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The latest issue of The Corporate Counsel has been sent to the printer. It is also available now online to members of TheCorporateCounsel.net who subscribe to the electronic format. The issue includes the following article:

– Time Is Up for Resource Extraction Issuers: Our Last-Minute FAQs

As I mentioned a few weeks ago, the SEC’s resource extraction issuer disclosure requirements require Form SD filings by September 26 for calendar year-end companies that are subject to these new requirements. Here are a few of the FAQs from the latest issue of The Corporate Counsel:

Will the SEC revisit the latest resource extraction issuer payment disclosure requirements?

In the time since the SEC adopted the latest rule and form amendments requiring the disclosure of payments by resource extraction issuers, an item has been included in the Regulatory Flexibility Act Agenda which references the resource extraction issuer disclosure rules. The more detailed description of the line-item states: “The Division is considering recommending that the Commission review the rules under section 1504 of the Dodd-Frank Act to determine if additional amendments might be appropriate.” In the Spring 2024 Reg Flex Agenda, the action is categorized in the proposed rule stage and projects a date for the proposal of April 2025, well after the date when Form SD filings are first required. At this point, all hope is lost that any changes will be made or a delay in the deadline will be adopted prior to the September 2024 Form SD filing deadline for calendar year-end companies.

When is the first Form SD required to be filed?

In the 2020 rulemaking, the SEC adopted a two-year transition period which specified that a resource extraction issuer will be required to comply with Rule 13q-1 and Form SD for fiscal years ending no earlier than two years after the effective date of the final rules. The final rules became effective on March 16, 2021, with initial Form SD filings due no later than 270 calendar days after the end of an issuer’s next completed fiscal year. Therefore, the deadline for companies with a fiscal year ended December 31, 2023 is September 26, 2024. While the example provided in the Adopting Release specifically referred to September 30, 2024 as the initial due date for a company with a fiscal year-end of December 31, 2023, the September 26, 2024 date is the actual due date for the Form SD under the transition provisions.

There is nothing in the rule that would facilitate combining the Form SD for conflict minerals disclosure with the Form SD for payments made by resource extraction issuers, given that they have different filing deadlines (the Form SD for conflict minerals disclosure is due on May 31 for the prior calendar year).

What happens if the Form SD is not timely filed?

The failure to timely file a Form SD pursuant to Exchange Act Section 13(q) does not cause a company to lose its eligibility to utilize Form S-3. As noted in Question 115.04 of the Securities Act Forms CDIs, in determining eligibility for use of Form S-3, the requirement that the company has filed in a timely manner all reports and materials required to be filed during the prior 12 calendar months refers only to Exchange Act Section 13(a) or 15(d) reports and Exchange Act Section 14(a) and 14(c) materials. Further, a report that is deemed to be “furnished” and not “filed” does not impact a company’s Form S-3 eligibility, as noted in Securities Act Forms CDI Question 115.07. As noted above, a Form SD disclosing payments made by resource extraction issuers is required to be furnished under Exchange Act Section 13(q), therefore the failure to timely file does not impact a company’s Form S-3 eligibility. It is conceivable, although perhaps unlikely, that the SEC could bring an enforcement action against a company for a failure to file a Form SD under Section 13(q). It is also possible that the Staff of the Division of Corporation Finance could utilize the comment process to ask a company why it has not filed a Form SD to disclose payments by resource extraction issuers.

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– Dave Lynn