Taylor on Foreign Issuer Reporting Enhancements


In SEC Securities Act Release No. 8959, 2008 SEC LEXIS 2251 (Oct. 6, 2008), the Securities and Exchange Commission (SEC) adopted amendments to the foreign private issuer disclosure requirements. These rule amendments foist significant changes upon the current foreign private issuer disclosure regime. As a result, foreign issuers that are subject to registration under the Securities Exchange Act of 1934 should critically review the effect that these significant amendments likely will have on them, and consider taking appropriate preparatory actions. In this Commentary, Jeffrey M. Taylor examines the foreign private issuer reforms in Securities Act Release No. 8959. He writes:
 
     In the adopting release, the SEC . . . requires foreign private issuers to test their status as such as of the last business day of their second fiscal quarter, except for certain Canadian issuers, which would also be required to test their status at the end of the year. A company that no longer qualifies as a foreign private issuer on this date would be required to comply with the domestic company forms and rules as of the first day of its next fiscal year. A domestic company that qualifies as a foreign private issuer on the last day of its second fiscal quarter would immediately be able to take advantage of the rules and forms applicable to foreign private issuers.
 
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     The SEC has accelerated the current Form 20-F annual report filing deadline for most foreign private issuers from 180 days to 120 days. A Form 20-F is a foreign private issuer annual report form similar in breadth to a Form 10-K for domestic issuers and is required to be filed by all reporting foreign private issuers (except for certain Canadian issuers eligible to file on Form 40-F). This form also can be used to register a class of securities under the Exchange Act.
 
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     Under the prior rules, foreign private issuers filing annual reports on Form 20-F or registering a class of securities under the Exchange Act could provide financial statements prepared under non-U.S. generally accepted accounting principles ("GAAP") or International Financial Reporting Standards ("IFRS"), provided that they include a reconciliation of some of the information provided to U.S. GAAP. The new rules require all foreign private issuers (except certain Canadian filers) to provide all information required under U.S. GAAP and Regulation S-X, the SEC’s accounting rules, as well as a specific reconciliation of the financial statements to U.S. GAAP, if their financial statements are prepared under an accounting standard other than U.S. GAAP or IFRS. This rule applies to all annual reports and registration statements filed on Form 20-F, including in connection with non-capital raising offerings, such as offerings for reinvestment plans, the conversion of securities and investment grade debt. This new rule must be complied with beginning with the first annual report filed for a fiscal year ending on or after December 15, 2011.