Header graphic for print
Oil & Gas Law Report Reporting on recent legal developments and trends in the oil and gas industry.

Category Archives: Securities

Subscribe to Securities RSS Feed

SEC will redraft, not appeal, district court rejection of resource extraction issuer payment disclosure rules

Posted in Exploration & Production, Securities

We wrote previously about the United States District Court for the District of Columbia vacating Securities and Exchange Commission Rule 13q-1, which required certain companies to disclose payments made to foreign governments in connection with the commercial development of oil, natural gas or minerals. The SEC announced Sept. 3, 2013 that it would not appeal the court’s decision and would instead redraft the rule, taking into account the court’s concerns, and restart the rulemaking process.

The court had found that:

  1. The SEC erroneously read the statutory language as requiring public disclosure of these payments; and
  2. The SEC’s decision to deny any exemption to the disclosure requirements, specifically in the case of countries that prohibit disclosure of these payments, was arbitrary and capricious.

The SEC has not provided a timetable for the redraft of the rule.…


Continue Reading →

District Court Vacates Resource Extraction Issuer Payment Disclosure Rules; May Foreshadow Ruling on Conflict Minerals Challenge

Posted in Exploration & Production, Securities

On July 2, 2013, the United States District Court for the District of Columbia vacated Securities and Exchange Commission (SEC) Rule 13q-1, which required certain companies to disclose payments made to foreign governments in connection with the commercial development of oil, natural gas or minerals. The court found:

  1. the SEC erroneously read the statutory language as requiring public disclosure of these payments; and
  2. the SEC’s decision to deny any exemption to the disclosure requirements, specifically in the case of countries that prohibit disclosure of these payments, was arbitrary and capricious.


Continue Reading →

SEC Updates: Staying Ahead of the Regulatory Curve

Posted in Securities

Our colleagues on the Federal Securities Law Blog have been tracking new and updated SEC regulations that are likely to have an impact on your business now and in the near future. The compilation of articles in their most recent eBook — SEC Updates: Staying Ahead of the Regulatory Curve — discuss three important SEC regulatory changes: compensation committee rules, conflict minerals reporting and whether companies that use social media to communicate with investors are complying with Regulation Fair Disclosure.

Download the SEC Updates: Staying Ahead of the Regulatory Curve eBook.…


Continue Reading →

SEC Issues Investor Alert for Private Oil and Gas Offerings

Posted in Ohio, Regulatory, Securities

We previously blogged about securities regulation of interests in oil and gas exploration and development. Industry participants, state and federal securities regulators have recently cautioned investors regarding investing in oil and gas ventures.

At the federal level, the U.S. Securities and Exchange Commission (SEC) issued an investor alert aimed at private oil and gas offerings. In addition to the usual cautions to investors to do their homework on these deals, the SEC encouraged investors to verify that the person offering the investment is licensed as a broker-dealer. The SEC recently stepped up its efforts to pursue “finders” and other unlicensed persons compensated by issuers to assist in finding investors. Companies raising investment funds need to understand that persons who they engage to assist in selling investments are required to have a securities license. Failure to do so exposes the issuer to civil liability, including rescission claims by investors, and potential criminal liability in cases where material misstatements or omissions are made in the private placement memorandum or other offering material, or other fraudulent activity is present. The investor alert cites several examples of recent enforcement actions where such illegal activity was involved.…


Continue Reading →

The sale of oil & gas working interests is the sale of a security

Posted in Contracts and Leases, Regulatory, Securities

It is unfortunately commonplace for many participants in the oil and gas industry, particularly in the sale of interests in oil and gas production activities, to ignore the requirements of federal and state securities laws applicable to these activities.  However, the sale of an oil & gas working interest is the sale of a “security” under the securities laws, and the disclosure requirements of these laws apply just the same as the would in the sale of stock or an interest in a limited liability company.

Non-operating working interests in oil and gas leases are “securities” under the Securities Act of 1933 (the “Securities Act”), the Securities Exchange Act of 1934 (“Exchange Act”), and the Ohio Securities Act (“OSA”) because (i) working interests are “fractional undivided interest[s] in oil, gas or other mineral rights” [1] or “interests in or under oil, gas or mining leases” [2] and (ii) working interests coupled with an operating agreement and a promotional scheme are “investment contracts” under thes provisions.  A non-operating working interest owner in an oil and gas lease (“NWI”) is an undivided co-owner and tenant in common with the other working interest owners in an oil and gas lease. By definition, a NWI owns (i) a “fractional undivided interest in oil, gas, or other mineral rights” under the Securities Act, (ii) a “participation in . . . any oil, gas, or other mineral royalty or lease” under the Exchange Act, and (iii) an “interest[ ] in or under oil, gas or mining …


Continue Reading →

SEC Adopts Final Rules Requiring Payment Disclosures by Resource Extraction Issuers

Posted in Mineral Interest, Regulatory, Securities

The Securities and Exchange Commission (“SEC”) recently adopted a final rule pursuant to Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) requiring resource extraction issuers (companies engaged in the development of oil, natural gas, or minerals) to disclose in an annual report information relating to any payment made by the issuer, a subsidiary of the issuer, or an entity under the control of the issuer, to a foreign government or the U.S. government for the purpose of the commercial development of oil, natural gas, or minerals. Section 1504 added Section 13(q) to the Securities Exchange Act of 1934 (the “Exchange Act”), which requires the SEC to promulgate rules requiring disclosure to be made by resource extraction issuers annually by filing a Form SD with the SEC. 

Bob Tannous, Editor of  the Federal Securities Law blog, has a post focused on the rule; as this may be of interest to many in the industry, we wanted to share it with you. 

 …


Continue Reading →