October 16, 2023
Disclosure Implications of the Israel-Hamas War
The disclosure implications of the horrific terrorist attacks on Israel & the war that those attacks spawned are rightfully pretty far down the list of concerns raised by those events, but they are nevertheless something that public companies and those who advise them must keep in mind. This recent Goodwin blog addresses those implications, and points out that the Staff’s prior guidance concerning the implications of Russia’s invasion of Ukraine provides some insights about what the SEC is likely to expect from public companies impacted by the current hostilities in the Middle East:
Given the recency of the War, the Securities and Exchange Commission’s (the “SEC”) Division of Corporation Finance is yet to provide specific disclosure guidance related to the War. For context,when the geopolitical situation in Eastern Europe intensified in February 2022, with Russia’s invasion of Ukraine, the Securities and Exchange Commission’s (the “SEC”) Division of Corporation Finance released a sample letter reflecting comments it may issue to a registrant regarding compliance withthe SEC’s disclosure obligations.
The sample letter underscores the need for registrants to evaluate both direct and indirect impacts of wars, including potential or actual disruptions to suppliers, customers, or employees, among other considerations. The sample comments within the letter primarily focus on (1) risk factors, (2) Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), (3) internal control over financial reporting, (4) disclosure controls and procedures, and (5) non-GAAP measures.
The blog points out the importance of considering a company’s direct and indirect exposures to the impact of the conflict, particularly for those companies with material business ties to the region and those that lend to or borrow from entities in Israel or Gaza. It also notes that the war may impact an even wider range of public companies given its potential ramifications for the global economy and financial markets.
– John Jenkins