SEC Releases Sample Letter Regarding Disclosures Related to Russia's Invasion of Ukraine | Practical Law

SEC Releases Sample Letter Regarding Disclosures Related to Russia's Invasion of Ukraine | Practical Law

The SEC's Division of Corporation Finance released a sample letter related to disclosure obligations regarding the impact that Russia's invasion of Ukraine and the international response have had or may have on a company's business.

SEC Releases Sample Letter Regarding Disclosures Related to Russia's Invasion of Ukraine

by Practical Law Corporate & Securities.
Published on 04 May 2022 • USA (National/Federal)
The SEC's Division of Corporation Finance released a sample letter related to disclosure obligations regarding the impact that Russia's invasion of Ukraine and the international response have had or may have on a company's business.
On May 3, 2022, the SEC's Division of Corporation Finance (Division) released a sample letter to companies that may have disclosure obligations related to the direct or indirect impact that Russia's invasion of Ukraine and the international response have had or may have on their business.
The Division's illustrative letter provides sample comments the Division may issue to issuers depending on the particular facts and circumstances. The comments, which do not constitute an exhaustive list of issues companies should consider, focus on the need for detailed disclosure, if material or otherwise required, of a company's:
  • Direct or indirect exposure to Russia, Belarus, or Ukraine through its:
    • operations;
    • employee base;
    • investments in Russia, Belarus, or Ukraine;
    • securities traded in Russia;
    • sanctions against Russian or Belarusian individuals or entities; or
    • legal or regulatory uncertainty associated with operating in or exiting Russia or Belarus.
  • Direct or indirect reliance on goods or services sourced in Russia, Ukraine, or in some cases, in countries supportive of Russia.
  • Actual or potential supply chain disruptions, and any increased or ongoing supply chain challenges.
  • Business relationships, connections to, or assets in Russia, Belarus, or Ukraine.
  • Heightened cybersecurity risks.
  • Volatility related to the trading prices of commodities regardless of whether they have operations in Russia, Belarus, or Ukraine.
The Division reminds companies that, consequently, their financial statements may also need to reflect and disclose any:
  • Impairment of assets.
  • Changes in inventory valuation.
  • Deferred tax asset valuation allowance.
  • Disposal or exiting of a business.
  • De-consolidation.
  • Changes in exchange rates.
  • Changes in contracts with customers or the ability to collect contract considerations.
In addition, the Division reminds companies that they must consider how these matters impact:
  • Management's evaluation of disclosure controls and procedures.
  • Management's assessment of the effectiveness of internal control over financial reporting.
  • The role of the board of directors in risk oversight of any action or inaction related to Russia's invasion of Ukraine, including consideration of whether to continue or to halt operations or investments in Russia and/or Belarus.
The Division's sample letter represents the SEC's effort to monitor and enhance disclosures related to the direct and indirect risks associated with Russia's invasion of Ukraine. For a collection of Practical Law resources covering Russian's invasion of Ukraine and related considerations, see Russia Sanctions and Related Considerations Toolkit and Legal Update, SEC Division of Trading and Markets Issues Staff Statement on Market Volatility and Uncertainties.
For more information on the SEC's review of company filings, see Practice Notes, Registration Process: SEC Review and SEC Review of Periodic Reports. For a collection of Practical Law resources covering the reporting and disclosure obligations for public companies generally, see Periodic Reporting Requirements and Disclosure Obligations Toolkit (Domestic Issuers) and Periodic Reporting Requirements and Disclosure Obligations Toolkit (Foreign Private Issuers).