Risk & Compliance

SEC Eases Filing Rules for Non-U.S. Firms

Goal is to give U.S. investors more access to information involving overseas issuers, and attract more foreign companies.
Stephen TaubAugust 27, 2008

On a busy day in which it also drew a roadmap for moving to international financial reporting standards, the Securities and Exchange Commission moved to simplify disclosure requirements for foreign companies offering securities in the U.S.

Under the amendments — designed to make it easier for U.S. investors to gain timely access information, and to further attract foreign companies to American markets — foreign companies without SEC-registered securities no longer are required to submit paper disclosures. Rather, they are permitted to deliver information electronically.

The SEC also said that after a transition period, foreign companies will be required to file their annual reports with the SEC two months earlier. Further, the commission agreed to amendments to speed U.S. investors toward participating in cross-border tender offers and other merger deals.

“Today’s action will make foreign companies’ disclosures available to U.S. investors more quickly and without cost — and in English,” SEC Chairman Christopher Cox said. “These changes to our regulation of foreign private issuers will encourage cross-border capital flows and eliminate needless barriers to our securities markets, so U.S. investors have better information about the securities of foreign companies.”

The first of three sets of commission rule amendments, called Foreign Issuer Reporting Enhancements, will update filing requirements by shortening the deadline for annual reports filed by foreign private issuers from six months to four months. The amendments also enable foreign issuers to test their eligibility to use special rules available to certain private issuers once a year, rather than continuously, among other things.

Another set of amendments sets terms for an exemption allowing foreign private issuers to have securities traded in the U.S. over-the-counter market without registration. Those amendments will eliminate the current written application. And the third involves changes to the SEC’s cross-border exemptions relating to business combinations, tender offers, and rights offerings. They are designed to encourage U.S. security holders to be allowed to participate in transactions on the same terms as other security holders.