SEC Adopts Final Rules Regarding Mine Safety Disclosure
The U.S. Securities and Exchange Commission has adopted final rules to implement Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act which require both U.S. domestic issuers and foreign private issuers that are SEC registrants, and that are operators, or that have a subsidiary that is an operator, of a coal or other mine located in the United States, to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. In addition, U.S. domestic issuers that are SEC registrants must file a Form 8-K disclosing the receipt of certain orders and notices from the Mine Safety and Health Administration (the MSHA).
The disclosure requirements set forth in Section 1503 of the Dodd-Frank Act are currently in effect, and SEC registrants subject to the provision have been required to provide disclosures in their periodic and current reports filed with the SEC since August 20, 2010, the effective date of Section 1503 of the Dodd-Frank Act. The SEC's final rules specify how the disclosure requirements in Section 1503 of the Dodd-Frank Act will be implemented, and will take effect 30 days after the rules are published in the Federal Register.
Applicability
The new rules are applicable to U.S. domestic issuers and foreign private issuers that file reports with the SEC, that "operate" (or have a "subsidiary" that operates) a "coal or other mine" located in the United States.
An "operator" means an owner, lessee, or other person who operates, controls, or supervises a coal or other mine or any independent contractor performing services or construction at such mine. Orders and citations issued to independent contractors (who are not subsidiaries of the reporting company) who are working at the reporting company's mine site would not need to be reported by the reporting company, but rather by the independent contractor if they were themselves a reporting company.
A "subsidiary" is an affiliate controlled by the SEC registrant, directly, or indirectly through one or more intermediaries.
A "coal or other mine" is defined by reference to its meaning under the Federal Mine Safety and Health Act of 1977 (the "Mine Act") and includes an area of land from which minerals are extracted in non-liquid form or, if in liquid form, are extracted with workers underground. The SEC has stated that exploration stage mining companies would be required to provide the Section 1503 disclosure if such companies were to become operators, or have subsidiaries that become operators, of coal or other mines subject to the Mine Act.
Disclosure Required in Periodic Reports
The new rules include the following disclosure requirements for periodic reports filed with the SEC:
- A brief statement in the body of the reports on Forms 10-K, 10-Q, 20-F and 40-F disclosing that the SEC registrant or subsidiary has mine safety violations or other regulatory matters to report and that the required disclosure is included as an Exhibit to the filing.
- An amendment to Item 601 of Regulation S-K requires a new "Mine Safety Disclosure Exhibit" to be included in reports on Forms 10-K and 10-Q (and corresponding Items with identical requirements in Forms 20-F and 40-F). The Mine Safety Disclosure Exhibit will disclose the detailed Item information outlined below, in each case for the applicable time period covered by the report. Although there is no prescribed format, tabular disclosure is encouraged.
- New Item 104 of Regulation S-K requires the following information to be disclosed in the new Mine Safety Disclosure Exhibit included in reports on Forms 10-K and 10-Q (and corresponding Items with identical requirements in Forms 20-F and 40-F), in each case for the applicable time period covered by the report, and on a mine-by-mine basis:
o the total number of violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a coal or other mine safety or health hazard under Section 104 of the Mine Act for which the operator received a citation from the MSHA;
o the total dollar value of proposed assessments (regardless of whether the assessment is being challenged or appealed) from the MSHA under the Mine Act;
o the total number of mining-related fatalities;
o any pending legal action before the Federal Mine Safety and Health and Health Review Commission involving such coal or other mine.
o the total number of orders issued under Section 104(b) of the Mine Act;
o the total number of citations and orders for unwarrantable failure of the mine operator to comply with mandatory health or safety standards under Section 104(d) of the Mine Act;
o the total number of flagrant violations under Section 110(b)(2) of the Mine Act;
o the total number of imminent danger orders issued under Section 107(a) of the Mine Act;
o a list of mines for which the SEC registrant or a subsidiary received written notice from the MSHA of a pattern of violations of mandatory health or safety standards that are of such a nature as could have significantly and substantially contributed to the cause and effect of coal or other mine health and safety hazards under the Mine Act; and
o a list of mines for which the SEC registrant or a subsidiary received written notice from MHSA of the potential to have such a pattern.
Disclosure Required in Current Reports
The new rules include the following disclosure requirements for current reports filed with the SEC:
- New Item 1.04 of Form 8-K requires the following information to be disclosed in a current report on Form 8-K if SEC registrants or their subsidiaries receive, with respect to a coal or other mine of which the registrant or a subsidiary of the registrant is an operator, any of the following:
o an imminent danger order issued under Section 107(a) of the Mine Act;
o a written notice from the MSHA that the coal or other mine has a pattern of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect of coal or other mine health or safety hazards under Section 104(e) of the Mine Act; or
o a written notice from the MSHA that the coal or other mine has the potential to have such a pattern.
- New Item 1.04 of Form 8-K requires the SEC registrant to disclose the date of receipt by the SEC registrant or subsidiary of the order or notice, the category of the order or notice, and the name and location of the mine involved.
- Foreign private issuers are not subject to these current reporting requirements because they are not required to file current reports on Form 8-K; however, the disclosure requirements for periodic reports (including Forms 20-F and 40-F) described above under the heading "New Disclosure Required in Periodic Reports" include the information required by Item 1.04 of Form 8-K.
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