Risk & Compliance

SEC May Lure Foreign Firms by Easing Disclosure

Electronic filing is the centerpiece of Cox's plan to beckon companies to the U.S. capital markets.
Stephen TaubFebruary 14, 2008

In a continuing effort to make U.S. capital markets more appealing to foreign companies, the Securities and Exchange Commission proposed a number of amendments to its disclosure standards, including eliminating all requirements for paper submissions.

“The proposed amendments would bring our foreign company disclosure requirements into the 21st Century by eliminating any requirement for paper, and by giving investors instant access to foreign company disclosure documents electronically, in English, on the Internet,” SEC Chairman Christopher Cox said.

One set of proposals, known as Foreign Issuer Reporting Enhancements, would permit issuers outside the U.S. to assess their eligibility to use the special forms and rules available to foreign private issuers once a year, on the last business day of their second fiscal quarter, rather than on the continuous basis that current rules require.

Another proposal would accelerate the reporting deadline for annual reports from six months to 90 days after an issuer’s fiscal year-end in the case of large accelerated filers and accelerated filers. The acceleration would be to 120 days after the fiscal year-end for all other issuers. The change calls for a two-year transition period.

The SEC is also proposing to permit certain foreign private issuers to omit segment data from their U.S. GAAP financial statements.

Another proposal would amend Exchange Act Rule 12g3-2(b), which permits a foreign private issuer to exceed the shareholder thresholds for registration, and effectively to have its equity securities traded on a limited basis in the over-the-counter market in the U.S.

The SEC explained that currently, in order to obtain the Rule 12g3-2(b) exemption, a non-reporting issuer must initially submit written materials to the Commission in paper, including a list of the issuer’s non-U.S. disclosure obligations, information concerning its U.S. shareholders, and paper copies of its non-U.S. disclosure documents published since the beginning of its most recently completed fiscal year.

The proposed amendments would eliminate the paper submission requirements by automatically granting the exemption that meets specified conditions, which do not depend on a count of an issuer’s U.S. security holders, and which would require an issuer to publish electronically in English specified non-U.S. disclosure documents.

As a result, the proposed amendments should make it easier for U.S. investors to gain access to a foreign private issuer’s material non-U.S. disclosure documents and make better informed decisions regarding whether to invest in that issuer’s equity securities, the Commission explains.

The SEC is seeking comments on these proposals for 60 days.