At an open meeting yesterday, the SEC adopted final rules that will require public “resource extraction” issuers to disclose payments made to the U.S. federal government or foreign governments, if the company engages in the commercial development of oil, natural gas or minerals. After some drama in which Congress disapproved the SEC’s 2016 rulemaking on this topic, the current iteration is based on a 2019 proposal and implements Section 13(q) of Exchange Act, which was added by Dodd-Frank a decade ago. All of the SEC Commissioners, including Chair Jay Clayton, released their own statements about the final rules.
Although the final rules will be effective 60 days after publication in the Federal Register, there’s a two-year transition period before companies will be required to submit a Form SD with this info. And unlike the “conflict minerals” Form SD that is due by May 31st of each year for all companies, this one will be due within 270 days of each company’s fiscal year end. So for calendar-year companies, the first report will likely be due at the end of September 2024. The SEC also issued an order to recognize that a company that meets resource extraction payment disclosure requirements in the EU, UK, Norway or Canada would satisfy the Section 13(q) “alternative reporting” requirements.
Here are other highlights from the SEC’s press release. We’ll also be covering these new rules during our upcoming webcast, “Conflict Minerals & Resource Extraction: Latest Form SD Developments:”
– Require public disclosure of company-specific, project-level payment information;
– Define the term “project” to require disclosure at the national and major subnational political jurisdiction, as opposed to the contract, level, recognizing that more granular contract-level disclosure could be used to satisfy the rule;
– Add two new conditional exemptions for situations in which a foreign law or a pre-existing contract prohibits the required disclosure;
– Add a conditional exemption for smaller reporting companies and emerging growth companies;
– Define “control” to exclude entities or operations in which an issuer has a proportionate interest;
– Limit the liability for the required disclosure by deeming the payment information to be furnished to, but not filed with, the Commission;
– Add relief for issuers that have recently completed their US IPOs; and
– Extend the deadline for furnishing the payment disclosures.
-Liz Dunshee, TheCorporateCounsel.net December 17, 2020
