By Mark S. Nelson, J.D.
The SEC’s Division of Corporation Finance issued three new Compliance and Disclosure Interpretations (C&DIs) regarding the timing and content of mining property disclosures newly required under Subpart 1300 of Regulation S-K. The latest C&DIs add to a growing list of 2020 issuances that have addressed topics such as COVID-19 and the Management’s Discussion and Analysis (MD&A). The mining operations disclosure guidance can be found in the Regulation S-K C&DIs under new Section 155.
The Commission updated the disclosure rules for companies with mining operations in Release No. 33-10570 on October 31, 2018. The purpose of the update was to modernize such disclosures while also aligning them with global standards.
With respect to the new C&DIs, Question 155.01 addressed concerns about when a company must comply with the mining property disclosures required by Subpart 1300 of Regulation S-K. The SEC staff replied that an Exchange Act annual report containing the required disclosures must be filed for the first fiscal year on or after January 1, 2021. However, the staff indicated that it would be acceptable for a company to invoke the existing guidance contained in Industry Guide No. 7 regarding mining operations disclosures before January 1, 2021. Industry Guide No. 7 will be rescinded as of the date all companies with mining operations must comply with Subpart 1300.
In Question 155.02, it was asked if a company filing a Securities Act registration statement may incorporate by reference the Subpart 1300 disclosure by referring to its Exchange Act annual report, even if that annual report was not required to comply with Subpart 1300. The SEC staff answered in the affirmative. But the staff also said, citing Securities Act Rule 411, that the company must be careful not to include potentially incomplete, unclear, or confusing references. Although not mentioned in the C&DI, Rule 411(e) offers the example of a filing that incorporates by reference from a second document that in turn incorporates by reference from a third document. In this instance, Rule 411 suggests incorporation by reference could be inappropriate unless expressly allowed or otherwise required.
Question 155.03 asked when compliance with Subpart 1300 is required if an Exchange Act or Securities Act registration statement does not incorporate by reference from an Exchange Act annual report regarding mining property disclosures. The SEC staff reiterated the general compliance date of January 1, 2021. However, the staff also offered two examples: (1) a calendar year-end company would have to comply by January 1, 2021; and (2) a company with a June 30 fiscal year-end would have to comply by July 1, 2021.