SEC Adopts Final Rules to Implement the “Resource Payments” Disclosure Requirements of the Dodd-Frank Act: Final Rules Require Filing a Separate Report Disclosing Payments Made to Governments for the Commercial Development of Oil, Natural Gas or Minerals

Sullivan & Cromwell LLP - August 31, 2012

On August 22, 2012, the SEC adopted final rules under the Securities Exchange Act of 1934 that implement the “resource payments” disclosure provisions of Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The final rules require an issuer that files an annual report on Form 10-K, Form 20-F or Form 40-F to file separately a new Form SD to be filed annually that discloses detailed information relating to payments made during the covered fiscal year by the issuer or any entity controlled by it to a foreign government (including subnational governments and government-owned companies) or the U.S. federal government for purposes of the commercial development of oil, natural gas or minerals.

The final rules are largely similar to the rules proposed in December 2010. Some of the more significant differences between the proposed rules and the final rules are as follows:

  • Rather than being included in the issuer’s Form 10-K, 20-F or 40-F, the disclosure will be included in a separate Form SD, to be filed within 150 days of fiscal year-end. This is the same form that will be used for conflict mineral disclosure, under rules adopted by the SEC on the same day (see our separate publication on those rules).
  • Form SD will be “filed with,” not “furnished to,” the SEC, and will be subject to liability under Section 18 of the Exchange Act. Form SD will not, however, be incorporated by reference into Securities Act offering documents, and will not be covered by the Sarbanes-Oxley CEO and CFO certifications.
  • The final rules include a $100,000 bright-line standard for determining whether a payment is “not de minimis.”
  • The final rules add dividends and payments for infrastructure improvements to the exclusive list of payment types that require disclosure.
  • The adopting release provides a number of examples of activities covered by the terms “extraction,” “processing” and “export.”
  • The final rules include a new anti-evasion provision to prevent re-characterization of activities or payments to evade disclosure.

The final rules will become effective 60 days after their publication in the Federal Register. Resource extraction issuers must file Form SD for fiscal years ending after September 30, 2013. With respect to fiscal years beginning before and ending after September 30, 2013 (e.g., calendar year 2013), resource extraction issuers may file a partial-year report covering the period from October 1, 2013 through the end of the issuer’s fiscal year. Resource extraction issuers must file a full-year report for any fiscal year beginning after September 30, 2013.