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December 05, 2012 

U.S. Securities and Exchange Commission Issues Answers to FAQs on Iran Reporting Requirements

The U.S. Securities and Exchange Commission (SEC) yesterday issued some answers to frequently asked questions on the new reporting requirement contained in section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (TRA) (H.R. 1905, enacted as Public Law 112-158) that was signed into law on August 10, 2012 and requires ''issuers" to disclose certain activities in Iran starting on February 6, 2013.

As expected, the guidance is broad in nature and does not shed too much light on important terms, such as the definition of “affiliate.” As noted below, the SEC has stated that they will use the definition of that term that is currently contained in section 12b-2 of the SEC’s regulations, which states:


Affiliate. An “affiliate” of, or a person “affiliated” with, a specified person, is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.

The FAQs can be found on the SEC's website here and include questions 147.01 through 147.07. 

The text of each of the FAQs are reprinted below:

Question 147.01

Question: Section 219(b) of the Iran Threat Reduction and Syria Human Rights Act of 2012, signed into law on August 10, 2012, specifies that new Section 13(r) of the Exchange Act “shall take effect with respect to reports required to be filed with the Securities and Exchange Commission after the date that is 180 days after the date of the enactment of this Act,” which would be February 6, 2013. If an issuer’s periodic report is required to be filed on a date after February 6, 2013 — such as, for example, the 2012 Form 10-K for calendar year filers — is the issuer required to disclose Iran-related business activities pursuant to Section 13(r) if it files the periodic report on or before February 6, 2013?

Answer: Yes. We interpret “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. [Dec. 4, 2012]

Question 147.02

Question: If an issuer’s annual report is required to be filed after February 6, 2013, must it include disclosure of activities specified in Section 13(r)(1) that occurred during the fiscal year but prior to enactment of the Iran Threat Reduction and Syria Human Rights Act of 2012 on August 10, 2012?
Answer: Yes. 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. 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. [Dec. 4, 2012]

Question 147.03

Question: Section 13(r) covers activities by an issuer “or any affiliate of the issuer.” How is the term “affiliate” defined for purposes of Section 13(r)?
Answer: The term “affiliate” in Section 13(r) is as defined in Exchange Act Rule 12b-2. [Dec. 4, 2012]

Question 147.04

Question: If an issuer and its affiliates have not engaged in any of the activities specified in Section 13(r)(1) during the period covered by the report, must the issuer include a statement to that effect in its periodic report?
Answer: No. Disclosure is required only if the issuer or any of its affiliates engaged in any of the activities specified in Section 13(r)(1) during the period covered by the report. [Dec. 4, 2012]

Question 147.05

Question: 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.” Would this provision allow issuers to omit disclosure of transactions or dealings that have been specifically authorized by foreign governmental authorities, but not any U.S. federal department or agency?
Answer: No. 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 could disclose that fact in addition to the other information required by Section 13(r)(2) to provide the appropriate context for the disclosure. [Dec. 4, 2012]

Question 147.06

Question: 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, available at http://www.treasury.gov/resource-center/faqs/Sanctions/Pages/answer.aspx#60 (explaining the difference between a general license and a specific license). Does a general license issued by OFAC count as a “specific authorization of a Federal department or agency” for purposes of Section 13(r)(1)(D)(iii)?
Answer: Yes. 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. [Dec. 4, 2012]

Question 147.07

Question: If an issuer includes disclosure responsive to Section 13(r) in a periodic report filed with the Commission, will the disclosure become public?
Answer: Yes. All periodic reports filed with the Commission are made public automatically upon filing through the Commission’s EDGAR system. [Dec. 4, 2012]


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