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Taylor on Amending the Foreign Private Issuer Exemption

The SEC Exchange Act Release No. 58465, 2008 SEC LEXIS 2098 (Sept. 5, 2008), adopted amendments to the conditions for foreign private issuers to rely upon the “information exemption.” The amendments will require such issuers to publish certain key information electronically and in English. In this Commentary, Jeffrey M. Taylor discusses the amendments to the foreign private issuer exemption and offers advice on complying with the amendments. He writes:
[T]he Exchange Act specifically permits the SEC to adopt rules, regulations or orders exempting “foreign issuers" from SEC registration if in the public interest and consistent with investor protection goals. With this exemptive authority, the SEC adopted rules establishing special exemptions from Exchange Act registration applicable to ''foreign private issuers.'' A foreign private issuer is, broadly speaking, a non-governmental entity located and operated primarily outside of the United States or that has securities owned primarily by non-U.S. residents. . . .
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    . . . [A] foreign private issuer may be exempt from Exchange Act registration if it complies with the so-called “information exemption,'' which is contained in Exchange Act Rule 12g3-2(b). Under the rules formerly in place before the adoption of Exchange Act Release No. 58465, the information exemption required a foreign private issuer to file an initial application with the SEC and to provide the SEC with specified information, including information that it made publicly available in its home jurisdiction. This information was required to be submitted to the SEC only in paper format, meaning that the submissions were not available electronically on the SEC’s website, although they could be reviewed and copied through the SEC’s Public Reference Room. The foreign private issuer was required to continue to submit those documents to the SEC on an ongoing basis, as well as additional information material to an investment decision in the securities. Examples of this additional information included, among other things, disclosures regarding the issuer’s financial condition and results of operations, changes in its business, the acquisition or disposition of assets and changes in management and control.
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     Because the new rules are designed to increase access of current public information to U.S. investors, the SEC now requires that, to claim and maintain the information exemption, the required information must be published in English. At a minimum, a foreign private issuer must provide English translations of the following documents if they are in a foreign language:
·       its annual report with annual financial statements;
·       any interim reports if they include financial statements;
·       press releases; and
·       any other communications or documents distributed directly to security holders of each class of securities to which the exemption relates.
(citations omitted)