There’s still a great deal of uncertainty regarding the scope and timing of sanctions relief under a potential comprehensive nuclear deal between the P5+1 and Iran. It seems likely that in exchange for verifiable nuclear-related steps on Iran’s part, the U.S. will relax a significant portion of the secondary (i.e. extraterritorial) sanctions currently in place. This will be accomplished through the use of national security waivers enshrined in virtually every section of Congressional sanctions legislation, as well as the President’s authority under the International Emergency Economic Powers Act (“IEEPA”).

One unanswered question that may prove more important than many may realize is what happens to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (“TRA”) if there is in fact a deal.

Pursuant to TRA 219, firms, including foreign firms, that are required to file annual or quarterly reports with the Securities and Exchange Commission (“SEC”) must report if they or any of their affiliates knowingly engage in certain Iran-related activity. Activity requiring disclosure generally includes:

• Activity described in subsection (a) or (b) of section 5 of the Iran Sanctions Act of 1996 (“ISA”). This includes investment in Iran’s petroleum sector; the provision of goods, services, information or support to Iran’s ability to domestically refine petroleum; the exportation of refined petroleum products to Iran, including the provision of shipping or insurance services for these imports; and the provision of goods, services or support that would materially contribute to Weapons of Mass Destruction (“WMD”) proliferation or terrorism;
• Activity described in subsection (c)(2) of section 104 of the Comprehensive Iran Sanctions Accountability and Divestment Act of 2010 (“CISADA”). This includes significant financial transactions on behalf of the Iranian Revolutionary Guard Corps (“IRGC”), any of its agents or affiliates who are blocked pursuant to IEEPA, and any Iranian financial institutions blocked for proliferation or terrorism purposes; and
• Transactions with any individual or entity designated for terrorism purposes under Executive Order 13224, proliferation purposes under Executive order 13382, or the Government of Iran as described by 31 C.F.R. 560.304 without the express authorization of the Office of Foreign Assets Control (“OFAC”).

Reports containing TRA 219 disclosures, which are identified with a separate [IRANNOTICE] filing, must include

• The nature and extent of the activity;
• The gross revenues and net profits attributable to the to the activity; and
• Whether the issuer or affiliate intends to continue the activity.

When a company discloses any covered activity, the SEC must send the report to the President and relevant congressional committees, after which the President must decide whether to initiate an investigation for possible sanctions violations.

It’s hard to tell how extensive overall compliance with these reporting requirements has been, though many companies take their responsibilities with extreme seriousness. This sometimes produces humorous results, such as when Costco disclosed $170-worth of memberships maintained for Iranian embassy employees or Citibank reporting a $4 profit on ATM-transactions involving a designated Iranian bank.

What makes the issue of TRA 219 reporting important in the context of the nuclear deal is that it appears that filers will be required to continue disclosing covered Iran-related activity, even if that activity has been authorized via presidential waiver. Unlike the Democratic Republic of the Congo conflict minerals reporting contained in the Securities Exchange Act of 1934, there is no grant of authority whereby the President can waive the reporting requirements if he determines doing so is in the national security interests of the United States. The result is that foreign firms, for instance energy companies currently exploring renewed operations in Iran, would still be required to provide detailed reports on their activities in, even if petroleum-related sanctions in section 5 of ISA are waived.

This could have potentially adverse effects on the ability of the P5+1 to provide the degree of sanctions relief expected by Iran under a nuclear deal. As has been the case in the Burma context, companies have been hesitant to invest in the country in part because of the State Department’s reporting requirements. These reports can be expensive and time-consuming to draft as they may require extensive use of specialized outside counsel and also open companies up to reputational risk from advocacy groups opposed to the business in question.

In the Iran context specifically, groups like United Against a Nuclear Iran (UANI) have done an effective job highlighting firms’ dealings with Iran and deploying targeted name-and-shame campaigns against them. Public TRA 219 reports containing significant Iran-related activity may provide a great deal of ammunition for opponents of a comprehensive nuclear deal.

It’s unclear what, if anything, the Obama administration can do about TRA 219 reporting following a nuclear deal. I am not an expert on SEC law, so there may be provisions in the Securities Exchange Act, which allow certain requirements to be waived. However at this point it seems as though the requirements will remain in place. SEC filers anticipating re-entering the Iranian market would do well to begin planning now for how they will address potential reputational concerns arising from future TRA 219 disclosures.