SEC Notifies Companies Of Ukraine Disclosure Obligations

Law360 (May 4, 2022, 6:54 PM EDT) -- The U.S. Securities and Exchange Commission is advising companies that investors may need them to disclose more details about how Russia's invasion of Ukraine is affecting their operations.

A man pays tribute to foreign citizens killed during Russia-Ukraine war near a memorial sign reading "Foreigners killed by Putin" in a central square in Kyiv, Ukraine, Saturday, Apr. 30, 2022. Names of the killed foreigners are written on the Ukrainian flags. (AP Photo/Efrem Lukatsky)

The agency's Division of Corporation Finance posted guidance and a sample letter to a hypothetical "ABC Corporation" on its website Tuesday, indicating what questions regulators might ask to assure that material developments stemming from the war are made public.

According to the SEC, companies should provide "detailed disclosure" if they have direct or indirect operations in Russia, Belarus or Ukraine affected by the war; whether they have securities traded in Russia; whether they are affected by financial sanctions imposed on Russia; and any related legal uncertainties caused by the conflict.

Additionally, companies should disclose supply chain disruptions or cybersecurity risks resulting from the war. The SEC also wants to know if companies rely on goods serviced or sourced in Russia or Ukraine, or possibly in countries supporting Russia. Companies should also report business relationships or assets based in Russia, Belarus or Ukraine, regulators said.

Corporate financial statements should reflect whether the value of a company's assets have been impaired because of the war and related tax impacts, according to the guidance. The SEC is also advising companies to consider how these matters affect their disclosure controls and what role its board of directors play in overseeing risks.

The SEC said public companies should ask it questions if they are unsure what to disclose.

"The sample comments do not constitute an exhaustive list of the issues that companies should consider," the Division of Corporation Finance said in its guidance. "As always, companies should evaluate whether they have experienced or been impacted by matters characterized as potential risks and, if so, update disclosures accordingly."

This marks the SEC's first explicit guidance on how corporations should factor the Russia-Ukraine conflict into their disclosures, though companies may update periodic filings on their own to reflect new risks. The SEC has previously issued guidance on how companies should craft climate-change disclosures or what they should tell investors when selling securities during volatile periods.

Russia invaded Ukraine on Feb. 24, triggering financial sanctions by the U.S. and European Union intended to isolate the Russian economy. EU officials also said on Thursday they planned to ban all Russia oil imports for the rest of the year.

Stinson LLP partner Steve Quinlivan said he expects large companies with global operations will take the SEC's guidance into account as they craft quarterly reports.

"I thought the SEC guidance was remarkable in its thoroughness," said Quinlivan, who counsels companies on SEC disclosures. "They appeared to leave no stone unturned."

--Editing by Adam LoBelia.

For a reprint of this article, please contact

Hello! I'm Law360's automated support bot.

How can I help you today?

For example, you can type:
  • I forgot my password
  • I took a free trial but didn't get a verification email
  • How do I sign up for a newsletter?
Ask a question!