SEC Issues FAQs On Disclosure Of Payments By Resource Extraction Issuers

The SEC has issued nine frequently asked questions, or FAQs, on the disclosure of payments by resource extraction issuers.

Guidance offered by the FAQs includes:

  • Failure to timely file a Form SD regarding payments by resource extraction issuers will not cause an issuer to lose eligibility to use Form S-3.
  • Holding companies that have subsidiaries which engage in commercial development of oil, natural gas or minerals are covered by the rules, even if the holding company does not itself engage in those activities.
  • A company providing only services associated with exploration, extraction, processing and export generally would not be considered to be a resource extraction issuer.  For instance the SEC does not believe companies that provide hardware and logistics to help companies explore for or extract resources would be considered to be exploring for or extracting the resources even though their services are being used to explore or extract.  Similarly, the SEC does not believe a company engaged by an operator to provide hydraulic fracturing services or drilling services for the operator, thus enabling the operator to extract resources, would be considered to be a resource extraction issuer.
  • As to what constitutes “export,” the SEC generally would not view transportation activities by an issuer that does not have an ownership interest in the resource as directly related to the export of the resource, and therefore, the issuer would not be considered to be a “resource extraction issuer.”
  • A resource extraction issuer is required to disclose payments made to governments to further its commercial development activities and is not required to disclose other payments made to those governments.  In this regard, a resource extraction issuer may elect to segregate income from exploration, extraction, processing and export from income earned on other business activities in a particular country and disclose income taxes paid solely on the income generated by the commercial development activities.  A resource extraction issuer that does not segregate the income information may disclose that the information includes payments made for purposes other than commercial development activities.

Check dodd-frank.com frequently for updated information on the JOBS Act, the Dodd-Frank Act and other important securities law matters.

Topics:  Disclosure Requirements, Payment Records, Resource Extraction, SEC

Published In: Business Organization Updates, General Business Updates, Energy & Utilities Updates, International Trade Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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