SEC Adopts Final Rules Regarding Mining Safety Disclosure Required Under Dodd-Frank

By Cydney Posner

Yesterday, without an open meeting, the SEC adopted final rules required under Section 1503 of Dodd-Frank regarding the mining safety disclosure requirements. Here is the press release and here are the final rules. These rules will be effective 30 days after publication in the Federal Register.

Under the final rules, companies that operate mines (or that have a subsidiary that operates mines), in the U.S. are required to include information, on a mine-by-mine basis, about mine safety and health in the quarterly and annual reports they file with the SEC. The final rules add new Item 104 of Reg S-K, new item 1.04 to Form 8-K, new Item 4 to Part II of Form 10-Q, and new Item 4 to Part I of 10-K, and amend item 601 of Reg S-K to add a new exhibit requirement to Form 10-K and Form 10-Q. Under the amendments, issuers that have matters to report will be required to include brief disclosure in their periodic reports noting that they have mine safety violations or other regulatory matters to report in accordance with Section 1503(a) and that the required information is included in an exhibit to the filing. The exhibit would include the detailed disclosure about specific violations and regulatory matters as required. The final rule does not require disclosure in the body of the periodic report of certain information, such as all fatal accidents or receipt of notice that a mine has a pattern of violations. However, the SEC emphasizes that, to the extent that mine safety matters raise concerns that should be addressed in other parts of a periodic report, such as risk factors, the business description, legal proceedings or MD&A, that disclosure would still be required. Orders and citations issued to independent contractors (that are not subsidiaries of the issuer) that are working at the issuer's mine site would not need to be reported by the issuer. Tabular presentations are encouraged but not required. Although not mandated, the release includes an example of a format for the presentation of the required information. The use of footnotes, accompanying narrative disclosure or additional tables may also be used to clarify information provided, as appropriate. XBRL is not required for the table. The disclosure will be considered "filed," not "furnished."

The final rule requires each Form 10-Q to include the required disclosure for the quarter covered by the report. However, in a change from the proposal, the final rule requires each Form 10-K to include disclosure of the information for the fiscal year only, but not separately for the fourth quarter. The final rule does not allow issuers to exclude information about orders or citations that were received during the time period covered by the report but subsequently dismissed, reduced or vacated. Issuers may include additional disclosure with regard to the status of orders or citations received.

Each issuer that is an operator, or has a subsidiary that is an operator, of a mine will be required to report on Form 8-K the receipt of certain notices from the DOL's Mine Safety and Health Administration, including imminent danger orders and written notices of a pattern (or the potential to have a pattern) of violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of coal or other mine health or safety hazards. (Note that these orders and notices are still also required to be disclosed in issuers' periodic reports.) Failure to timely file the Form 8-K will not result in the loss of Form S-3 eligibility.

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