SEC Requirements under the Iran Threat Reduction and Syria Human Rights Act

The following post comes to us from Larry Sonsini, chairman of Wilson Sonsini Goodrich & Rosati. This post is based on a WSGR alert.


On August 10, 2012, President Obama signed the Iran Threat Reduction and Syria Human Rights Act into law. The act is available at

The purpose of the act is to expand U.S. sanctions against Iran in order to compel Iran to stop pursuing a nuclear weapons program and other controversial initiatives.

Public companies, however, may have new disclosure obligations as a consequence of the act. Among other things, the act requires that companies subject to the reporting requirements of the Securities Exchange Act of 1934 (Exchange Act) make certain disclosures relating to activities that they and their worldwide affiliates knowingly engage in involving Iran in their quarterly and annual reports filed with the Securities and Exchange Commission (SEC). This provision of the act does not require additional rulemaking by the SEC in order to be effective. As a consequence, public reporting companies must comply with the new reporting obligations under the act by February 6, 2013.

The act requires that a public reporting company disclose in its quarterly and annual reports whether, during the period covered by the report, it or any of its affiliates knowingly: [1]

  • engaged in the transfer of technology or services to Iran that are likely to be used for human rights abuses against Iranian people, including hardware, software, telecommunications equipment, or any other technology or related services that the President determines is to be used specifically to restrict the free flow of unbiased information in Iran, or to disrupt, monitor, or otherwise restrict speech of the people of Iran;
  • engaged in sanctionable activities under the Iran Sanctions Act of 1996, including transactions relating to Iran’s petroleum industry and Iran’s procurement and proliferation of weapons of mass destruction and conventional weapons;
  • engaged in sanctionable activities under the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010, including financing the Iranian government’s acquisition of weapons of mass destruction and facilitating terrorist activities;
  • conducted transactions with blocked persons who are designated by the U.S. government as such for their involvement with weapons of mass destruction; or
  • conducted transactions with the Iranian government, its delegates, or entities owned or controlled by the Iranian government.

Public reporting companies are required not only to report their activities, but also the activities of their affiliates, [2] which include non-U.S. entities that are controlled by the company, and that are organized under the laws of non-U.S. jurisdictions.

If a public reporting company or its affiliates knowingly engage in any of these reportable transactions during the period of the applicable quarterly or annual report, it must provide a detailed description of the activity in the report, including the nature and extent of the activity, gross revenues and net profit attributable to the activity, and whether it intends to continue the activity.

The company also must file a separate notice regarding the activity with the SEC, which the SEC will make publicly available on its website. The SEC is required to forward the company’s quarterly or annual report to the President, the Senate Committees on Foreign Relations and Banking, Housing and Urban Affairs, and the House of Representatives Committees on Foreign Affairs and Financial Services. The President must then initiate an investigation into the reported activity and within 180 days make a determination as to whether sanctions should be imposed on the company.

What to Do Now

To prepare for the February 6, 2013, compliance deadline, companies should do the following:

  • Review their activities and the activities of their affiliates to determine whether there has been any knowing conduct involving Iran by any such parties that must be disclosed under the act
  • Update their disclosure controls and procedures for quarterly and annual reports to ensure that any such knowing conduct in the future is identified and properly disclosed in connection with the preparation of such reports
  • Review and update their regulatory and compliance programs to ensure compliance with other aspects of the act


[1] As defined in the act, the term “knowingly,” with respect to conduct, a circumstance, or a result, means that a person has actual knowledge, or should have known, of the conduct, the circumstance, or the result.
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[2] Exchange Act Rule 12b-2 defines an “affiliate” of a company as a person who directly (or indirectly through one or more intermediaries) controls, is controlled by, or is under common control with such company, and defines “control” and its related words as the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.
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  3. […] recommended in a blog post by Larry Sonsini on the Harvard Law School Forum on Corporate Governance and Financial Regulation Blog, public companies should continue to take the following actions to help ensure compliance with ITRA […]