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New SEC ruling eases transparency reporting burden on extractive sector

12th July 2016

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – New rules adopted late in June by issuers reporting under the US Securities and Exchange Commission (SEC) held the promise that oil, gas and mining companies operating in Canada, which file annual transparency reports, might now be able to use that same report to meet new US requirements.

According to professional services firm KPMG, the new US transparency reporting requirements were similar to Canada’s Extractive Sector Transparency Measures Act (ESTMA), which required Canadian resource companies to report tax and other payments they made to Canadian and foreign governments.

In its announcement of the new reporting regime, the SEC had indicated that reports prepared to meet the Canadian ESTMA rules and the European Union (EU) Accounting and Transparency Directives would also comply with the new US transparency reporting requirements, subject to certain conditions.

As a result, affected resource companies that would be subject to both the ESTMA and SEC transparency regimes might not have to prepare separate reports for each jurisdiction.

The SEC rules require resource extraction issuers to disclose certain payments made to US federal and foreign governments for the commercial development of oil, natural gas or minerals for fiscal years ending after September 30, 2018. The rules, which were announced on June 27, 2016, were mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

RULE IMPLICATIONS
According to a news flash published by KPMG, these new rules would apply to resource extraction issuers, subject to a de minimus rule, if the issuers were required to file an annual report with the SEC under section 13 or 15(d) of the Exchange Act. This comprised issuers engaging in the commercial development of oil, natural gas or minerals who filed yearly reports on Forms 10-K, 20-F or 40-F.

The rules will be effective for fiscal years ending after September 30, 2018.

According to the SEC announcement, a resource extraction issuer might use a report prepared for other disclosure regimes to comply with the rules, as long as those reports are deemed to be substantially similar. The SEC had already determined that the current reporting requirements that applied in Canada and the EU were substantially similar, subject to certain conditions.

These required the issuer to be subject to the reporting requirements of that jurisdiction or regime.

CANADIAN ACCEPTANCE
Natural Resources Canada (NRCan) might also allow companies to use reports prepared to meet the reporting requirements of another jurisdiction to meet Canada’s requirements.

Specifically, NRCan had indicated that the current reporting requirements of the European Union Accounting and Transparency Directives (as implemented in an EU or European Economic Area member country) were considered acceptable substitutes for ESTMA reports.

However, companies still needed to meet ESTMA’s publishing requirements using their report prepared under the other jurisdiction’s reporting requirements. NRCan had not indicated whether a report filed under the SEC regime would fulfil its substitution requirements, KPMG pointed out.

Edited by Samantha Herbst
Creamer Media Deputy Editor

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