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SEC votes to update disclosure rules for foreign companies

  • SEC (US Securities and Exchange Commission) (dark gray) Image

28 Aug 2008

On 27 August 2008, the US Securities and Exchange Commission voted unanimously to update and modernise the disclosure requirements for foreign companies offering securities in US markets.

Currently, there are around 1,100 foreign SEC registrants and another 700 foreign companies whose equity securities trade over-the-counter in the US without SEC registration. Click for the SEC Press Release (PDF 34k). Three sets of amendments were approved:

Foreign issuer reporting enhancements. These will shorten the deadline for annual reports filed by foreign private issuers from six months to four months. The rule amendments also enable foreign issuers to test their eligibility to use the special forms and rules available to foreign private issuers once a year, rather than continuously; enhance the disclosures a foreign private issuer provides to investors regarding any changes in and disagreements with its auditor; and revise the annual report and registration statement forms used by foreign private issuers to improve certain disclosures provided in these forms.

Exemption from registration. Exchange Act Rule 12g3 exempts a foreign private issuer from registering equity securities if it submits to the SEC of certain information published outside the US. The exempted securities can then trade in the US over-the-counter (OTC) market without registration. Currently, there are around 700 Such Companies (PDF 399k). The adopted rule amendments will eliminate the current written application and paper submission requirements by automatically exempting a foreign private issuer from Section 12(g) provided it meets specified conditions. As is currently the case, issuers must continue registering their securities under the Exchange Act to have them listed on a national securities exchange or traded on the OTC Bulletin Board.

Cross-border business combinations and rights offerings. The Commission approved amendments to expand and enhance the utility of the exemptions for business combination transactions, tender offers, and rights offerings and to encourage offerors and issuers to permit US security holders to participate in these transactions on the same terms as other security holders. The Commission also voted to provide interpretive guidance on several topics that come up frequently for practitioners in the cross-border area.

 

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