activities pursuant to Section 13(r) that occurred during the entire fiscal year covered by the report, including the period prior to enactment of the Act. For example in the case of an issuer that files an annual report for the fiscal year ending December 31, 2012, that issuer is required to disclose any Iran-related business activities specified in Section 13(r) for the period from January 1, 2012 through December 31, 2012.

• The term “affiliate” as used in the Act has the meaning set forth in Exchange Act Rule 12b-2.

• Disclosure is only required in a periodic report if an issuer or any of its affiliates engaged in any Iran-related business activities specified in Section 13(r) for the period covered by the report; it is not necessary to include a statement to the effect that the issuer and its affiliates have not engaged in any Iran-related business activities specified in Section 13(r).

• A transaction or dealing with any person or entity identified under 31 CFR § 560.304 must be disclosed unless it was specifically authorized by a U.S. federal department or agency. If a disclosable transaction was specifically authorized by a foreign governmental authority, an issuer may disclose that fact in addition to the other information specified in Section 13(r) to provide appropriate context.

• Both general and specific licenses constitute specific authorization by the Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury to engage in a transaction, provided all conditions of the applicable license are strictly observed.

• Any disclosures included in a periodic report in response to Section 13(r) will automatically become publicly available upon filing through the EDGAR system.