By Cydney Posner
The SEC has just issued some new CDIs regarding the Iran Threat Reduction and Syria Human Rights Act of 2012, Exchange Act Section 13(r). You'll remember that Section 13(r) provides that periodic reports required to be filed with the SEC after February 6, 2013, must contain specified information if, during the period covered by the report, the issuer or any affiliate of the issuer knowingly engaged in certain activities proscribed by the Iran Act with or related to Iran.
- If an issuer's periodic report is required to be filed on a date after February 6, 2013 — for example, the 2012 Form 10-K for calendar year filers — the issuer will be required to disclose Iran-related business activities pursuant to Section 13(r) even if it files the periodic report on or before February 6, 2013. The SEC interprets "reports required to be filed" to include any periodic report with a due date after February 6, 2013, regardless of when the report is actually filed.
- An issuer is required to disclose activities specified in Section 13(r)(1) that occurred during the period covered by the report, which, for a Form 10-K, is the entire fiscal year, even if those activities took place prior to enactment of the Iran Act on August 10, 2012. For example, an issuer that files an annual report for the fiscal year ending December 31, 2012 is required to disclose any activities specified in Section 13(r)(1) that took place between January 1, 2012 and December 31, 2012.
- Section 13(r) covers activities by an issuer "or any affiliate of the issuer." The term "affiliate" in Section 13(r) is defined in Exchange Act Rule 12b-2. Section 13(r)(1)(D)(iii) requires disclosure if an issuer or any of its affiliates knowingly conducts any transaction or dealing with "any person or entity identified under section 560.304 of title 31, Code of Federal Regulations (relating to the definition of the Government of Iran) without the specific authorization of a Federal department or agency." Authorization by foreign governmental authorities, but not a U.S. federal department or agency, does not allow issuers to omit disclosure of transactions or dealings. A transaction or dealing with any person or entity identified under § 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 could disclose that fact in addition to the other information required by Section 13(r)(2) to provide the appropriate context for the disclosure.
- The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury issues both general and specific licenses. A general license authorizes a particular type of transaction for a class of persons without the need to apply for a specific license. A specific license is a document issued by OFAC to a particular person or entity, authorizing a particular transaction in response to a written license application. See OFAC's Frequently Asked Questions and Answers #74 (explaining the difference between a general license and a specific license). For purposes of Section 13(r)(1)(D)(iii), both general and specific licenses constitute specific authorization by OFAC to engage in a transaction, provided all conditions of the applicable license are strictly observed.
- If an issuer includes disclosure responsive to Section 13(r) in a periodic report filed with the SEC, that disclosure will become public on EDGAR.