On Tuesday, the regulator urged companies to provide detailed information about their exposure to Russia, Belarus, and Ukraine, ranging from business relationships to supply-chain disruptions to investments.
The SEC published a list of requests sent to corporate executives by its staff in an effort to compel them to provide more information to their investors. The agency's corporate-finance division sends comment letters to public companies on a regular basis, inquiring about their disclosures or accounting practices related to filings such as quarterly or annual reports.
The requests focus on the financial impact of sanctions, import or export bans, and investor or customer reactions to their actions, such as continuing to pay taxes to the Russian government.
Questions may also be raised about the role of corporate boards in overseeing war-related risks, the increased risk of cyberattacks, or the nature of adjustments companies have made to expenses—for example, for compensation, bad debt, or other reasons related to operations in the relevant countries. In proxy statements, companies typically disclose their board's role in governance and risk oversight, but not in annual or quarterly filings. The SEC did not specify which companies received the letters.
According to the Yale School of Management, nearly 1,000 international businesses have reduced or closed their operations in Russia since the invasion of Ukraine began in late February. According to the data, more than 200 businesses from around the world continue to operate in the country.
Companies like BP PLC and General Electric Co. recently recorded impairment charges of $25.5 billion and $200 million, respectively, to account for losses incurred as a result of their withdrawal from Russia.
So far, only a few of the letters have been made public. In some cases, companies were asked to revise their financial reporting disclosure in response to the SEC's comments. The regulator did not respond to a request for comment.
The SEC asked United Parcel Service Inc. for more information on the war's negative impact on the delivery giant's business in letters released last month, which it mentioned in its annual report for the fiscal year ended Dec. 31. UPS generates less than 1% of its annual revenue from Russia, Belarus, or Ukraine, which it does not consider significant, according to Chief Financial Officer Brian Newman in a March 15 letter in response to the SEC.
In February, UPS announced a temporary suspension of all shipping services to, from, and within Ukraine, Belarus, and Russia. The company claims that its March ban on overflights over Russia has had no significant impact on its costs. UPS will include appropriate disclosure in its public filings if the invasion has a significant impact, according to Mr. Newman. A request for comment was not returned by the company.
In another set of letters made public by the SEC last month, the regulator sought clarification from ESAB Corp. In March, the industrial-technology company revealed that its business in Russia accounted for 7% of total revenue last year. The SEC inquired whether this meant that the North Bethesda, Md.-based company derived that portion of its revenue from domestic sales. A lawyer for ESAB told the SEC on March 17 that the company revised its disclosure to clarify that the figure represented sales there.
ESAB, which declined further comment for this story, announced on April 25 that it was transitioning its operations out of Russia.
The sample questions follow the SEC's request last fall for public companies to provide more information to investors about how climate change may affect their financial earnings or business operations. According to research firm Audit Analytics, the SEC has sent approximately 35 U.S.-listed companies a total of 70 letters since then. According to Audit Analytics, the regulator sent 1,330 letters to US-listed companies last year, a 19.8 percent decrease from the previous year.
In recent years, the SEC has only met with a few companies to discuss Russia-related risks, including Atlassian Corp., an Australian software provider, and Ozon Holdings PLC, a Russian e-commerce platform.
The Ukrainian American Bar Association, a group of Ukrainian-American attorneys, judges, and law students, petitioned the SEC last month, requesting that the regulator establish a rule requiring companies to disclose their business dealings in and with Russia and Belarus.
According to David Lynn, partner at law firm Morrison Foerster LLP and former chief counsel at the SEC's corporate-finance division, finance executives will need to analyze to what extent the specific circumstances outlined in the SEC's sample letter apply to them.
"You don't want to be too focused on anticipating the SEC's comments and more focused on how this situation affected the company," Mr. Lynn said.