Foreign Issuer Reporting Enhancements, 58300-58327 [E8-22760]
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Federal Register / Vol. 73, No. 194 / Monday, October 6, 2008 / Rules and Regulations
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Parts 230, 239, 240 and 249
[Release Nos. 33–8959; 34–58620;
International Series Release No. 1310; File
No. S7–05–08]
RIN 3235–AK03
Foreign Issuer Reporting
Enhancements
Securities and Exchange
Commission.
ACTION: Final rule.
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AGENCY:
SUMMARY: We are adopting a number of
amendments to our rules relating to
foreign private issuers that are intended
to enhance the information that is
available to investors. These
amendments are part of a series of
initiatives that seek to effect changes in
our disclosure and other requirements
applicable to foreign private issuers in
light of market developments, new
technologies and other matters in a
manner that promotes investor
protection and cross-border capital
flows. We are adopting amendments
that would 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. We also are adopting
amendments to change the deadline for
annual reports filed by foreign private
issuers and to eliminate an option under
which foreign private issuers are
permitted to omit segment data from
their U.S. GAAP financial statements,
and an amendment to the rule
pertaining to going private transactions
to reflect the new termination of
reporting and deregistration rules for
foreign private issuers. In addition, we
are adopting amendments that would
revise the annual report and registration
statement forms used by foreign private
issuers to improve certain disclosures
provided in these forms.
DATES: Effective Date: December 5, 2008.
Compliance Dates: The compliance
dates are as follows:
• A foreign private issuer must begin
to comply with the requirements to
provide information pursuant to Item
16G of Form 20–F, which pertains to
corporate governance disclosures, for its
first fiscal year ending on or after
December 15, 2008.
• A foreign private issuer must begin
to comply with the amendment to
eliminate Instruction 3 to Item 17 of
Form 20–F, which permits the omission
of segment data in certain
circumstances; to provide disclosure
pursuant to Item 16F of Form 20–F,
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which pertains to a change in
registrant’s certifying accountant; and to
provide disclosure about American
Depositary Receipts fees and payments
for its first fiscal year ending on or after
December 15, 2009.
• A foreign private issuer must begin
to comply with the requirement to file
its Form 20–F annual report on an
accelerated basis for its first fiscal year
ending on or after December 15, 2011.
A foreign private issuer must begin to
comply with the requirements to file
transition reports pursuant to the
amendments to Rules 13a–10(g)(3) and
15d–10(g)(3), and special financial
reports pursuant to the amendments to
Rule 15d–2(a) for its first fiscal year
ending on or after December 15, 2011.
In addition, a foreign private issuer
must begin to comply with the
requirement to prepare financial
statements according to Item 18 of Form
20–F in the annual report filed for its
first fiscal year ending on or after
December 15, 2011.
FOR FURTHER INFORMATION CONTACT:
Felicia H. Kung, Senior Special Counsel,
Office of International Corporate
Finance, Division of Corporation
Finance, at (202) 551–3450, or Craig
Olinger, Deputy Chief Accountant,
Division of Corporation Finance, at
(202) 551–3400, or Jeffrey J. Minton,
Chief Counsel, Office of the Chief
Accountant, at (202) 551–5300, U.S.
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–3628.
SUPPLEMENTARY INFORMATION: We are
adopting amendments to Rule 405 1 of
Regulation C,2 Form F–1,3 Form F–3 4
and Form F–4 5 under the Securities Act
of 1933 (‘‘Securities Act’’),6 Form 20–F 7
under the Securities Exchange Act of
1934 (‘‘Exchange Act’’),8 and Exchange
Act Rules 3b–4,9 13a–10,10 13e–3,11
15d–2,12 and 15d–10.13 The
amendments will: (1) Permit foreign
issuers to test their qualification to use
the forms and rules available to foreign
private issuers on an annual basis,
rather than on the continuous basis that
is currently required; (2) Accelerate the
filing deadline for annual reports filed
on Form 20–F by foreign private issuers
1 17
CFR 230.405.
CFR 230.400 et seq.
3 17 CFR 239.31.
4 17 CFR 239.33.
5 17 CFR 239.34.
6 15 U.S.C. 77a et seq.
7 17 CFR 249.220f.
8 15 U.S.C. 78a et seq.
9 17 CFR 240.3b–4.
10 17 CFR 240.13a–10.
11 17 CFR 240.13e–3.
12 17 CFR 240.15d–2.
13 17 CFR 240.15d–10.
2 17
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under the Exchange Act by shortening
the filing deadline from six months to
four months after the foreign private
issuer’s fiscal year-end, after a threeyear transition period; (3) Eliminate an
instruction to Item 17 of Form 20–F that
permits certain foreign private issuers to
omit segment data from their U.S. GAAP
financial statements; (4) Amend Rule
13e–3 under the Exchange Act by
reflecting the new termination of
reporting and deregistration rules for
foreign private issuers; 14 (5) Require
foreign private issuers that are required
to provide a U.S. GAAP reconciliation
to do so pursuant to Item 18 of Form
20–F; and (6) Amend Form 20–F to
require foreign private issuers to
disclose information about changes in
the issuer’s certifying accountant, the
fees and charges paid by holders of
American Depositary Receipts
(‘‘ADRs’’), the payments made by the
depositary to the foreign issuer whose
securities underlie the ADRs, and, for
listed issuers, the differences in the
foreign private issuer’s corporate
governance practices and those
applicable to domestic companies under
the relevant exchange’s listing rules.
Table of Contents
I. Summary
A. Proposed Amendments
B. Principal Comments Received
C. Summary of Adopted Amendments
II. Discussion of the Amendments
A. Annual Test for Foreign Private Issuer
Status
B. Accelerating the Reporting Deadline for
Form 20–F Annual Reports
C. Segment Data Disclosure
D. Exchange Act Rule 13e–3
E. Requiring Item 18 Reconciliation in
Annual Reports and Registration
Statements
F. Disclosure About Changes in a
Registrant’s Certifying Accountant
G. Annual Disclosure About ADR Fees and
Payments
H. Disclosure About Differences in
Corporate Governance Practices
III. Other Matters Considered
IV. Paperwork Reduction Act
V. Cost-Benefit Analysis
VI. Consideration of Impact on the Economy,
Burden on Competition, and Promotion
of Efficiency, Competition, and Capital
Formation
VII. Regulatory Flexibility Act Certification
VIII. Statutory Authority and Text of Final
Amendments
14 Although amending Rule 13e–3 is consistent
with other Commission initiatives that seek to
address changes in our disclosure and other
requirements applicable to foreign private issuers,
the amendment also will apply to transactions
effected by domestic issuers.
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I. Summary
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A. Proposed Amendments
In February 2008, we published for
comment proposed amendments to
rules and forms aimed at enhancing the
disclosures that foreign private issuers
provide to investors in the U.S. public
markets, and improving the accessibility
of our public markets to these issuers.15
The proposed amendments reflect
changes in the nature of the global
capital markets, as well as advances in
technology with respect to the gathering
and processing of information, that have
occurred since the Commission’s
adoption of Form 20–F almost 30 years
ago. When the Commission adopted
Form 20–F, the form used by foreign
private issuers 16 to register a class of
securities under the Exchange Act and
to file annual reports,17 our objective
was to elicit disclosures from foreign
private issuers that were as equal as
practicable to that provided by domestic
issuers.18 Because of differences in the
national laws and accounting
regulations applicable to foreign private
issuers, we provided specified
disclosure accommodations in Form 20–
F.19 However, we indicated that our
assessment of the appropriate disclosure
requirements for foreign private issuers
was part of an ongoing evolutionary
process.20
As noted previously in the Proposing
Release, there has been a movement
toward greater international agreement
on the accounting and other nonfinancial statement disclosures that
should be provided by issuers. The
Commission has undertaken a number
of initiatives that recognize this. For
example, we adopted rules last
December to permit foreign private
issuers to file financial statements with
the Commission that are prepared in
accordance with International Financial
15 Release No. 33–8900 (Feb. 29, 2008) [73 FR
13404] (hereinafter ‘‘Proposing Release’’).
16 ‘‘Foreign private issuer’’ is defined in Exchange
Act Rule 3b–4(c). A foreign private issuer is any
foreign issuer other than a foreign government,
except for an issuer that (1) has more than 50% of
its outstanding voting securities held of record by
U.S. residents and (2) any of the following: (i) A
majority of its officers and directors are citizens or
residents of the United States, (ii) more than 50
percent of its assets are located in the United States,
or (iii) its business is principally administered in
the United States.
17 Form 20–F is the combined registration
statement and annual report form for foreign private
issuers under the Exchange Act. It also sets forth
disclosure requirements for registration statements
filed by foreign private issuers under the Securities
Act.
18 See Release No. 34–16371 (Nov. 29, 1979) [44
FR 70132] (hereinafter ‘‘Form 20–F Adopting
Release’’).
19 See id.
20 See id.
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Reporting Standards (‘‘IFRS’’), as issued
by the International Accounting
Standards Board (‘‘IASB’’), without
reconciliation to generally accepted
accounting principles (‘‘GAAP’’) used in
the United States.21 Those rules are part
of our efforts to foster a single set of
globally accepted accounting standards.
We also incorporated into Form 20–F all
of the International Organization of
Securities Commission’s
(‘‘IOSCO’’) 22 International Disclosure
Standards for Cross-Border Offerings
and Initial Listings by Foreign Issuers,23
which pertain to prospectuses prepared
by foreign issuers for public offerings
and listing of equity securities.24
In addition, the Commission has
sought to facilitate cross-border capital
flows. When implementing certain
provisions of the Sarbanes-Oxley Act of
2002 (‘‘Sarbanes-Oxley Act’’),25 we also
provided several significant
accommodations to foreign private
issuers relating to the requirements on
internal control over financial
reporting 26 and audit committee
21 Release No. 33–8879 (Dec. 21, 2007) [73 FR
986].
22 IOSCO consists of securities regulators from
109 countries (‘‘ordinary’’ members) who are
committed to working together ‘‘to promote high
standards of regulation to maintain just, efficient
and sound markets.’’ IOSCO, General Information
About IOSCO, at https://www.iosco.org/about/.
23 Available at https://www.iosco.org/library/
pubdocs/pdf/IOSCOPD81.pdf. The IOSCO
Technical Committee recently published the
International Disclosure Principles for Cross-Border
Offerings and Listings of Debt Securities by Foreign
Issuers (2007), available at https://www.iosco.org/
library/pubdocs/pdf/IOSCOPD242.pdf. These
IOSCO Principles apply to prospectuses used by
foreign issuers for offerings and listings of debt
securities. The Commission’s prospectus disclosure
requirements for debt securities offered by foreign
private issuers, which are contained in Form 20–
F, are also consistent with these IOSCO Principles.
24 Release No. 33–7745 (Sept. 28, 1999) [64 FR
53900].
25 15 U.S.C. 7201 et seq.
26 We permitted foreign private issuers to comply
with the requirement to include in their annual
reports management’s report on the company’s
internal control over financial reporting and the
auditor’s attestation on a delayed basis compared to
some domestic issuers. See Release No. 33–8392
(Feb. 24, 2004) [69 FR 9722] (extending the original
compliance dates for accelerated filers to fiscal
years ending on or after November 15, 2004, and
for companies that are not accelerated filers and for
foreign private issuers, to fiscal years ending on or
after July 15, 2005); Release No. 33–8545 (Mar. 2,
2005) [70 FR 11528] (adopting an additional oneyear extension of the compliance dates for
companies that are non-accelerated filers and for
foreign private issuers filing annual reports on
Forms 20–F or 40–F); Release No. 33–8730A (Aug.
9, 2006) [71 FR 47056] (extending for one year the
date by which a foreign private issuer that is an
accelerated filer and that files annual reports on
Forms 20–F or 40–F must begin to comply with the
requirement to provide the auditor’s attestation
report on internal control over financial reporting).
Foreign private issuers also are permitted to report
changes in their internal controls over financial
reporting on an annual basis, rather than on a
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independence.27 These
accommodations recognized non-U.S.
practices and requirements. In March
2007, we also adopted rules that made
it easier for foreign private issuers to
terminate their reporting obligations and
deregister their securities.28 We adopted
these rules to address concerns that the
burdens and uncertainties associated
with terminating their registration and
reporting obligations under the
Exchange Act could serve as a
disincentive to foreign private issuers
accessing the U.S. public capital
markets.29 In a related release,30 we are
adopting amendments to Exchange Act
Rule 12g3–2(b) 31 to expand the
availability of this exemption from
registration under Section 12(g) 32 of the
Exchange Act for foreign private issuers,
so that a qualified foreign private issuer
that meets specified conditions can
claim the exemption automatically
without regard to the number of its U.S.
shareholders. In another related release,
we are adopting amendments that
expand and enhance the utility of the
cross-border exemptions for business
combination transactions.33 These
amendments are expected to encourage
offerors and issuers in cross-border
business combinations, and rights
offerings by foreign private issuers to
permit U.S. security holders to
participate in these transactions in the
same manner as other holders.
As part of our continuous assessment
of our rules pertaining to foreign private
issuers, we proposed amendments to
rules and forms last February that
reflected our view that some of the
disclosure accommodations that we
provided to foreign private issuers
almost 30 years ago may no longer be
appropriate or necessary in light of
global market developments and
advancements in technology.34 These
proposed rule and form amendments
sought to balance our dual objectives of
enhancing the reporting of information
by foreign private issuers, including the
timeframe within which investors can
have access to that information, and
improving the accessibility of our public
markets to these issuers. Among other
things, we proposed amendments that
would permit reporting foreign issuers
quarterly basis as is required of domestic issuers.
Release No. 33–8238 (June 5, 2003) [68 FR 36636].
27 See Release No. 33–8220 (Apr. 9, 2003) [68 FR
18788].
28 Release No. 34–55540 (Mar. 27, 2007) [72 FR
16934].
29 Id.
30 Release No. 34–58465 (Sept. 5, 2008).
31 17 CFR 240.12g3–2(b).
32 15 U.S.C. 78l(g).
33 See Release No. 34–58597 (Sept. 19, 2008).
34 See Proposing Release, supra note 15.
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to assess their eligibility to use the
special forms and rules available to
foreign private issuers once a year,
rather than on a continuous basis. We
also proposed amendments to change
the deadline for annual reports filed by
foreign private issuers and to eliminate
an option under which foreign private
issuers may omit segment data from
their U.S. GAAP financial statements,
and an amendment to the rule
pertaining to going private transactions
to reflect the new termination of
reporting and deregistration rules for
foreign private issuers. In addition, we
proposed amendments that would
revise Form 20–F to improve certain
disclosures provided in that form.
B. Principal Comments Received
We received 52 comment letters in
response to our proposed rule and form
amendments from a variety of market
participants.35 The respondents
included businesses, financial and legal
associations, law firms, accounting
firms, depositary banks, financial
services providers, and one securities
exchange. The comments received on
most of the proposed amendments were
supportive, although commenters
provided useful suggestions on several
of the proposals. Almost all of the
comments received on the proposal to
permit foreign issuers to test their status
as foreign private issuers once a year,
rather than continuously, were very
positive. Commenters noted that this
proposal would reduce compliance
burdens on foreign private issuers, as
well as align the testing and transition
requirements for foreign private issuer
status with the requirements applicable
to determining accelerated filer and
small reporting company status.
We also received mainly positive
comments about the proposed
amendments to require foreign private
issuers to disclose in their Form 20–F
annual reports changes in and
disagreements with their certifying
accountant, and significant differences
in the corporate governance practices of
listed foreign private issuers compared
to the corporate governance practices
applicable to domestic companies under
the relevant exchange’s listing
standards. While several commenters
believed the proposed disclosure would
be more useful if it was made on a more
timely basis, commenters generally
noted that the proposal regarding
disclosure of a change in a registrant’s
certifying accountant would provide
35 These comment letters are available on the
Commission’s Internet Web site, located at https://
www.sec.gov/comments/s7-05-08/s70508.shtml, and
in the Commission’s Public Reference Room in its
Washington, DC headquarters.
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investors with useful information, and
would be consistent with the disclosure
currently required of domestic issuers.
With respect to the corporate
governance proposal, commenters noted
the usefulness of having all of a foreign
private issuer’s corporate governance
information in one location.
In addition, we received primarily
positive feedback on our proposed
amendments to eliminate the option
permitting foreign private issuers to
omit segment data from their U.S. GAAP
financial statements, to reference the
new termination of reporting and
deregistration rules applicable to foreign
private issuers in Exchange Act Rule
13e–3, and to require annual disclosure
in Form 20–F about ADR fees and
payments. These proposals were
supported as providing useful
information to investors, and in the case
of Rule 13e–3, providing regulatory
consistency with the new deregistration
and termination of reporting provisions.
We received a wide range of
comments on some of the other
proposed amendments. In particular,
many commenters opposed the proposal
to accelerate the reporting deadline for
Form 20–F annual reports. We had
proposed amendments to accelerate the
filing deadline for Form 20–F annual
reports by shortening the filing deadline
from 6 months to within 90 days after
the foreign private issuer’s fiscal yearend in the case of large accelerated and
accelerated filers, and to within 120
days after a foreign private issuer’s fiscal
year-end for all other issuers, after a
two-year transition period. Commenters
expressed concern that many foreign
private issuers must prepare financial
statements according to local GAAP
under their home country’s laws and
regulations, and would need additional
time to prepare their financial
statements in accordance with U.S.
GAAP or IFRS as issued by the IASB, or
to reconcile their financial statements to
U.S. GAAP for the Form 20–F.
Commenters also noted that many
foreign private issuers need additional
time to translate information into
English for Form 20–F, and to provide
the additional non-financial statement
disclosures that are required in Form
20–F compared to their home country
annual reports. Other commenters noted
that the proposed acceleration deadlines
could well result in filing dates that
override annual report filing deadlines
in some issuers’ home countries, and
that, in any case, foreign private issuers
provide their home country annual
reports to U.S. investors through the
submission of those reports on Form
6–K.
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We also received a wide range of
responses to our proposed amendments
to require foreign private issuers that are
required to provide a U.S. GAAP
reconciliation to do so pursuant to Item
18 of Form 20–F. Although some
commenters noted that the proposal to
require Item 18 information would
provide investors with more complete
financial information, others expressed
concern about the necessity of the
proposed amendments, since many
countries are gradually requiring
footnote disclosures comparable to U.S.
GAAP and Regulation S–X.
C. Summary of Adopted Amendments
We have carefully considered the
comments received regarding the
proposed amendments and have
concluded that it is appropriate to adopt
the amendments, substantially as
proposed in the case of most of the
amendments. Some of the amendments
have been modified to reflect
suggestions offered by commenters in
response to questions posed in the
Proposing Release.
The adopted amendments will:
• Permit reporting foreign issuers 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 a continuous
basis, which is currently required;
• Accelerate the reporting deadline
for annual reports filed on Form 20–F
by foreign private issuers from six
months to four months after the issuer’s
fiscal year-end, after a three-year
transition period;
• Amend Form 20–F by eliminating
an instruction to Item 17 of that Form
that permits certain foreign private
issuers to omit segment data from their
U.S. GAAP financial statements;
• Amend Exchange Act Rule 13e–3,
which pertains to going private
transactions by reporting issuers or their
affiliates, to reflect the recently adopted
deregistration and termination of
reporting rules applicable to foreign
private issuers;
• Eliminate the availability of the
limited U.S. GAAP reconciliation option
that is contained in Item 17 of Form 20–
F for foreign private issuers that are only
listing a class of securities on a U.S.
national securities exchange, or only
registering a class of equity securities
under Section 12(g) of the Exchange
Act, and not conducting a public
offering. We also are eliminating this
limited reconciliation option for annual
reports filed on Form 20–F, and for
certain non-capital raising offerings,
such as offerings pursuant to
reinvestment plans, offerings upon the
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conversion of securities, or offerings of
investment grade securities. Thus, all
foreign private issuers that are required
to provide a U.S. GAAP reconciliation
must do so pursuant to Item 18 of Form
20–F, although required third party
financial statements could continue to
be prepared pursuant to Item 17 of Form
20–F;
• Amend Form 20–F to require
disclosure in annual reports filed on
that Form about any changes in the
registrant’s certifying accountant;
• Amend Form 20–F to require
annual disclosure of the fees and other
charges paid by holders of ADRs to
depositaries, as well as any payments
made by depositaries to the foreign
private issuers whose securities
underlie the ADRs; and
• Amend Form 20–F to require
annual disclosure of the significant
differences in the corporate governance
practices of listed foreign private issuers
compared to the corporate governance
practices applicable to domestic
companies under the relevant
exchange’s listing standards.
II. Discussion of the Amendments
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A. Annual Test for Foreign Private
Issuer Status
The Commission’s longstanding
policy of facilitating the access of
foreign issuers to the U.S. capital
markets is evidenced by the various
accommodations to foreign practices
and policies it has provided to foreign
issuers that qualify as ‘‘foreign private
issuers.’’ 36 For many companies, the
determination of whether they qualify
as a foreign private issuer is important
because of these accommodations and
exemptions.37 However, to make sure
that it qualifies for these
accommodations, a foreign private
issuer that has close to 50% of its
outstanding voting securities held of
record by U.S. residents may find that
it must monitor on a continuous basis
the different factors used to assess
foreign private issuer status.38 This can
36 See supra note 16 for the definition of ‘‘foreign
private issuer.’’
37 For example, Exchange Act Rule 3a12–3(b) [17
CFR 240.3a12–3(b)] exempts foreign private issuers
from the Commission’s proxy rules [17 CFR
240.14a–1 et seq.], and from the insider stock
trading reports and short-swing profit recovery
provisions under Section 16 [15 U.S.C. 78p] of the
Exchange Act. Foreign private issuers also provide
any interim reports on the basis of home country
regulatory and stock exchange practices, rather than
the quarterly reports that are required of U.S.
issuers, and executive compensation disclosure on
an aggregate basis if the information is reported on
such a basis in the issuer’s home country. See Item
6.B. of Form 20–F.
38 See note 16 above for a description of the
factors that foreign issuers must monitor. The
Commission’s staff has taken the position that, for
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result in uncertainty for these issuers as
to which reporting and regulatory
requirements will apply to them within
a given period of time, as well as
increase their compliance burdens.39
This also can result in confusion for
investors if the issuer needs to switch
between foreign and domestic reporting
forms within the same fiscal year.
We proposed amendments to permit
foreign private issuers to assess their
status once a year on the last business
day of their second fiscal quarter as a
means of providing greater certainty to
both issuers and investors as to the
status of these foreign issuers within a
given period of time. This is the same
date used to determine accelerated filer
status under Exchange Act Rule 12b–2 40
and smaller reporting company status in
Item 10(f)(2)(i) 41 of Regulation S–K.42
The vast majority of comments
received on the proposed amendments
were highly supportive. Commenters
noted that the proposed amendments
would benefit investors by eliminating
confusion in the markets as to an
issuer’s status if an issuer needs to move
between foreign and domestic reporting
forms in the same fiscal year.
Commenters also noted that the
proposed amendments would also
eliminate uncertainty for issuers, and
possibly reduce accounting, audit and
the purpose of the exemptions contained in
Exchange Act Rule 3a12–3(b), foreign private
issuers need to assess their status at the end of each
fiscal quarter. In addition, they must assess their
status at the completion of any purchase or sale by
the issuer of its equity securities (other than in
connection with an employee benefit plan or
compensation arrangement, conversion of
outstanding convertible securities, or exercise of
outstanding options, warrants or rights), any
purchase or sale of assets by the issuer other than
in the ordinary course of business, and any
purchase of equity securities of the issuer in a
public tender offer or exchange offer by a nonaffiliate. Foreign Private Issuers Relying on Rule
3a12–3(b) under the Exchange Act, SEC No-Action
Letter, [1993 Transfer Binder] Fed. Sec. L. Rep.
(CCH) ¶ 76,667 (Mar. 30, 1993). This letter will be
superseded by the amendments.
39 For example, if a foreign issuer concludes that
it does not qualify as a foreign private issuer in the
middle of its fiscal year, it may find it difficult to
change its basis of accounting to U.S. GAAP in
order to comply on a timely basis with the reporting
requirements applicable to domestic issuers under
the Exchange Act. These issuers also face the
challenge of modifying their information and
processing systems to comply with the domestic
reporting and registration regime, as well as the
executive compensation disclosure requirements,
proxy rules and Section 16 reporting requirements
that are applicable to domestic issuers.
40 17 CFR 240.12b–2.
41 17 CFR 229.10(f)(2)(i).
42 17 CFR 229.10 et seq. See also Release No. 33–
8876 (Dec. 19, 2007) [73 FR 934] (adopting
amendments to the disclosure and reporting
requirements under the Securities Act and the
Exchange Act to expand the number of companies
that qualify for the scaled disclosure requirements
for smaller reporting companies).
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58303
information technology fees that would
otherwise result if an issuer changed its
status mid-year. They noted that
substantial incremental effort is often
required to comply with the
Commission’s domestic issuer
requirements. Commenters also pointed
out that the proposed amendments
would simplify compliance with the
Commission’s regulations because this
approach would be more consistent
with our approach to determining
accelerated filer and smaller reporting
company status. One commenter
suggested that the proposal would
increase certainty and predictability for
foreign companies with respect to their
reporting obligations, which should in
turn enhance the attractiveness of the
U.S. capital markets by removing a
disincentive to register with the
Commission.43
After considering the comments
received, we are adopting the
amendments as proposed. In addition,
we are adopting the proposed
amendments that would require a
foreign private issuer that determines
that it no longer qualifies as a foreign
private issuer on the last business day
of its second fiscal quarter to comply
with the reporting requirements and use
the forms prescribed for domestic
companies beginning on the first day of
the fiscal year following the
determination date. We proposed this
amendment to give these issuers six
months’ advance notice that they will
need to transition to the domestic forms
and applicable reporting requirements.
All of the comments that we received on
this aspect of the proposal were highly
supportive. Under the amendments as
adopted, a foreign issuer that does not
qualify as a foreign private issuer as of
the end of its second fiscal quarter in
2009 would file a Form 10–K in 2010 for
its 2009 fiscal year. The issuer would
also begin complying with the proxy
rules and Section 16, and become
subject to reporting on Forms 8–K and
10–Q on the first day of its 2010 fiscal
year.
We also are adopting amendments to
permit a reporting company that
qualifies as a foreign private issuer to
avail itself of the foreign private issuer
accommodations, including use of the
foreign private issuer forms and
reporting requirements, beginning on
the determination date on which it
establishes its eligibility as a foreign
private issuer. Although the majority of
comments received on this aspect of the
proposal were positive, one
43 See comment letter by Organization for
International Investment.
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commenter 44 contended that the
disclosure provided in domestic forms
was important enough to require the
issuer to file on such forms for the
balance of the fiscal year. Nonetheless,
we are adopting this distinction because
we believe the new foreign private
issuer, who would be eligible to file its
annual report for that fiscal year on
Form 20–F, need not continue to
provide reports on Form 8–K and 10–Q
for the remainder of that fiscal year. An
issuer that qualifies as a foreign private
issuer should be allowed to enter the
foreign reporting system immediately
and furnish reports on Form 6–K,45
especially because it will be subject to
the reporting requirements of its home
regulator. Any reports that it files with
its home regulator will be available to
the Commission and the public through
its Form 6–K submission. We note that
the approach that we are taking here is
consistent with our approach to smaller
reporting companies.46
A few commenters supported
requiring a foreign issuer to notify the
market, either in the form of a press
release and/or via notification on the
issuer’s Web site, when it has
determined that it has switched its
status from domestic issuer to foreign
private issuer, or vice versa. Currently,
however, foreign private issuers do not
provide a notice when they switch from
domestic issuer to foreign private issuer
status. Moreover, such a notice
requirement would be an anomaly in
our regulations. In similar contexts,
such as with respect to accelerated filers
or smaller reporting companies, we do
not require issuers to notify the market
when they have switched status.
Therefore, we are not adopting a notice
requirement, although we note that by
furnishing a current report on Form 6–
K rather than Form 8–K after it changes
status, a foreign issuer in essence will be
providing notice that it has switched
status. Of course, issuers may
voluntarily provide explicit notice to
mstockstill on PROD1PC66 with RULES2
44 See
comment letter from CFA Institute Centre
for Financial Market Integrity (‘‘CFA Institute’’).
45 Foreign private issuers submit current reports
to the Commission on Form 6–K [17 CFR 249.306].
Unlike Form 8–K [17 CFR 249.308], which is the
current report form used by domestic issuers, there
are no specific substantive disclosures that are
required by Form 6–K. Instead, foreign private
issuers furnish under cover of Form 6–K whatever
information that they (i) make or are required to
make public pursuant to the law of the jurisdiction
of their domicile or in which they are incorporated
or organized, or (ii) file or are required to file with
a stock exchange on which their securities are
traded and which was made public by that
exchange, or (iii) distribute or are required to
distribute to their security holders. These reports
are required to be furnished promptly after the
material contained in the report is made public.
46 17 CFR 229.10(f)(2)(i).
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the market when they switch from
domestic to foreign private issuer status
in order to provide enhanced
transparency to investors. We note that
issuers that lose their foreign private
issuer status would be required to file
quarterly reports on Form 10–Q or
current reports on Form 8–K
immediately, thereby effectively
providing prompt notice of their new
status because of the change in the
forms used.
In addition to the amendments noted
above, we are adopting amendments
requiring a Canadian issuer that files
registration statements and Exchange
Act reports using the multijurisdictional
disclosure system (‘‘MJDS’’) 47 to test its
status as a foreign private issuer only as
of the last business day of its second
fiscal quarter. Currently, a Canadian
issuer that is eligible to file a Form 40–
F 48 annual report at the end of a fiscal
year is presumed to be eligible to use
Form 40–F, as well as Form 6–K, from
the date of filing until the end of its next
fiscal year.49 The amendments would
require a Canadian issuer that plans to
use the MJDS to test its foreign private
issuer status earlier in the year.
However, it would continue to have to
test its eligibility to file annual reports
on Form 40–F based on all of the other
requirements of that Form, such as
public float, at the end of the fiscal
year.50 The amendments would not
change the responsibility of the
Canadian issuer to check its eligibility
to use Forms 40–F and 6–K at the end
of its fiscal year.
With respect to MJDS filings made
pursuant to the Securities Act, a
Canadian issuer must test its ability to
use the MJDS registration statement
forms at the time of filing. As a result
of the amendments, a Canadian MJDS
filer that does not qualify as a foreign
private issuer on the last day of its
second fiscal quarter would
immediately not be able use the MJDS
forms for Securities Act offerings.
However, the issuer would still be able
to use the other foreign private issuer
registration statement forms, such as
Form F–3, until the end of its fiscal
year.51
Although we received many
comments generally supporting this
47 17 CFR 239.37 to 17 CFR 239.41 and 17 CFR
249.240f.
48 17 CFR 249.240f. MJDS filers file annual
reports on Form 40–F and current reports on Form
6–K.
49 See Release No. 33–6902 (June 21, 1991) [56 FR
30036] (adopting the MJDS system).
50 See id.
51 Form F–3 permits a foreign private issuer to
incorporate by reference its latest Form 40–F. See
Item 6(a) of Form F–3.
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approach to MJDS filers, several
commenters had additional
recommendations. A few commenters
suggested that a registrant that did not
qualify for MJDS status on the testing
date should be permitted to use the
MJDS registration statement forms until
the end of its fiscal year. Some
commenters also suggested that MJDS
filers be permitted to test their MJDS
status on the last business day of their
second fiscal quarter, rather than at the
end of the year. Other commenters
argued that the foreign private issuer
eligibility test should be conducted at
the end of the year in conjunction with
the test for MJDS eligibility, or
alternatively, that MJDS filers should be
required to test their foreign private
issuer eligibility status twice a year.
After carefully considering all of these
comments, we have decided to adopt
the MJDS-related amendments as
proposed because we believe this
approach takes into account the
substantial accommodations that have
been provided to MJDS filers, including
significant disclosure
accommodations.52 As a result of the
amendments, the new foreign private
issuer testing date will provide MJDS
filers with advance notice that they may
need to switch to the domestic issuer
forms after the end of the fiscal year.
Even if an MJDS filer determines that it
no longer qualifies as a foreign private
issuer as of the test date, it will be
permitted to use the Securities Act
registration statement forms, although
not the MJDS forms, available to foreign
private issuers for the remainder of that
fiscal year. The new date for testing
foreign private issuer status will provide
a substantial accommodation for MJDS
filers because, currently, these filers are
required to use the domestic forms as
soon as they lose their foreign private
issuer status.
B. Accelerating the Reporting Deadline
for Form 20–F Annual Reports
We proposed amendments to the
filing due date for Form 20–F to reflect
technological and other developments
that have occurred in the nearly 30
years that have elapsed since Form 20–
52 Under the MJDS, eligible Canadian issuers may
satisfy certain securities registration and reporting
requirements of the Commission by providing
disclosure documents prepared in accordance with
the requirements of the Canadian securities
regulatory authorities. The MJDS also allows certain
cash tender and exchange offers for securities of
Canadian issuers to proceed in accordance with
Canadian and provincial or territorial tender offer
requirements, instead of in accordance with the
Commission’s tender offer requirements. For more
specific information about the accommodations
provided to MJDS issuers, see Release No. 33–6902,
supra note 49.
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mstockstill on PROD1PC66 with RULES2
F was first adopted. Our proposed
amendments would have accelerated
the reporting due date for annual reports
filed on Form 20–F by foreign private
issuers from six months to 90 days after
the issuer’s fiscal year-end in the case of
large accelerated filers and accelerated
filers, and to 120 days after the issuer’s
fiscal year-end for all other issuers, after
a two-year transition period. We also
proposed similar conforming
amendments for transition reports filed
on Form 20–F when a foreign private
issuer changes its fiscal year.
In the Proposing Release, we noted
that technological advances have made
it easier for companies to process and
disseminate information quickly.
Investors also evaluate and react to
information in a shorter timeframe, and
many now expect to receive information
on a faster basis. Although some
information about foreign private
issuers is available through their
earnings releases and other
announcements, investors currently
may not have access to the more
complete disclosure contained in an
issuer’s Form 20–F annual report until
six months after the end of the issuer’s
fiscal year. Although the longer filing
due date for these reports was initially
established as an accommodation to the
different disclosure requirements in the
foreign private issuers’ home
jurisdictions,53 many companies that
operate globally gather and evaluate
information on a vastly expedited basis
compared to almost 30 years ago, when
Form 20–F was adopted. As a result,
such a delayed filing date for these
reports is no longer necessary. In the
Proposing Release, we also noted that
foreign private issuers in many
jurisdictions are expected to file annual
reports with their home securities
regulator on a faster timetable.54
53 Form 20–F Adopting Release, supra note 18
(noting that the Commission decided not to adopt
a filing due date for Form 20–F annual reports of
four months after the registrant’s fiscal year-end in
deference to commenters’ concerns about the need
for more time to comply with applicable foreign
regulations, which at that time often permitted
annual reports to be furnished to shareholders more
than four months after the issuer’s fiscal year-end).
54 For example, the European Union’s (‘‘EU’’)
Transparency Directive requires companies listed
on an EU regulated market to file their annual
financial reports four months after the end of each
financial year at the latest. Directive 2004/109/EC
of the European Parliament and of the Council (Dec.
15, 2004). All EU member states were required to
implement the Transparency Directive by January
20, 2007. Canadian issuers are also required to file
their annual financial statements within a similar
timeframe. Under National Instrument 51–102
Continuous Disclosure Obligations, a reporting
Canadian issuer must file its annual financial
statements within 90 to 120 days after its most
recently completed financial year-end, depending
on its status as a ‘‘venture issuer’’. Israeli companies
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We received 49 comment letters on
the proposed amendments. Some
commenters expressed support for the
accelerated deadlines as proposed. One
of these commenters, a professional
association of investment
professionals,55 urged the Commission
to move toward requiring the same
filing requirements for foreign private
issuers as for domestic issuers. This
commenter noted that the value of
information in financial statements
decreases as the gap between the date of
the financial statements and the date of
their release increases. This commenter
also noted that recently the financial
position of some companies has
deteriorated significantly over relatively
short periods of time. Outdated
financial information may make it more
likely that investors will misjudge both
the viability of the issuer and the value
of its securities. Another supportive
commenter, an accounting firm,56 noted
that accelerating the deadline for Form
20–F would provide investors with
timelier and more useful information. It
also noted that the overwhelming
majority of foreign private issuers’ home
country securities regulators already
have annual report deadlines of either
three or four months. However, this
commenter pointed out that although a
90-day reporting deadline for
accelerated and large accelerated filers
would be earlier than their home
country deadlines for some issuers, this
would still be an accommodation
compared to the deadlines of 75 or 60
days faced by their same-sized U.S.
counterparts, respectively. This
commenter also acknowledged that for
foreign private issuers that are still
required to reconcile home country
GAAP to U.S. GAAP, a 90-day reporting
deadline could impose additional,
significant burdens. As a result, it
recommended accelerating the deadline
for these issuers to within 120 days after
the foreign private issuer’s fiscal yearend. Another commenter, a foreign
private issuer,57 supported the proposed
amendments and indicated that it
believed that the amendments would
not impose any unreasonable burdens
on foreign registrants. However, it also
expressed concern about accelerating
are required to file their annual reports within three
months of the end of their reporting year, provided
that the report is submitted 14 days or more before
the date fixed for convening the general meeting at
which the company’s financial statements will be
presented, or within three days of the date when the
company’s accountant signed his audit opinion,
whichever is earlier. Regulation 7, Israeli Securities
Regulations (Periodic and Immediate Reports).
55 See comment letter from CFA Institute.
56 See comment letter from Ernst & Young
(‘‘E&Y’’).
57 See comment letter from Vodafone.
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58305
the reporting deadline for financial
statements of non-registrants that are
included in the Form 20–F, especially
those required to be filed pursuant to
Rule 3–09 58 of Regulation S–X.
We received many more comments
expressing concerns about the proposed
due dates. Several commenters noted
that the burdens faced by foreign issuers
in producing Form 20–F was not related
to size (i.e., accelerated or nonaccelerated filer), but to whether the
issuer needs to produce a second set of
full financial statements in accordance
with U.S. GAAP, or a reconciliation
from their home country accounts to
U.S. GAAP.59 Commenters noted that
the proposal could create a burden for
many issuers that are still required to
prepare their financial statements in
accordance with local GAAP, especially
those from some of the emerging
markets.60 In addition, in certain
jurisdictions, bank issuers are required
to prepare their primary financial
statements in accordance with local
GAAP.61 We also received comments
that Industry Guide 3, Statistical
Disclosure by Bank Holding Companies,
calls for additional disclosures, as well
as the classification and disclosure of
certain information under different
standards than required in the foreign
private issuer’s home country.62
Commenters also noted that many
foreign private issuers need more time
than provided under the proposed
amendments to translate local financial
information into English for Form 20–
F; 63 to provide the additional
disclosures of Form 20–F, such as Item
5 (Operating and Financial Review and
Prospects) and the Commission’s
industry guide disclosures; and to
satisfy certain requirements of the
Sarbanes-Oxley Act.64 Commenters
noted that many foreign private issuers
have limited resources, and must use
the same staff to comply with both local
filing requirements and the
Commission’s filing requirements. As a
result of the proposed amendments, the
staff of these issuers would have to
58 17
CFR 210.3–09.
e.g., comment letters from American Bar
Association (‘‘ABA’’) and Linklaters LLP
(‘‘Linklaters’’).
60 See, e.g., comment letter from Linklaters.
61 See comment letters from Mitsubishi UFJ
Financial Group, Inc. (‘‘Mitsubishi’’) and Mizuho.
62 See comment letter from Institute of
International Bankers, Mitsubishi, and Paul, Weiss,
Rifkind, Wharton & Garrison LLP (‘‘Paul Weiss’’).
63 See, e.g., comment letters from Cleary Gottlieb
Steen & Hamilton (‘‘Cleary Gottlieb’’), Mitsubishi,
Mizuho, and Sociedad Quimica y Minera de Chile
S.A.
64 These requirements, which are generally not
required in home country reporting, include the
Section 302 and 906 officer certifications and the
review of internal controls over financial reporting.
59 See,
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mstockstill on PROD1PC66 with RULES2
produce financial information for home
country purposes on the same timetable
as for Form 20–F, rather than in
seriatim, as is currently the case.
In addition, commenters indicated
that in some cases the proposed due
dates would require foreign private
issuers to file their Form 20–F before
they are required to file their annual
reports in their home country. The
proposed due dates would in effect
override domestic filing requirements.65
Commenters noted that when foreign
private issuers complete their annual
reports for home country filing
purposes, they furnish significant
financial information to the Commission
on Form 6–K, often within 90 days after
their fiscal year-end. These commenters
asserted that investors typically make
investment decisions based on the fiscal
year-end financial results disclosed in
Form 6–K or through the issuer’s press
releases, rather than through the Form
20–F.
Several commenters recommended
that the Commission adopt a deadline
that was linked to the foreign private
issuer’s home country requirements for
filing annual reports. These commenters
suggested that foreign private issuers be
required to file Form 20–F annual
reports within a specified period after
the issuer’s home country report is
filed.66 Others, recognizing that such a
deadline would be difficult to
implement and confusing to investors,
recommended that the Commission
accelerate the due date for Form 20–F
for all foreign private issuers to five
months after the issuer’s fiscal yearend.67
After carefully considering all of the
comments, as well as the benefits to
investors of timelier annual reports, we
are adopting amendments to accelerate
the due date for annual reports filed on
Form 20–F, but with modifications from
the proposed amendments that respond
to some of the concerns that were
expressed. Under the amendments as
65 See, e.g., comment letters from Linklaters
(noting that the 90-day due date is earlier than the
annual report due dates required by the EU Member
States, China and Brazil) and Gold Fields Limited
(noting that the Johannesburg Stock Exchange
requires listed issuers to publish annual financial
statements within six months after the end of the
issuer’s financial year).
66 See comment letters from The Royal Bank of
Scotland Group (recommending a due date two to
three weeks after the annual report deadline in the
issuer’s home jurisdiction), European Issuers
(recommending a due date that is one month after
the due date for annual reports in the issuer’s home
country), PetroChina Company Limited
(recommending a due date that is two months after
the issuer’s annual report due date in its home
country).
67 See, e.g., comment letters from Cleary Gottlieb
and Mitsubishi.
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adopted, all foreign private issuers will
be required to file their annual reports
on Form 20–F within four months after
their fiscal year-end, regardless of their
size, after a three-year transition
period.68 As discussed above,
commenters indicated that the size of
the issuer would not affect its ability to
file Form 20–F on an expedited basis.
Rather, the issue was whether the
foreign private issuer was required to
prepare a second set of full financial
statements in accordance with U.S.
GAAP, or a reconciliation from their
home country accounts to U.S. GAAP.69
In determining that a four-month due
date would be appropriate, we note that
in the next several years a majority of
the foreign private issuers who file
annual reports with the Commission
will have incentives to use IFRS as
issued by the IASB as more countries
adopt IFRS as their basis of accounting,
or permit companies to use IFRS as
issued by the IASB as their basis of
accounting. Our recent rule
amendments that allow foreign private
issuers to file financial statements in
accordance with IFRS, as issued by the
IASB, without a U.S. GAAP
reconciliation should make it easier for
many foreign private issuers to prepare
their annual reports on Form 20–F.70 As
indicated in the Proposing Release, we
did not propose amendments to change
the age of financial statement
requirements for registration statements
under the Securities Act or Exchange
Act.71
The new due date also reflects our
observation that many foreign private
issuers registered with the Commission
have a three-month due date for filing
68 We are not adopting a similar acceleration in
the filing deadline for annual reports filed on Form
40–F, which is used by eligible Canadian issuers
under the MJDS. Under the MJDS, issuers who file
annual reports on Form 40–F must comply with the
substantive disclosure requirements and filing
deadlines established by the relevant Canadian
securities regulator. In keeping with the purpose of
MJDS, which is to facilitate cross-border capital
flows between the United States and Canada by
streamlining the registration and periodic reporting
process for cross-border issuers, the Form 40–F
must continue to be filed with the Commission on
the same day that the information is due to be filed
with the relevant Canadian securities regulatory
authority, as set forth in General Instruction D.(3)
of Form 40–F. However, we note that a reporting
Canadian issuer that is not a ‘‘venture issuer’’ must
file its annual financial statements on or before 90
days after its most recently completed financial
year-end, while all other Canadian issuers must file
their annual financial statements on or before 120
days after their most recently completed financial
year-end. See supra note 54.
69 See, e.g., comment letters from ABA, E&Y, and
Linklaters.
70 Release No. 33–8879, supra note 21.
71 Under Item 8.A.4. of Form 20–F, the last year
of audited financial statements may not be older
than 15 months at the time of the offering or listing.
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annual reports in their home country,
and would be accorded an additional
month after their home country due
dates to prepare the Form 20–F under
the new amendments. We note that,
based on a review of recent filings, a
number of foreign private issuers
already file their annual reports on
Form 20–F well before the current sixmonth deadline. In addition, the new
due date for Form 20–F will still
provide a substantial accommodation to
many foreign private issuers, since large
accelerated and accelerated domestic
filers are required to file annual reports
on Form 10–K 72 within 60 days and 75
days, respectively, of their fiscal yearends.73 All other domestic issuers are
required to file annual reports on Form
10–K within 90 days after their fiscal
year-end.74 We will continue to monitor
market developments to consider
whether it would be appropriate to
accelerate further the due date for Form
20–F annual reports.
The amendments that we are adopting
today reflect our view that annual
reports that are filed on a faster basis
would not only provide investors with
more timely access to these filings, but
also improve the delivery and flow of
reliable information to investors and the
capital markets, thereby helping to
improve the efficiency of the markets.
The accelerated deadline for Form 20–
F should enable investors in the U.S.
markets to get annual reports on a more
current basis. As the Commission noted
when it adopted the accelerated filing
dates for periodic reports filed by
domestic issuers,75 investors and
analysts evaluate the more extensive
information provided in periodic
reports against the incremental
disclosures that are made by an issuer.
The accelerated due date will enable
this analysis to take place at an earlier
time.
Although various commenters
recommended that the Form 20–F
annual report due date be linked in
some manner to the foreign private
issuer’s annual report due date in its
home country, we concluded that this
would be confusing for investors and
72 17
CFR 249.310.
General Instructions A.(2)(a) and (b) of
Form 10–K. At the time that we first adopted rule
and form amendments to accelerate the filing of the
quarterly and annual reports of reporting U.S.
issuers, we noted that those amendments would
increase the discrepancy in the due dates for filing
annual reports between foreign private issuers and
larger seasoned U.S. issuers, and indicated that we
would continue to consider this issue. Release No.
33–8128 (Sept. 5, 2002) [67 FR 58480]
74 See General Instruction A.(2)(c) of Form 10–K.
75 See Release No. 33–8128, supra note 73.
73 See
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mstockstill on PROD1PC66 with RULES2
would be difficult to implement.76 We
also concluded that a due date that is
five months after the foreign private
issuer’s fiscal year-end would not
address our concerns about providing
more timely information to investors.
As discussed previously, we received
several comments about the potential
burdens placed on foreign private
issuers that provide disclosures under
Industry Guide 3, which relates to bank
holding companies. We note that the
Commission’s staff will consider what
accommodations with regard to Industry
Guide 3 would be appropriate.
When we proposed the amendments,
we proposed a two-year transition
period for implementation of the
accelerated deadline, but also solicited
comments on whether a different
transition period would be more
appropriate. While we received several
comments supporting a two-year
transition period, several commenters
noted that a three-year transition period
would ease the burden on many foreign
private issuers that will be required to
adopt IFRS for home country reporting
purposes in 2011. After considering all
of the comments received, we have
decided to provide a three-year
transition period for implementation of
the accelerated Form 20–F due date. As
adopted, foreign private issuers will be
required to file their annual report on
Form 20–F within four months after
their fiscal year-end for fiscal years
ending on or after December 15, 2011.
Of course, foreign private issuers may
file their Form 20–F annual reports
earlier than the current deadline, as
numerous issuers now do.
In addition to these amendments, we
are adopting amendments that conform
the deadline for transition reports filed
on Form 20–F, and for the filing of
special financial reports 77 pursuant to
Rule 15d–2 of the Exchange Act. The
deadlines for these reports were based
on the annual report deadlines for
foreign private issuers.78 We are
amending the due dates for each of
these reports so that they are consistent
76 This difficulty would be especially evident for
foreign private issuers that are listed only in the
United States and are not subject to another
securities regulatory reporting regime.
77 Under Exchange Act Rule 15d–2, a special
financial report must be filed if a registrant’s
Securities Act registration statement did not contain
certified financial statements for its last full fiscal
year preceding the fiscal year in which the
registration statement became effective. Currently,
foreign private issuers must file this special
financial report by the later of 90 days after the date
on which the registration statement became
effective, or six months after the end of the
registrant’s latest full fiscal year (consistent with the
current due date of Form 20–F annual reports).
78 See Release No. 33–7026 (Nov. 3, 1993) [58 FR
60304].
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with the new deadline for annual
reports filed on Form 20–F.79
provide a longer transition period for
the new amendment.
C. Segment Data Disclosure
D. Exchange Act Rule 13e–3
We are adopting amendments to
Exchange Act Rule 13e–3,80 which
pertains to going private transactions by
reporting issuers or their affiliates, to
reflect the recently adopted rules
pertaining to the ability of foreign
private issuers to terminate their
Exchange Act registration and reporting
obligations.81 Currently, Rule 13e–3 is
triggered when an issuer and/or any of
its affiliates are engaged in a specified
transaction or series of transactions 82
that have either a reasonable likelihood
or a purpose of causing (i) any class of
equity securities of the issuer that is
subject to Section 12(g) or Section
15(d) 83 of the Exchange Act to be held
of record by less than 300 persons, or
(ii) the securities to be neither listed on
any national securities exchange nor
authorized to be quoted on an interdealer quotation system of any
registered national securities
association.
Rule 13e–3 requires any issuer or
affiliate that engages in a Rule 13e–3
transaction to file a Schedule 13E–3 84
disclosing its plan to take the company
private, and to make prompt
amendments to reflect certain
information about the proposed
transaction. In the Schedule 13E–3, the
filing party must disclose the purposes
for the transaction, whether any
alternative means for accomplishing the
stated purposes were considered, the
reasons for the structure of the
transaction and why it was being
undertaken at the time, the effects that
the transaction would have on the issuer
and its unaffiliated security holders,
whether or not the filing party believes
the transaction is fair to unaffiliated
security holders, and the factors
considered in determining fairness. Rule
13e–3(f) 85 also requires dissemination
of the information required by Schedule
13E–3 to security holders within
specified time periods.
When the Commission adopted Rule
13e–3, we emphasized that the Rule
would be triggered only if a specified
transaction has either the reasonable
Under Item 17 of Form 20–F, foreign
private issuers that present financial
statements otherwise fully in
compliance with U.S. GAAP may omit
segment data from their financial
statements, and also are permitted to
have a qualified U.S. GAAP audit report
as a result of this omission. We
proposed an amendment to Form 20–F
that would eliminate this narrow
accommodation.
Most of the comments received on
this proposal supported the proposed
amendments. However, several
commenters suggested permitting a
longer transition period to the new
rules. For example, a few commenters
recommended a three-year transition
period, so that the amendment would be
effective for fiscal years on or after
December 15, 2011 to align the effective
date with the timeframe in which many
jurisdictions will mandate IFRS
reporting.
After considering all of the comments
and noting that approximately five
foreign private issuers in the past few
years have used this accommodation,
we have decided to adopt the
amendment as proposed. Foreign
private issuers will be required to
comply with the amendment beginning
with their first fiscal years ending on or
after December 15, 2009. The delayed
compliance date will provide foreign
private issuers with sufficient time to
establish internal procedures that will
enable them to obtain the required
information. We are amending Item 17
of Form 20–F by removing Instruction 3
to that Form, which currently permits
the omission of segment data from U.S.
GAAP financial statements. We believe
that an accommodation that permits a
few foreign private issuers to present
incomplete and non-compliant U.S.
GAAP financial statements is no longer
necessary or appropriate, especially
given recent international developments
in financial reporting. For example, in
order to file financial statements
without reconciliation to U.S. GAAP,
foreign private issuers must comply
fully with IFRS as issued by the IASB,
including presentation of segment data.
Accordingly, we have decided not to
79 We also took this approach when we adopted
amendments to accelerate the periodic report filing
dates for domestic companies. See Release No. 33–
8128, supra note 73; Release No. 33–8644 (Dec. 21,
2005) [70 FR 76626] (adopting further refinements
to the acceleration rules). See also Release No. 33–
6823 (Mar. 13, 1989) [54 FR 10306] (conforming the
transition report rules to the periodic report rules).
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80 17
CFR 240.13e–3.
No. 34–55540, supra note 28.
82 A ‘‘Rule 13e–3 transaction’’ is defined as (i) a
purchase of any equity security by the issuer of
such security or by an affiliate, (ii) a tender offer,
(iii) a proxy solicitation or information statement
distribution in connection with a merger or similar
transaction, (iv) the sale of substantially all the
assets of an issuer to its affiliate, or (v) a reverse
stock split. 17 CFR 240.13e–3(a)(3)(i).
83 15 U.S.C. 78o(d).
84 17 CFR 240.13e–100.
85 17 CFR 240.13e–3(f).
81 Release
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likelihood or purpose of causing the
termination of reporting obligations
under the Exchange Act.86 Recently, we
adopted amendments to the
deregistration provisions applicable to
foreign private issuers that would
permit them to terminate their reporting
obligations under the Exchange Act by
meeting a quantitative benchmark
designed to measure relative U.S.
market interest for their equity
securities that does not depend on a
head count of the issuers’ U.S. security
holders.87 Although Rule 13e–3 does
not reflect the termination of
registration and reporting provisions
that were previously applicable to
foreign private issuers, we proposed to
amend the Rule to better reflect the
current deregistration provisions.
We received several comments on this
proposal supporting our efforts to
amend Rule 13e–3 to make it consistent
with the recently adopted termination of
reporting and deregistration provisions.
However, two commenters expressed
concern that the Rule could be triggered
by securities transactions in the
ordinary course of business, such as
share repurchases.88 One commenter
also suggested that the disclosures in
Schedule 13E–3 regarding fairness to
unaffiliated security holders would not
apply in the context of deregistration of
a foreign private issuer, especially when
the applicable corporate law does not
require such determinations, and
requested an instruction to the Schedule
that would recognize this circumstance.
We also received two comments
suggesting that the Rule should not
apply to a foreign private issuer whose
shares will be traded on a foreign
securities exchange, and hence subject
to home country and/or foreign
securities exchange reporting
obligations, because its home country
disclosures will continue to be available
and furnished to the Commission
pursuant to Rule 12g3–2(b). One
commenter also cited concerns that the
application of the Rule could deter the
entry of foreign private issuers into the
U.S. markets.
At this time, we believe that
amending Rule 13e–3 as proposed will
modernize one of the Rule’s two
specified going private effects and
assure that the Rule operates
consistently with an important policy
purpose expressed at its initial
86 Release No. 34–16075 (Aug. 2, 1979) [44 FR
46736].
87 Release No. 34–55540, supra note 28.
88 See comment letters from Cleary Gottlieb and
The Hundred Group of Finance Directors
(‘‘Hundred Group’’).
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adoption.89 By substituting a test foreign
private issuers already use to deregister
a class of securities in place of the ‘‘300
person’’ test, foreign private issuers will
benefit from simplicity and uniformity
when making decisions to exit the U.S.
reporting system. In addition, adopting
the proposed amendment will provide
clarity to a Rule that does not
distinguish whether the cited effect is
triggered when the number of holders of
record is projected to fall below 300
persons in the United States or
worldwide. Amending Rule 13e–3 will
eliminate the need to interpret its
indefinite reference to ‘‘held of record
by less than 300 persons.’’
We believe that adoption of the
proposed amendment to Rule 13e–
3(a)(3)(ii)(A) should have a neutral
effect on foreign private issuers. As is
the case under Rule 13e–3 today, foreign
private issuers will remain eligible
under the amended Rule to voluntarily
take steps to deregister a class of
securities without implicating Rule 13e–
3. We also do not believe share
repurchases made in the ordinary
course of an issuer’s business are within
the scope of Rule 13e–3, as amended,
when such transactions are not
undertaken with the purpose or
reasonable likelihood of producing one
of the two going private effects specified
in Rule 13e–3.90 Currently, share
repurchases are only required to comply
with Rule 13e–3 to the extent
undertaken with a purpose or with a
reasonable likelihood of producing one
of the two going private effects
identified in Rule 13e–3.91 Because the
89 Release No. 34–16075, supra note 86. The Rule
13e–3 adopting release explained that the Rule was
intended to apply when one of the transactions
identified in the Rule was undertaken with a
purpose of or had a reasonable likelihood of
terminating the issuer’s reporting obligations and
consequently depriving security holders of the
benefits of public ownership. See subsection (a)
under ‘‘Discussion.’’
90 We understand that a trading market may not
exist in the U.S. for the shares of a foreign private
issuer. For purposes of the Williams Act, ADRs and
similar instruments that represent an ownership
interest in a class of securities are not considered
a class of securities separate from the foreign
private issuer’s underlying shares. See Release No.
33–6894 (May 23, 1991) [56 FR 24420] at Section
II.D.2.
91 17 CFR 240.13e–3(a)(3)(ii). See also Release No.
34–14185 (Nov. 17, 1977) [42 FR 60090]. The Rule
13e–3 proposing release explains, ‘‘In his testimony
before Congress on the provision that was to
become Section 13(e)(1), then Commission
Chairman Cohen recognized that, while there might
be ‘perfectly legitimate corporate purposes’[ ] for a
corporation to purchase its own securities,
purchases by a corporation of its own securities can
be used to affect the control of the corporation. The
management may cause the corporation to
repurchase shares for the purpose of preserving or
improving the management’s control position or to
counteract the tender offer or other takeover bid.’’
See Hearings on S. 510 Before the Subcomm. on
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amendment only seeks to provide
regulatory consistency with the new
deregistration and termination of
reporting provisions, Rule 13e–3, as
amended, will continue to govern share
repurchases made in the ordinary
course of an issuer’s business only when
such repurchases are executed with the
purpose or reasonable likelihood of
causing security holders to lose ‘‘the
benefits of public ownership,’’ 92 and in
this case the benefits of U.S. reporting.
Accordingly, we are adopting the
amendment to Rule 13e–3(a)(3)(ii)(A) 93
as proposed. Under the amended Rule,
the cited effect is deemed to have
occurred when: A domestic or foreign
private issuer becomes eligible under
Exchange Act Rule 12g–4 94 to deregister
a class of securities; a foreign private
issuer becomes eligible under Exchange
Act Rule 12h–6 95 to deregister a class of
securities or terminate a reporting
obligation; or such issuers become
eligible under Exchange Act Rule 12h–
3 96 or Exchange Act Section 15(d) to
have a reporting obligation
suspended.97
When a foreign private issuer or
domestic issuer engages in a Rule 13e–
3 transaction that would cause the
termination or suspension of its
registration or reporting obligations
under the Exchange Act, Rule 13e–3 is
intended to provide the issuer’s security
holders with one last opportunity to
obtain information about the issuer and
consider their alternatives. This is
equally true in the context of a foreign
private issuer or domestic issuer that
plans to complete one of the
transactions specified in Rule 13e–
3(a)(3) for purposes of deregistering a
class of securities or terminating or
suspending a reporting obligation as it
is for a foreign private issuer or
domestic issuer that has executed one of
the specified Rule 13e–3(a)(3)
transactions and is ceasing to file
reports because the number of its
shareholders falls below 300.
Securities of the Senate Comm. on Banking and
Currency, 90th Cong., 1st Sess. 37 (1967) (‘‘Senate
Hearings’’) Hearing on H.R. 14475, S. 510 Before the
Subcomm. on Commerce and Finance of the House
Comm. on Interstate and Foreign Commerce 15
(1967) (‘‘House Hearings’’).
92 Release No. 34–16075, supra note 86.
93 17 CFR 240.13e–3(a)(3)(ii)(A).
94 17 CFR 240.12g–4.
95 17 CFR 240.12h–6.
96 17 CFR 240.12h–3.
97 We have made a technical modification to the
proposed amendments to Rule 13e–3 to make clear
that the Rule may be triggered when a domestic or
foreign private issuer’s Section 15(d) reporting
obligations are suspended pursuant to Section 15(d)
or Exchange Act Rule 12h–3.
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E. Requiring Item 18 Reconciliation in
Annual Reports and Registration
Statements
We are adopting amendments to
eliminate the option to provide financial
statements according to Item 17 of Form
20–F in annual reports and registration
statements filed on that form. Currently,
a foreign private issuer that is only
listing a class of securities on a national
securities exchange, or only registering
a class of securities under Exchange Act
Section 12(g), without conducting a
public offering of those securities may
provide financial statements according
to Item 17 of Form 20–F. In addition,
foreign private issuers may provide
financial statements according to Item
17 for their annual reports on Form 20–
F. Under Item 17, a foreign private
issuer must prepare its financial
statements and schedules in accordance
with U.S. GAAP, or IFRS as issued by
the IASB. If its financial statements and
schedules are prepared in accordance
with another basis of accounting, the
issuer must include a reconciliation to
U.S. GAAP. This reconciliation must
include a narrative discussion of
reconciling differences, a reconciliation
of net income for each year and any
interim periods presented, a
reconciliation of major balance sheet
captions for each year and any interim
periods, and a reconciliation of cash
flows for each year and any interim
periods.98 In contrast, if a foreign
private issuer that presents its financial
statements on a basis other than U.S.
GAAP, or IFRS as issued by the IASB,
provides financial statements under
Item 18 of Form 20–F, it must provide
all the information required by U.S.
GAAP and Regulation S–X, in addition
to the reconciling information for the
line items specified in Item 17.
To eliminate this distinction between
the disclosure provided to the primary
and secondary markets, we proposed
amendments to require Item 18
information for foreign private issuers
that are only listing a class of securities
on an exchange, or only registering a
class of securities under Exchange Act
Section 12(g), without conducting a
public offering. We also proposed
amendments to require Item 18
information for foreign private issuers
that file annual reports on Form 20–F.
In addition, foreign private issuers
that are making certain non-capital
raising offerings, such as offerings
pursuant to reinvestment plans,
offerings upon the conversion of
securities or offerings of investment
98 See
Item 17(c)(2) of Form 20–F.
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grade securities,99 currently are
permitted to provide Item 17 financial
statements in their registration
statements under the Securities Act. To
ensure that the same type of financial
information is provided regardless of
the type of offering that is being made,
we proposed amendments to require
foreign private issuers to file financial
statements that comply with Item 18
when registering these types of offerings
under the Securities Act.
Many commenters supported the
proposals as useful to investors.
Commenters noted that the amendments
would help ensure that investors receive
the complete financial information
required by U.S. GAAP and Regulation
S–X.100 However, several other
commenters expressed concern about
the benefits of the amendments in light
of the potential compliance burdens.
They also asserted that other countries
are gradually requiring footnote
disclosures comparable in scope to U.S.
GAAP and Regulation S–X, such that
the proposed amendments are not
necessary.101
After carefully considering all of the
comments, we are adopting the
amendments as proposed. We believe
that a reconciliation that includes the
footnote disclosures required by U.S.
GAAP and Regulation S–X 102 can
provide important additional
information.103 We also note that the
majority of foreign private issuers who
do not prepare financial statements in
accordance with U.S. GAAP elect to
provide financial information pursuant
to Item 18, rather than Item 17, of Form
99 The Commission recently proposed
amendments permitting foreign private issuers to
comply with the less extensive U.S. GAAP
reconciliation requirements under Item 17 in a
registration statement or private offering document
if the issuer met the proposed new Form F–3
transaction eligibility criteria for registering primary
offerings of non-convertible securities. The
proposed eligibility criteria would eliminate the
current requirement in Form F–3 of an investment
grade rating by a nationally recognized statistical
rating agency. Release No. 33–8940 (July 1, 2008)
[73 FR 40106]. We requested comment on whether,
if we decided not to eliminate the option of
providing Item 17 financial disclosure, we should
revise the Form F–3 eligibility requirements as
proposed. Id. at Section II.B.2.
100 See, e.g., comment letter from the CFA
Institute.
101 See, e.g., comment letter from Cleary Gottlieb.
102 17 CFR Part 210.1–01 et seq.
103 Under Item 17, an issuer is not required to
provide the footnote disclosures required by U.S.
GAAP and Regulation S–X, unless these disclosures
are otherwise required under its home country
GAAP. For example, the footnote disclosures
related to pension assets, obligations and
assumptions, lease commitments, business
segments, tax attributes, stock compensation
awards, financial instruments and derivatives,
among many others, are not required under Item 17
unless they are otherwise required by the issuer’s
home country GAAP.
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58309
20–F.104 Under the amendments, Form
20–F and the registration statement
forms available to foreign private issuers
under the Securities Act (Forms F–1, F–
3 and F–4) will require the disclosure of
financial information according to Item
18 of Form 20–F for registration
statements filed under both the
Exchange Act and the Securities Act, as
well as for annual reports.
When we proposed the amendments,
we did not propose eliminating the
availability of Item 17 disclosures for
Canadian MJDS filers in light of the
special recognition accorded to MJDS
filings. We also noted that more
countries, including Canada, are
expected to adopt IFRS as their basis of
accounting, or to permit companies to
use IFRS as issued by the IASB as their
basis of accounting in the next few
years. As a result, we concluded that it
would not be appropriate to eliminate
the availability of Item 17 in MJDS
registration statements. We also
proposed maintaining the availability of
Item 17 for financial statements of nonregistrants that are required to be
included in a foreign or domestic
issuer’s registration statement, annual
report or other Exchange Act report.
These include significant acquired
businesses under Rule 3–05 105 of
Regulation S–X, significant equity
method investees under Rule 3–09 of
Regulation S–X, and exempt
guarantors 106 under Rule 3–10(i) 107 of
Regulation S–X. The commenters who
commented on these accommodations
supported them, so the amendments as
adopted will not apply to MJDS filers or
to the financial statements of nonregistrants.
Several commenters who supported
the proposed amendments
recommended that we establish a
compliance date that would provide
foreign private issuers with a longer
transition period before they would be
required to prepare financial statements
pursuant to Item 18.108 Among other
104 A foreign private issuer’s latest annual report
filed on Form 20–F and all subsequent Form 20–
F annual reports are incorporated by reference into
its Form F–3 shelf registration statement. See Item
6 (Incorporation of Certain Information by
Reference) in Form F–3. General Instruction I.B.1.
of Form F–3 requires foreign private issuers to
provide financial statements that comply with Item
18 for primary offerings.
105 17 CFR 210.3–05.
106 A guarantor that is required to file separate
financial statements must comply with Item 18.
107 17 CFR 210.3–10(i).
108 See comment letters from BDO Seidman, LLP
(‘‘BDO’’), Center for Audit Quality (‘‘CAQ’’),
Deloitte Touche Tohmatsu (‘‘Deloitte’’), E&Y, Grant
Thornton LLP (‘‘Grant Thornton’’), KPMG IFRG
Limited (‘‘KPMG’’), and PricewaterhouseCoopers
LLP (‘‘PricewaterhouseCoopers’’).
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things, these commenters noted that the
foreign private issuers that provide the
Item 17 reconciliation in their annual
reports tend to be smaller companies,
and that these companies would face
significant burdens on their financial
accounting and reporting systems if they
are required to provide the additional
Item 18 disclosures, as well as comply
with the accelerated due date for Form
20–F, at the same time. In addition, they
noted that many countries, such as
Canada, will be adopting IFRS in 2011.
Aligning the compliance date for the
adopted amendments with the date on
which many countries will be adopting
IFRS would reduce the potential
burdens on these issuers.
For the reasons enumerated above, we
are establishing a compliance date that
should provide foreign private issuers
with sufficient time to transition to the
Item 18 requirements when preparing
their financial statements. A foreign
private issuer that currently prepares its
financial statements according to Item
17 of Form 20–F will not be required to
prepare financial statements pursuant to
Item 18 until it files an annual report for
its first fiscal year ending on or after
December 15, 2011. The longer
transition period should reduce the
impact of these amendments on many of
the affected issuers. In addition, because
foreign private issuers that prepare
financial statements in accordance with
IFRS, as issued by the IASB, are not
required to prepare a reconciliation to
U.S. GAAP, we expect that the number
of companies that will be affected by the
amendments will be small.
F. Disclosure About Changes in a
Registrant’s Certifying Accountant
Domestic companies currently report
any changes in and disagreements with
their certifying accountant in a current
report on Form 8–K and in a registration
statement on Form 10 109 under the
Exchange Act,110 as well as in their
registration statements filed on Forms
S–1 111 and S–4 112 under the Securities
Act. Among other things, this disclosure
provides information about potential
opinion shopping situations by issuers.
‘‘Opinion shopping’’ generally refers to
the search for an auditor that is willing
to support a proposed accounting
treatment that is designed to help a
109 17
CFR 249.210.
their annual reports on Form 10–K,
domestic issuers do not provide the same type of
change of accountant disclosure, since they should
have reported this information on a more current
basis on Form 8–K. However, they do provide the
disclosures required by Item 304(b) of Regulation
S–K [17 CFR 229.304(b)].
111 17 CFR 239.11.
112 17 CFR 239.25.
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company achieve its reporting
objectives, even though that treatment
could frustrate reliable reporting.113
Foreign private issuers have not been
required to provide this disclosure.114
However, the issues underlying the
need for this disclosure also apply to
foreign private issuers, and the
relationship between issuers and their
auditors in this area would seem to be
as important for investors. Moreover,
foreign private issuers that are listed on
the New York Stock Exchange (‘‘NYSE’’)
are already required by that Exchange to
notify the public about a change in their
auditors,115 although this information is
required to be furnished under cover of
Form 6–K, which does not have the
substantive disclosure requirements of
Form 8–K.116 As a result, we proposed
amendments that would require
substantially the same types of
disclosures currently provided by
domestic issuers about changes in and
disagreements with their certifying
accountant. After reviewing the
comment letters received on these
proposed amendments, most of which
were generally supportive, we are
adopting the amendments substantially
as proposed. As discussed below, in
response to a question on this point in
the Proposing Release, several
commenters suggested that we extend
this disclosure requirement to all
registration statements, not just initial
registration statements filed by foreign
private issuers. We have modified the
proposal accordingly.
The few commenters who expressed
opposition to the proposed
amendments, either in whole or in part,
expressed concern that foreign private
issuers may be required to disclose more
information about their former auditors
in their Form 20–F annual reports than
is required under their home country
law.117 In addition, some commenters
encouraged the Commission to research
and evaluate whether compliance with
the proposed requirements would be
frustrated or precluded when the
113 See Release No. 33–6766 (Apr. 7, 1988)
(adopting amendments to Form 8–K, Regulation S–
K and Schedule 14A [17 CFR 240.14a–101] related
to disclosure concerning a change in a registrant’s
certifying accountant).
114 When we proposed the adoption of Form 20–
F, we proposed a disclosure requirement soliciting
information about changes in the registrant’s
certifying accountant. Release No. 34–14128 (Nov.
2, 1977) [42 FR 58684] (contained in proposed Item
24). The disclosure item was not included in Form
20–F. Form 20–F Adopting Release, supra note 18.
115 Section 204.03 of the NYSE Listed Company
Manual.
116 See supra note 45 for a discussion of the
differences between Forms 6–K and 8–K.
117 See comment letters from CAQ, Deloitte,
Hundred Group, Linklaters, and Sullivan &
Cromwell LLP.
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disclosure pertains to a foreign-based
certifying accountant because of homecountry legal requirements, such as
privacy laws. Other commenters
recommended that we consider
mechanisms to require foreign private
issuers to provide the disclosure on a
timelier basis than proposed.
After considering all of the comments
received, we believe that the
amendments as proposed achieve an
appropriate balance among all of the
views that were expressed. Given the
usefulness of the information to
investors, we believe that foreign private
issuers should be required to disclose
substantially the same information
provided by domestic issuers. Several
commenters believed the value of the
information to investors would be
diminished by the potential time
between the change in accountants and
the proposed disclosure.118 We
recognize that foreign private issuers
will be disclosing the information on a
delayed basis in their annual reports
and registration statements, compared to
the current basis required by domestic
issuers. However, we do not believe it
would be appropriate to adopt a
separate current report requirement for
foreign private issuers to report this
information because they are already
required to furnish to the Commission
on Form 6–K the material information
that they provide to their home country
regulator, to their security holders and
to the public. To the extent that
information about a change in certifying
accountant is required by the foreign
private issuer’s home country, the
information would be disclosed in a
Form 6–K. Introducing an additional
U.S. current report requirement outside
of the traditional Form 6–K reporting
requirements does not seem appropriate
at this time. In addition, because the
new disclosure requirement may require
a foreign private issuer to disclose more
information about its former auditors
than may be required by its home
country law, permitting foreign private
issuers to prepare and provide the
disclosure in their annual reports may
help reduce the burdens of reporting
this information.
With respect to the concern expressed
by some commenters regarding potential
conflicts between the proposed
disclosure and home country legal
requirements, we note that we asked
commenters to provide details of any
restrictions under the foreign issuer’s
home country law or regulations that
118 See comment letters from AngloGold Ashanti
Limited; BDO; CAQ; Deloitte; E&Y; Grant Thornton;
Harmony Gold Mining Company Limited and
PricewaterhouseCoopers.
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would prohibit an auditor from
reporting to a foreign regulator about
disagreements with the issuer. Most of
the commenters did not provide any
examples of home country law or
regulations that would prohibit such
disclosure, but suggested that we
conduct further research about possible
conflicts.119
As adopted, Item 16F of Form 20–F
will elicit the same types of change of
accountant disclosures obtained in Item
4.01 (Changes in Registrant’s Certifying
Accountant) of Form 8–K,120 including
the disclosure requirements of Item
304(a) of Regulation S–K,121 which are
referenced in Form 8–K, and Item 9
(Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure) of Form 10–K,122
which refers to the disclosure
requirements of Item 304(b) of
Regulation S–K. However, because
foreign private issuers do not file Forms
8–K and 10–K and are not otherwise
subject to Item 304 of Regulation S–K,
we are adopting amendments requiring
them to provide disclosure about
changes in and disagreements with their
certifying accountants in their annual
reports on Form 20–F, as well as in their
registration statements filed on Forms
20–F, F–1, F–3 and F–4.
We are also adopting amendments to
Forms F–1, F–3 and F–4, which are
used to register public offerings of
securities by foreign private issuers
under the Securities Act, to require the
new Item 16F disclosure requirement
about the issuer’s changes in and
disagreements with their certifying
accountant. Although we had not
proposed requiring Item 16F disclosure
for repeat registrants, we solicited
comments on whether this was
disclosure that should be provided in
connection with all registration
statements filed by a foreign private
issuer under the Securities Act. Some
commenters supported this approach.
They noted that this information would
be useful in Securities Act registration
statements filed by repeat issuers,
especially if the change in accountant or
disagreement occurred after the filing of
the Form 20–F annual report and before
the filing of the next Securities Act
registration statement.123 As a result, we
119 One commenter suggested that South African
law may preclude such disclosures, see comment
letter from Deloitte, but the four South African
issuers that commented on the Proposing Release
did not cite specific restrictions under South
African law.
120 Item 4.01 of Form 8–K.
121 17 CFR 229.304(a).
122 Item 9 of Form 10–K.
123 See comment letters submitted by CAQ, the
CFA Institute, and KPMG.
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are adopting amendments to Forms F–
1, F–3 and F–4 that will require Item
16F disclosure by all registrants,
including repeat issuers. We are also
amending Form F–3 so that Item 16F
disclosure will be provided in a
registration statement at effectiveness,
as well as in a prospectus used in
connection with a shelf offering.
New Item 16F requires substantially
the same information required by Item
304 of Regulation S–K, which contains
the disclosure requirements applicable
to domestic issuers. Among other
things, Item 16F requires an issuer to
disclose whether an independent
accountant that was previously engaged
as the principal accountant to audit the
issuer’s financial statements, or a
significant subsidiary on which the
accountant expressed reliance in its
report, has resigned, declined to stand
for re-election, or was dismissed. Item
16F also requires an issuer to disclose
any disagreements or reportable events
that occurred within the issuer’s latest
two fiscal years and any interim period
preceding the change of accountant.
Item 16F(b) solicits disclosure about
whether, during the fiscal year in which
the change of accountants took place or
during the subsequent year, the issuer
had similar, material transactions to
those which led to the disagreements
with the former accountants, and
whether such transactions were
accounted for or disclosed in a manner
different from that which the former
accountants would have concluded was
required. If so, Item 16F(b) requires the
issuer to disclose the existence and
nature of the disagreement or reportable
event, and also to disclose the effect on
the financial statements if the method
that would have been required by the
former accountants had been followed.
Although the disclosure requirements
contained in Item 16F are substantially
similar to the disclosure requirements
applicable to domestic issuers in Item
304 of Regulation S–K, as proposed, we
have eliminated or modified some of the
due dates described in Item 304(a)(3) of
Regulation S–K because the disclosure
is being made on an annual, rather than
on a current, basis. For example,
although Item 16F would require the
issuer to provide a copy of the
disclosures that it is making in response
to Item 16F to the former accountant, it
would not require the issuer to provide
the disclosures within the timeframe
specified in Item 304(a)(3) of Regulation
S–K.124 In addition, we expect that the
124 Item 304(a)(3) of Regulation S–K requires the
issuer to provide a copy of the disclosures to the
former accountant no later than the day that the
disclosures are filed with the Commission. 17 CFR
229.304(a)(3).
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former accountant would be able to
furnish the issuer with a letter stating
whether it agrees with the statements
made by the issuer in response to Item
16F and, if not, stating the respects in
which it does not agree, and that the
issuer would be able to file the former
accountant’s letter as an exhibit to the
annual report or registration statement
that contains this disclosure at the time
that the annual report or registration
statement is due. Item 304(a)(3)
provides that if the former accountant’s
letter is not available at the time that the
report or registration statement is filed,
then the issuer can file the letter with
the Commission within ten business
days after the filing of the report or
registration statement. Because foreign
private issuers would be permitted to
provide the disclosure in their annual
reports, we believe that this
accommodation would not be necessary
unless the change in accountant
occurred less than 30 days prior to the
filing of the annual report 125 or
registration statement. As adopted, Item
16F would permit a delayed filing of the
former accountant’s letter in an annual
report or registration statement only if
the change in accountant occurred
within this 30-day timeframe.
Foreign private issuers will be
required to comply with the
amendments beginning with their first
fiscal year ending on or after December
15, 2009. The delayed compliance date
should provide these issuers and their
accountants with sufficient time to
establish internal procedures that will
enable them to comply with the new
requirements.
G. Annual Disclosure About ADR Fees
and Payments
We are adopting amendments that
will require foreign private issuers to
disclose information about the fees and
other charges paid in connection with
ADR facilities in their annual reports on
Form 20–F.126 We proposed these
amendments because we believe that
ADR holders can benefit from enhanced
disclosure in this area, especially in
light of new depositary fees that are
being charged to ADR holders in
connection with sponsored ADR
facilities. These new fees include an
125 Under General Instruction C.(b) of Form 20–
F, the information provided in a Form 20–F annual
report should be as of the latest practicable date,
unless a disclosure item in the Form explicitly
directs otherwise. As a result, changes in the foreign
private issuer’s certifying accountant that occur
after the issuer’s fiscal year-end, but before the
Form 20–F is filed, would be disclosed in the
issuer’s Form 20–F annual report.
126 We noted the importance of transparency in
fee disclosures in our 1991 ADR concept release,
Release No. 33–6894, supra note 90.
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annual fee for general depositary
services, a fee that was formerly
prohibited by some exchanges.127
Although ADR fees are disclosed in the
ADR itself,128 ADR holders frequently
purchase their ADRs in bookentry form
and do not see the disclosures provided
in the physical certificate.
Many commenters on the proposed
amendments supported the disclosure
of the ADR fees paid by ADR holders,
noting that complete and regular
disclosure of these fees is important in
light of their impact on investors. A few,
however, noted that these fees are
already disclosed in the deposit
agreement, on the Form F–6 registration
statement filed to register the ADRs with
the Commission under the Securities
Act, as well as in the Form 20–F that is
filed to register the deposited securities
under the Exchange Act.129 After
considering these comments, we have
concluded these ADR fees are
significant enough to warrant enhanced
transparency to investors on an annual
basis and will present a minimal
additional disclosure burden on foreign
private issuers.
We received a variety of comments in
reaction to the proposed disclosure
requirement regarding payments made
by depositary banks to the foreign
private issuers whose securities
underlie the ADRs. Some commenters
expressed concern that the disclosure
would have a detrimental effect on the
ADR market, would constitute
commercially sensitive proprietary
information, and would be immaterial
to investors.130 Other commenters,
however, noted that disclosure of such
payments would limit the risk that
depositary banks would attempt to
defray the incentive payments through
increased charges to ADR holders.131
One commenter suggested that
disclosure of the aggregate amount of
incentive payments made to issuers by
depositaries, rather than detailed
disclosure of each payment, would
127 See Release No. 34–53978 (June 13, 2006) [71
FR 35474] (notice of NYSE rule change to eliminate
the requirement that certain services be provided
without charge to ADR holders).
128 As a technical matter, an ADR is the physical
certificate that evidences American Depositary
Shares (‘‘ADS’’), and an ADS is the security that
represents an ownership interest in deposited
securities. However, the terms are often used
interchangeably by market participants.
129 Rule 12a–8 [17 CFR 240.12a–8] exempts
depositary shares registered on Form F–6 [17 CFR
239.36] under the Securities Act, but not the
underlying deposited securities, from the operation
of Section 12(a) of the Exchange Act [15 U.S.C.
78l(a)].
130 See, e.g., comment letters from the ABA, The
Bank of New York Mellon, and Deutsche Bank.
131 See, e.g., the comment letter from Depositary
Management Corporation.
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avoid undermining competition among
depositaries.132
After considering all of these
comments, we are adopting the
amendments to Form 20–F as proposed.
The amendments to Form 20–F revise
Item 12.D.3. and the Instructions to Item
12 to solicit disclosure of the fees paid
by ADR holders on an annual basis,
including the annual fee for general
depositary services. In addition, foreign
private issuers will be required to
disclose the payments that they have
received from depositaries in
connection with their ADR programs.
Because we believe that the value of the
information provided would be
diminished if it was provided only on
an aggregate basis, issuers must disclose
the information on a per payment basis.
We believe that information about the
types of payments made by depositaries
to issuers would be useful to investors
because it would enable them to
understand the purpose of the
payments. The amendments to Item
12.D.3. and the Instructions to Item 12
of Form 20–F will require disclosure of
these payments in the registration
statement on Form 20–F that is filed for
the deposited securities, as well as in
the annual report, for sponsored ADR
facilities.
To address the concerns about the
disclosure of incentive payments made
by depositaries to foreign issuers, a
foreign private issuer will not be
required to disclose this information
until it files its annual report for its first
fiscal year ending on or after December
15, 2009. This should permit depositary
banks and foreign issuers to make
appropriate contractual arrangements,
as necessary, in light of the new
disclosure requirements.
H. Disclosure About Differences in
Corporate Governance Practices
We proposed amendments that would
require listed foreign private issuers to
disclose in their Form 20–F annual
reports the significant ways in which
their corporate governance practices
differ from the practices followed by
domestic companies listed on the same
exchange. This proposal recognized that
foreign private issuers are subject to
different legal and regulatory
requirements in their home
jurisdictions, and as a result frequently
follow different corporate governance
practices from domestic companies.
Many U.S. securities exchanges exempt
listed foreign private issuers from many
of their corporate governance
132 See
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requirements,133 but require these
issuers to disclose the significant ways
in which their corporate governance
practices differ from those followed by
domestic companies under the relevant
exchange’s listing standards. Foreign
private issuers may provide this
disclosure either in their annual reports,
and/or on their Web sites,134 and many
foreign private issuers opt to provide
this disclosure on their Web sites, rather
than in their annual reports.
We reiterate, as we stated when we
proposed the amendments, that this
disclosure does not imply a preference
for any particular type of corporate
governance regime. Again, we note that
the disclosure should be useful to
investors by facilitating their ability to
monitor the issuer’s corporate
governance practices.
The vast majority of comments
received on this proposal were
supportive. Commenters noted that the
proposed amendment would benefit
investors by enabling them to access all
of the corporate governance information
about a foreign private issuer in one
location. They also noted that the
information would provide investors
with relevant disclosure of any updates
on a foreign private issuer’s corporate
governance practices.
After considering these comments, we
are adopting amendments as proposed
to require disclosure of this information
in the Form 20–F annual reports filed by
all foreign private issuers whose
securities are listed on a U.S. exchange.
New Item 16G would require foreign
private issuers to provide a concise
summary in their annual reports of the
significant ways in which the foreign
private issuer’s corporate governance
practices differ from the corporate
governance practices followed by
domestic companies under the relevant
exchange’s listing standards.
Several commenters expressed the
view that the new disclosure item
should not require disclosure of more
133 See Section 303A.00 of the NYSE Listed
Company Manual (noting that foreign private
issuers are permitted to follow home country
practice instead of the applicable corporate
governance provisions of the NYSE Listed Company
Manual, except for the requirements pertaining to
audit committees, certain certifications, and certain
corporate governance disclosures); Section
4350(a)(1) of the Nasdaq Manual (noting that
requirements pertaining to audit committees and
audit opinions apply, among other things); and
Section 110 of the Amex Company Guide (stating
that in evaluating the listing application of a foreign
private issuer, ‘‘the Exchange will consider the
laws, customs and practices of the applicant’s
country of domicile, to the extent not contrary to
the federal securities laws’’).
134 See Section 303A.11 of the NYSE Listed
Company Manual; Section 4350(a)(1) of the Nasdaq
Manual; and Section 110 of the Amex Company
Guide.
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information than foreign issuers
currently provide to the exchanges upon
which their securities are listed.135
Another commenter proposed
modifications to the proposed text of
Item 16G out of concern that the
proposed requirement would
inadvertently result in long, boilerplate
disclosures.136 Other commenters
supported presentation of the
information in a tabular format, while
others expressed concern that requiring
a particular type of presentation could
encourage a ‘‘tick box’’ approach to
corporate governance.137 In response to
these comments, we have revised new
Item 16G to more exactly track the
analogous disclosure requirements of
some of the exchanges,138 without
specifying a particular format for the
presentation of this information. We
expect that the disclosure provided in
response to new Item 16G will be
similar, if not the same, as the
disclosure that foreign private issuers
currently provide in response to the
corporate governance disclosure
requirements of the exchange on which
their securities are listed. Issuers should
assess, and in the future re-assess, the
format that they believe is most
appropriate in their circumstances.
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III. Other Matters Considered
At the time that we proposed the
amendments discussed above, we also
proposed to amend Item 17(a) of Form
20–F to require foreign private issuers to
provide, in certain circumstances, the
financial information required by Rule
3–05 and Article 11 139 of Regulation
S–X. These rules pertain, respectively,
to the financial statements that must be
provided for significant, completed
acquisitions and the preparation of pro
forma financial statements. Although
domestic companies must present the
financial statements of significant
acquired businesses and pro forma
financial information in their
registration statements under both the
Securities Act and the Exchange Act, as
well in a Form 8–K current report,140
135 See, e.g., the comment letters from the ABA,
CAQ, Deloitte, and E&Y.
136 See comment letter from Cleary Gottlieb.
137 See, e.g., comment letter from the British
Bankers’ Association.
138 See Section 303A.11 of the NYSE Listed
Company Manual; Section 110 of the Amex
Company Guide.
139 17 CFR 210.11 et seq.
140 Item 2.01 of Form 8–K requires domestic
issuers to disclose certain information when they or
one of their majority-owned subsidiaries complete
an acquisition or disposition of a significant amount
of assets, other than in the ordinary course of
business. The Form 8–K filed to report this
acquisition or disposition must be filed within four
business days after the event has occurred. See
General Instruction B.1. of Form 8–K. For a
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18:12 Oct 03, 2008
Jkt 217001
foreign private issuers only provide this
information in the registration
statements that they file under the
Securities Act and the Exchange Act.
We proposed amendments to require
foreign private issuers to provide the
financial information elicited by Rule
3–05 and Article 11 of Regulation S–X
in their Exchange Act annual reports.
Because foreign private issuers do not
file current reports on Form 8–K, we did
not propose imposing a requirement
that this financial information be
presented on a more current basis than
annually. We proposed requiring foreign
private issuers to provide financial
information in their annual reports on
Form 20–F about highly significant
acquisitions completed during the most
recent fiscal year covered by their
annual report on that Form. As
proposed, the disclosure requirement
would have been triggered at the 50%
or greater level of significance,141 and
would have required the provision of
financial statements for three fiscal
years as prescribed by Rule 3–
05(b)(2)(iv) of Regulation S–X.
We received several comments on this
proposal. Although many commenters
supported the proposal, several also
expressed concern about the timeliness
of the information that would be
provided, since it would be provided in
the foreign private issuer’s periodic
reports (i.e., its annual report), rather
than on a current basis. Other
commenters questioned the value of
requiring foreign private issuers to
provide historical financial statements
of significant acquirees for three fiscal
years. One commenter recommended
that foreign private issuers be afforded
the flexibility to include financial
information based on the relevant IFRS
and local auditing standards, and to
omit financial information when it
cannot be produced without
unreasonable burden or expense.142
Another commenter suggested that we
should defer to home country disclosure
requirements, and require financial
business acquisition significant at the 20% or
greater level that must be disclosed pursuant to
Item 2.01, Item 9.01 of Form 8–K requires the
financial statements of the acquired business to be
filed with the initial report of the acquisition on
Form 8–K, or by amendment no later than 71
calendar days after the date that the initial report
on Form 8–K is due.
141 The significance of an acquired business is
measured by the comparison of: (1) The registrant’s
investment in the acquired business (acquisition
price) to the registrant’s total assets, (2) the acquired
business’ total assets to the total assets of the
registrant, or (3) the acquired business’ pre-tax
income to the pre-tax income of the registrant. See
Rule 1–02(w) [17 CFR 210.1–02] of Regulation
S–X.
142 See comment letter from the New York City
Bar.
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statements only with respect to the most
recently completed fiscal year, unless
home country law requires more.143
This commenter suggested that this
approach would avoid the imposition of
unnecessary burdens on foreign private
issuers, as well as inconsistent
disclosure obligations on the issuer, and
would avoid creating a disparity in the
information available to investors in the
issuer’s home country and the United
States. We are not adopting these
amendments at this time, but will
continue to consider the proposal in
light of the concerns expressed.
IV. Paperwork Reduction Act
A. Background
The final amendments contain
‘‘collection of information’’
requirements within the meaning of the
Paperwork Reduction Act of 1995
(‘‘PRA’’).144 We have submitted the
proposed amendments to the Office of
Management and Budget (‘‘OMB’’) for
review in accordance with the PRA.145
The titles for the affected collections of
information are:
(1) ‘‘Form 20–F’’ (OMB Control No.
3235–0288);
(2) ‘‘Form F–1’’ (OMB Control No.
3235–0258);
(3) ‘‘Form F–3’’ (OMB Control No.
3235–0256); and
(4) ‘‘Form F–4’’ (OMB Control No.
3235–0325).
Form 20–F sets forth the disclosure
requirements for annual reports and
registration statements filed by foreign
private issuers under the Exchange Act,
as well as many of the disclosure
requirements for registration statements
filed by foreign private issuers under the
Securities Act. Forms F–1, F–3 and F–
4 were adopted pursuant to the
Securities Act, and set forth the
disclosure requirements for registration
statements filed by foreign private
issuers to offer securities to the public.
The hours and costs associated with
preparing, filing and sending these
forms and complying with these rules
constitute reporting and cost burdens
imposed by each collection of
information. An agency may not
conduct or sponsor, and a person is not
required to respond to, a collection of
information unless it displays a
currently valid OMB control number.
The information collection requirements
related to Forms 20–F, F–1, F–3 and F–
4 are mandatory. There is no mandatory
retention period for the information
disclosed, and the information disclosed
would be made publicly available on
See comment letter from the ABA.
U.S.C. 3501 et seq.
145 44 U.S.C. 3507(d) and 5 CFR 1320.11.
143
144 44
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the EDGAR filing system. We have
based our estimates of the effect that the
adopted rule and form amendments
would have on those collections of
information primarily on our review of
the most recently completed PRA
submissions for the affected rules and
forms.
The amendments will: (1) Amend
Rule 405 of Regulation C under the
Securities Act and Exchange Act Rule
3b–4 to permit foreign issuers to test
their qualification to use the forms and
rules available to foreign private issuers
on an annual basis, rather than on the
continuous basis that is currently
required; (2) Amend Form 20–F to
accelerate the filing deadline for annual
reports filed by foreign private issuers
on Form 20–F, subject to a three-year
transition period; and amend Exchange
Act Rules 13a–10 and 15d–10, which
pertains to transition reports filed by
foreign private issuers on Form 20–F,
and Exchange Act Rule 15d–2, which
pertains to special financial reports filed
by foreign private issuers, to conform
the due dates for those reports with the
due date for annual reports filed on
Form 20–F; (3) Amend Form 20–F by
eliminating an instruction to Item 17 of
that Form, which permits certain foreign
private issuers to omit segment data
from their U.S. GAAP financial
statements; (4) Amend Rule 13e–3,
which pertains to going private
transactions by reporting issuers or their
affiliate, to reflect the recently adopted
rules pertaining to the ability of foreign
private issuers to terminate their
Exchange Act registration and reporting
obligations; (5) Amend Form 20–F and
Forms F–1, F–3 and F–4 to require
foreign private issuers that are required
to provide a U.S. GAAP reconciliation
to do so pursuant to Item 18 of Form
20–F; (6) Amend Form 20–F, Forms F–
1, F–3 and F–4 to require foreign private
issuers to disclose information about a
change in the issuer’s certifying
accountant; and (7) Amend Form 20–F
to require foreign private issuers to
disclose the fees and charges paid by
ADR holders, the payments made by the
depositary to the foreign issuer whose
securities underlie the ADRs, and for
listed issuers, the differences in the
foreign private issuer’s corporate
governance practices and those
applicable to domestic companies under
the relevant exchange’s listing rules.
We have based the annual burden and
cost estimates of the adopted
amendments on the following estimates
and assumptions:
• A foreign private issuer incurs or
will incur 25% of the annual burden
required to produce each Form 20–F,
Form F–1, Form F–3, or Form F–4; and
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• Outside firms, including legal
counsel, accountants and other advisors,
incur or will incur 75% of the burden
required to produce each Form 20–F,
Form F–1, Form F–3, or Form F–4 at an
average cost of $400 per hour.146
We estimated the average number of
hours each entity spends completing the
forms and the average hourly rate for
outside professionals. That estimate
includes the time and the cost of inhouse preparers, reviews by executive
officers, in-house counsel, outside
counsel, independent auditors and
members of the audit committee.
We published a notice requesting
comment on the collection of
information requirements in the
Proposing Release and submitted these
requirements to OMB for review in
accordance with the PRA. Although we
received many comment letters on the
proposed rule amendments, none
specifically addressed the estimated
effects of these proposed amendments
on the collection of information
requirements. In response to the
comments received, we have made
certain modifications to the proposals.
We have decided not to adopt the
proposal to require disclosure of
significant, completed acquisitions in
the Form 20–F annual report, which
will reduce our previous estimates of
the reporting and cost burdens of
preparing Form 20–F. As a result of
comments received, we are also
adopting a requirement that repeat
registrants, rather than only first-time
registrants, provide information about
changes in and disagreements with their
certifying accountant in their Securities
Act registration statements. Because
such an event occurs very rarely, this
amendment will not significantly affect
our estimate of the incremental
reporting and cost burdens of this
amendment. We are revising our
estimates for Forms 20–F and Form F–
3 accordingly. Other modifications that
we have made to the proposed
amendments do not affect our estimate
of the incremental burden of the
amendments because they will not
change the amount of information
required to be included by registrants in
any of the affected Forms. These
amendments include certain
modifications to Rule 13e–3 to address
technical concerns, a different
146 In connection with other recent rulemakings,
we have had discussions with several law firms to
estimate an hourly rate of $400 as the cost to
companies for the services of outside professionals
retained to assist in the preparation of these
disclosures. For Securities Act registration
statements, we also consider additional reviews of
the disclosure by underwriter’s counsel and
underwriters.
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accelerated due date for Form 20–F
annual reports than proposed, and a
longer transition period for certain
amendments than originally proposed.
B. Burden and Cost Estimates Related to
the Amendments
1. Form 20–F
We estimate that currently foreign
private issuers file 942 Form 20–Fs each
year. We assume that 25% of the burden
required to produce the Form 20–Fs is
borne internally by foreign private
issuers, resulting in 614,891 annual
burden hours borne by foreign private
issuers out of a total of 2,459,564 annual
burden hours. Thus, we estimate that
2,611 total burden hours per response
are currently required to prepare the
Form 20–F. We further assume that 75%
of the burden to produce the Form 20–
Fs is carried by outside professionals
retained by foreign private issuers at an
average cost of $400 per hour, for a total
cost of $737,868,600.
The amendment to amend Form 20–
F to accelerate the filing deadline for
annual reports and transitions reports
filed on that Form will not change the
amount of information required to be
included in Exchange Act reports. In
connection with this amendment, we
are also adopting amendments to
Exchange Act Rules 13a–10 and 15d–10,
which pertain to transition reports filed
on Form 20–F, and to Exchange Act
Rule 15d–2, which pertains to special
financial reports filed by foreign private
issuers. Our amendments will conform
the deadlines for transition reports filed
on Form 20–F and for the special
financial reports filed by foreign private
issuers with the new deadline for
annual reports filed on Form 20–F.
These amendments also will not change
the amount of information required to
be included in Exchange Act reports.
Therefore, these amendments will
neither increase nor decrease the
amount of burden hours necessary to
prepare annual reports on Form 20–F
for the purposes of the PRA.
With respect to our amendment to
require foreign private issuers that are
required to provide a U.S. GAAP
reconciliation to do so pursuant to Item
18 of Form 20–F, we estimate that
approximately 200 companies that file
Form 20–F will be impacted by the
amendment. We expect that the
amendment will cause those foreign
private issuers to have more burden
hours. We estimate that for each of the
companies affected by the amendment,
there will occur an increase of 2%
(52.22 hours) in the number of burden
hours required to prepare their Form
20–F, for a total increase of 10,444 hours
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as a result of this amendment. We
expect that 25% of those increased
burden hours (2,611 hours) will be
incurred by foreign private issuers. We
further expect that 75% of these
increased burden hours (7,833 hours)
will be incurred by outside firms, at an
average cost of $400 per hour, for a total
of $3,133,200 in increased costs to the
respondents of the information
collection as a result of this amendment.
With respect to our amendment to
require disclosure about a change in the
issuer’s certifying accountant in annual
reports and registration statements filed
on Form 20–F, we estimate that
approximately 90 companies that file
Form 20–F will be impacted by the
amendment. The amendment will cause
those foreign private issuers to have
more burden hours. We estimate that for
each of the companies affected by the
amendment, there will occur an
increase of .75% (19.58 hours) in the
number of burden hours required to
prepare their Form 20–F, for a total
increase of 1,762.2 hours. We expect
that 25% of those increased burden
hours (440.55 hours) will be incurred by
foreign private issuers. We further
expect that 75% of these increased
burden hours (1,321.65 hours) will be
incurred by outside firms, at an average
cost of $400 per hour, for a total of
$528,660 in increased costs to the
respondents of the information
collection as a result of the amendment.
Our amendment to require disclosure
about ADR fees and payments on an
annual basis, we estimate that
approximately 442 companies that file
Form 20–F will be impacted by the
amendment. The amendment will cause
those foreign private issuers to have
more burden hours. We estimate that for
each of the companies affected by the
amendment, there will occur an
increase of .25% (6.53 hours) in the
number of burden hours required to
prepare their Form 20–F, for a total
increase of 2,886.26 hours. We expect
that 25% of those increased burden
hours (721.57 hours) will be incurred by
foreign private issuers. We further
expect that 75% of these increased
burden hours (2,164.71 hours) will be
incurred by outside firms, at an average
cost of $400 per hour, for a total of
$865,884 in increased costs to the
respondents of the information
collection as a result of the amendment.
With respect to our amendment to
require annual disclosure about
differences in a listed foreign private
issuer’s corporate practices and those
applicable to domestic companies under
the relevant exchange’s listing rule, we
estimate that approximately 783
companies that file Form 20–F will be
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impacted by the amendment. The
amendment will not cause a significant
change in the burden hours for those
foreign private issuers because they
already prepare this information for the
exchanges on which they are listed.
Our amendment to eliminate an
instruction to Item 17 of Form 20–F,
which permits certain foreign private
issuers to omit segment data from their
U.S. GAAP financial statements, we
estimate that approximately 5
companies that file Form 20–F will be
currently impacted by the amendment.
The amendment will cause those foreign
private issuers to have more burden
hours. We estimate that for each of the
companies affected by the amendment,
there will occur an increase of 2%
(52.22 hours) in the number of burden
hours required to prepare their Form
20–F, for a total increase of 261.1 hours.
We expect that 25% of those increased
burden hours (65.3 hours) will be
incurred by foreign private issuers. We
further expect that 75% of these
increased burden hours (195.83 hours)
will be incurred by outside firms, at an
average cost of $400 per hour, for a total
of $78,332 in increased costs to the
respondents of the information
collection as a result of the amendment.
Because we have decided not to adopt
the proposal to amend Form 20–F to
require foreign private issuers to
provide certain financial information in
their annual reports on that Form about
a significant, completed acquisition that
is significant at the 50% or greater level,
we have reduced the estimated burdens
and costs associated with preparing
Form 20–F.
Thus, we estimate that the
amendments to Form 20–F will increase
the annual burden borne by foreign
private issuers in the preparation of
Form 20–F from 614,891 hours to
618,729.5 hours. We further estimate
that the amendments will increase the
total annual burden associated with
Form 20–F preparation to 2,474,918
burden hours, which will increase the
average number of burden hours per
response to 2627. We further estimate
that the amendments will increase the
total annual costs attributed to the
preparation of Form 20–F by outside
firms to $742,475,400.
2. Form F–1
We estimate that currently foreign
private issuers file 42 registration
statements on Form F–1 each year. We
assume that 25% of the burden required
to produce a Form F–1 is borne by
foreign private issuers, resulting in
18,890 annual burden hours incurred by
foreign private issuers out of a total of
75,560 annual burden hours. Thus, we
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estimate that 1,799 total burden hours
per response are currently required to
prepare a registration statement on Form
F–1. We further assume that 75% of the
burden to produce a Form F–1 is carried
by outside professionals retained by
foreign private issuers at an average cost
of $400 per hour, for a total cost of
$22,667,400.
We estimate that currently
approximately 4 companies that file
registration statements on Form F–1 will
be impacted by the amendment to
require foreign private issuers to
provide disclosure about a change in
their certifying accountant in their
initial registration statements. The
amendment will cause those foreign
private issuers to have more burden
hours. We estimate that each company
affected by the amendment will have a
.75% increase (13.49 hours) in the
number of burden hours required to
prepare their registration statements on
Form F–1, for a total increase of 54
hours. We expect that 25% of these
increased burden hours (13.5 hours)
will be incurred by foreign private
issuers. We further expect that 75% of
the increased burden hours (40.5 hours)
will be incurred by outside firms, at an
average cost of $400 per hour, for a total
of $16,200 in increased costs to the
respondents of the information
collection as a result of the amendment.
We estimate that none of the
companies that file registration
statements on Form F–1 will be
impacted by the amendment to require
foreign private issuers that are required
to provide a U.S. GAAP reconciliation
to do so pursuant to Item 18 of Form
20–F. In our experience, the companies
that use Form F–1 are engaging in
capital raising transactions, so that all
registrants have been providing
financial information according to Item
18. The amendment will be a technical
change to the Form without any
expected impact on the companies
using that Form for collection of
information purposes.
Thus, we estimate that the
amendments to Form F–1 will increase
the annual burden incurred by foreign
private issuers in the preparation of
Form F–1 from 18,890 hours to 18,904
hours. We further estimate that the
amendments will increase the total
annual burden associated with Form F–
1 preparation to 75,614 burden hours,
which will increase the average number
of burden hours per response to 1800.
We further estimate that the
amendments will increase the total
annual costs attributed to the
preparation of Form F–1 by outside
firms to $22,683,600.
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3. Form F–3
We estimate that currently foreign
private issuers file 106 registration
statements on Form F–3 each year. We
assume that 25% of the burden required
to produce a Form F–3 is borne by
foreign private issuers, resulting in
4,399 annual burden hours incurred by
foreign private issuers out of a total of
17,596 annual burden hours. Thus, we
estimate that 166 total burden hours per
response are currently required to
prepare a registration statement on Form
F–3. We further assume that 75% of the
burden to produce a Form F–3 is carried
by outside professionals retained by
foreign private issuers at an average cost
of $400 per hour, for a total cost of
$5,278,800.
We estimate that currently
approximately 20 companies that file
registration statements on Form F–3 will
be impacted by the amendment to
require foreign private issuers that are
required to provide a U.S. GAAP
reconciliation to do so pursuant to Item
18 of Form 20–F. The amendment will
cause those foreign private issuers to
have more burden hours. We estimate
that each company affected by the
amendment will have a 2% increase
(3.32 hours) in the number of burden
hours required to prepare their
registration statements on Form F–3, for
a total increase of 66.4 hours. We expect
that 25% of these increased burden
hours (16.6 hours) will be incurred by
foreign private issuers. We further
expect that 75% of the increased burden
hours (49.8 hours) will be incurred by
outside firms, at an average cost of $400
per hour, for a total of $19,920 in
increased costs to the respondents of the
information collection as a result of the
amendment.
In response to comments received, we
have amended F–3 to require foreign
private issuers that are repeat registrants
to disclose a change in or disagreement
with their certifying accountant in their
registration statements filed on Form
F–3. As proposed, this amendment
would have applied only to registration
statements used in initial public
offerings, and would not have been
reflected in our collection of
information estimates for Form F–3,
since Form F–3 is not available for
initial public offerings. We estimate that
currently approximately 10 companies
that file registration statements on Form
F–3 will be impacted by this
amendment. The amendment will cause
those foreign private issuers to have
more burden hours. We estimate that
each company affected by the
amendment will have a .75% increase
(1.245 hours) in the number of burden
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hours required to prepare their
registration statements on Form F–3, for
a total increase of 12.45 hours. We
expect that 25% of these increased
burden hours (3.11 hours) will be
incurred by foreign private issuers. We
further expect that 75% of the increased
burden hours (9.34 hours) will be
incurred by outside firms, at an average
cost of $400 per hour, for a total of
$3,736 in increased costs to the
respondents of the information
collection as a result of the amendment.
Thus, we estimate that the
amendments to Form F–3 will increase
the annual burden incurred by foreign
private issuers in the preparation of
Form F–3 from 4,399 hours to 4,418.71
hours. We further estimate that the
amendments will increase the total
annual burden associated with Form F–
3 preparation to 17,674.85 burden
hours, which will increase the average
number of burden hours per response to
167. We further estimate that the
amendments will increase the total
annual costs attributed to the
preparation of Form F–3 by outside
firms to $5,302,455.
4. Form F–4
We estimate that currently foreign
private issuers file 68 registration
statements on Form F–4 each year. We
assume that 25% of the burden required
to produce a Form F–4 is borne
internally by foreign private issuers,
resulting in 24,497 annual burden hours
incurred by foreign private issuers out
of a total of 97,988 annual burden hours.
Thus, we estimate that 1,441 total
burden hours per response are currently
required to prepare a registration
statement on Form F–4. We further
assume that 75% of the burden to
produce a Form F–4 is carried by
outside professionals retained by foreign
private issuers at an average cost of $400
per hour, for a total cost of $29,396,400.
We estimate that currently
approximately none of the companies
that file registration statements on Form
F–4 will be impacted by the amendment
to require foreign private issuers that are
required to provide a U.S. GAAP
reconciliation to do so pursuant to Item
18 of Form 20–F. In our experience, the
companies that use Form F–4 have all
been providing financial information
according to Item 18 because of the
types of transactions that are registered
on that Form, so the amendment will be
a technical change to the Form without
any expected impact on the companies
using it.
We estimate that currently
approximately 5 companies that file
registration statements on Form F–4 will
be impacted by the amendment to
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require foreign private issuers to
provide disclosure about a change in
their certifying accountant in their
initial registration statements. The
amendment will cause those foreign
private issuers to have more burden
hours. We estimate that each company
affected by the amendment will have a
.75% increase (10.81 hours) in the
number of burden hours required to
prepare their registration statements on
Form F–1, for a total increase of 54
hours. We expect that 25% of these
increased burden hours (13.5 hours)
will be incurred by foreign private
issuers. We further expect that 75% of
the increased burden hours (40.5 hours)
will be incurred by outside firms, at an
average cost of $400 per hour, for a total
of $16,200 in increased costs to the
respondents of the information
collection as a result of the amendment.
Thus, we estimate that the
amendments to Form F–4 will increase
the annual burden incurred by foreign
private issuers in the preparation of
Form F–4 from 24,497 hours to 24,511
hours. We further estimate that the
amendments will increase the total
annual burden associated with Form F–
4 preparation to 98,042 burden hours,
which will decrease the average number
of burden hours per response to 1,442.
We further estimate that the
amendments will increase the total
annual costs attributed to the
preparation of Form F–4 by outside
firms to $29,412,600.
5. Other Amendments
The amendments to Securities Act
Rule 405 and Exchange Act Rule 3b–4
will revise the definition of ‘‘foreign
private issuer’’ to permit foreign issuers
to test their status as ‘‘foreign private
issuers’’ on the last business day of their
second fiscal quarter, rather than
continuously, as is currently the case.
Our amendments will not change the
amount of information required to be
included in Securities Act registration
statements or Exchange Act reports.
Therefore, they will neither increase nor
decrease the amount of burden hours
necessary to prepare documents under
either of those Acts for the purposes of
the PRA.
In addition, we do not expect a
change in the number of foreign private
issuers who will be required to comply
with Rule 13e–3, or the burden hours
required to prepare a Schedule 13E–3.
With respect to domestic issuers,
although we do not expect the number
of domestic issuers affected by the
amendments to Rule 13e–3 to decrease,
we also expect that the Rule
amendments will have a negligible
effect on these issuers because the
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smaller reporting companies that will be
affected by the amendments could
voluntarily deregister and thus avoid
any requirement to comply with that
Rule.
V. Cost-Benefit Analysis
We are adopting amendments to our
rules and forms relating to foreign
private issuers that are intended to
enhance the information that is
available to investors, promote investor
protection and facilitate cross-border
capital flows.
A. Annual Test for Foreign Private
Issuer Status
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1. Expected Benefits
The amendments to the definition of
‘‘foreign private issuer’’ contained in
Securities Act Rule 405 and Exchange
Act Rule 3b–4 will permit reporting
foreign issuers 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
continuously, as is currently the case.
This is the same date used to determine
accelerated filer status under Exchange
Act Rule 12b–2 and smaller reporting
company status in Item 10(f)(2)(i) of
Regulation S–K. As a result, these
adopted amendments should simplify
compliance with the Commission’s
regulations by establishing one date that
is used to ascertain an issuer’s status.
Foreign issuers should benefit as a
result of this simplification of their
compliance requirements, which could
make the U.S. markets more attractive to
them as a source of capital and thereby
enhance the competitiveness of the U.S.
markets compared to other markets. The
amendments are expected to reduce the
cost for foreign issuers of monitoring
whether they qualify as foreign private
issuers, including the time spent by
management in tracking this
information. If more foreign issuers are
encouraged to remain in the U.S.
markets and to make public offerings,
investors should also benefit because
this will enhance their ability to invest
in the securities of foreign issuers that
have been registered with the
Commission, and that are thus subject to
the disclosure requirements and
investor protections provided by the
federal securities laws.
Once a foreign issuer determines that
it no longer qualifies as a foreign private
issuer, the amendments will provide the
issuer with at least six months’ advance
notice that it must comply with the
domestic issuer forms and rules. This
will provide these issuers with more
time to comply with the reporting
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requirements applicable to domestic
issuers under the Exchange Act, and to
modify their information and processing
systems to comply with the domestic
reporting and registration regime. This
includes the requirements to comply
with the more extensive executive
compensation disclosure requirements
that apply to domestic issuers, as well
as the proxy rules and Section 16
reporting requirements under the
Exchange Act, which do not apply to
foreign private issuers. Because the
amendments will provide foreign
issuers with advance notice when their
status changes, more foreign issuers may
be encouraged to remain in the U.S.
markets, and investors should benefit
from the increased opportunities to
invest in foreign securities in the United
States.
The amendments should mitigate a
burden on foreign issuers by reducing
the amount of time and the resources
they expend to determine their status
pursuant to the four-factor test set forth
in the definition of ‘‘foreign private
issuer.’’ In this respect, the amendments
will be most beneficial to reporting
foreign private issuers that have close to
50% of their outstanding voting
securities held of record by U.S.
residents, since they are most at risk of
no longer qualifying as foreign private
issuers. The current requirement that
foreign issuers continuously test their
status can result in confusion for
investors if a foreign issuer needs to
move between foreign and domestic
reporting forms in the same fiscal year.
For example, investors may be confused
if a foreign issuer determines that it no
longer qualifies as a foreign private
issuer, and then switches from the
foreign private issuer forms (Form 6–K
and Form 20–F) to the domestic forms
(e.g., quarterly reports on Form 10–Q) in
the same fiscal year. In the case of a
foreign issuer that loses its foreign
private issuer status, the amendments
will benefit U.S. investors by
eliminating the confusion that could
result if the foreign issuer switched
forms in the middle of the year.
However, the amendments may not be
as helpful in reducing investor
confusion with respect to foreign private
issuers that have been reporting under
the domestic regime and that will now
be permitted to switch immediately to
the foreign private issuer reporting
regime upon the determination of their
eligibility to do so.
At the same time, foreign issuers that
previously did not qualify as foreign
private issuers, but that determine that
they will qualify as foreign private
issuers, will be able to use the foreign
private issuer rules and forms
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immediately under the amendments.
This accommodation could encourage
more foreign issuers to enter the U.S
markets and to make public offerings,
and should benefit investors by
enhancing their ability to invest in
foreign securities that have been
registered with the Commission.
2. Expected Costs
Investors could incur costs from the
amendments if foreign issuers that have
been reporting under the domestic
reporting regime immediately switch
over to the foreign private issuer forms
once they qualify as foreign private
issuers. Because foreign private issuers
have different Exchange Act reporting
obligations than domestic issuers and
file on different forms, some investors
may find it confusing if a foreign issuer
that had been reporting under the
domestic reporting regime switches
reporting regimes mid-year. In addition,
once a foreign issuer switches status
from a domestic issuer to a foreign
private issuer, investors will no longer
have the benefit of the disclosures that
were once provided by the foreign
issuer on the domestic forms.
Currently, when a foreign issuer no
longer qualifies as a foreign private
issuer, it must immediately file
quarterly reports on Form 10–Q and
current reports on Form 8–K. It must
also comply with the Commission’s
proxy rules and the Section 16 insider
stock trading and short-swing profit
recovery provisions. Under the
amendments, when a foreign issuer
determines that it no longer qualifies as
a foreign issuer, for the six months
following the test date, the foreign
issuer will be permitted to continue
relying on the rules applicable to foreign
private issuers, such as the exemption
from the proxy rules and Section 16.
The foreign issuer will also be allowed
to use the forms reserved for foreign
private issuers, and to provide current
reports on Form 6–K, rather than
Exchange Act reports on Forms 10–Q
and 8–K. During that period, investors
will not have the benefit of the
additional disclosures that the foreign
issuer would otherwise be required to
provide.
B. Amendments to Form 20–F
The amendments will make several
changes to annual reports filed on Form
20–F. We are adopting amendments to
accelerate the deadline for annual
reports filed on Form 20–F by foreign
private issuers. We are also adopting
amendments to Form 20–F to require
certain additional disclosures in annual
reports on that Form. The adopted
amendments will require issuers to
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disclose any changes in and
disagreements with the registrant’s
certifying accountant in their Form 20–
F annual reports, as well as in the
Securities Act registration statements
filed by registrants with the
Commission. The amendments will also
require disclosure of the fees and other
charges paid by ADR holders to
depositaries, and any payments made by
depositaries to the foreign issuers whose
securities underlie the ADRs. In
addition, we are adopting amendments
to Form 20–F to require disclosure in
the annual report about the significant
differences in the corporate governance
practices of listed foreign private issuers
compared to the corporate governance
practices applicable to domestic
companies under the relevant
exchange’s listing standards. Another
adopted amendment will eliminate an
instruction to Item 17 of Form 20–F that
permits certain foreign private issuers to
omit segment data from the U.S. GAAP
financial statements.
In addition to these amendments, we
are adopting amendments to eliminate
the availability of the limited U.S.
GAAP reconciliation option that is
contained in Item 17 of Form 20–F for
foreign private issuers that are only
listing a class of securities on a U.S.
national securities exchange, or only
registering a class of equity securities
under Section 12(g) of the Exchange
Act, and not conducting a public
offering. The amendments will apply
not only to registration statements filed
on Form 20–F in the circumstances
described above, but also to annual
reports filed on that Form. Related to
this adopted amendment, we are
adopting amendments to eliminate the
Item 17 limited reconciliation option for
certain non-capital raising offerings,
such as offerings pursuant to dividend
reinvestment plans, offerings upon the
conversion of securities, or offerings of
investment grade securities. The
Securities Act registration statement
forms available to foreign private issuers
(Form F–1, F–3 and F–4) are amended
accordingly.
1. Expected Benefits
We anticipate that the adopted
amendments to Form 20–F and the
related amendments to the Securities
Act registration statement forms
available to foreign private issuers will
provide a significant benefit to U.S.
investors by providing them with
enhanced disclosure that is more similar
to the disclosures provided by domestic
issuers, as well as disclosure on an
accelerated basis that is more
comparable to the timeframe within
which domestic issuers file annual
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reports. Because of the Commission’s
integrated disclosure system, in which
approximately the same information is
provided in both the primary and
secondary markets, the disclosure
requirements contained in Form 20–F
are often more comprehensive than the
disclosures required by foreign
securities regulators. For example,
although many foreign regulators
require audited financial statements and
a form of management’s report in annual
reports, they do not require disclosure
about executive compensation,
description about the issuer’s business,
or a Management’s Discussion and
Analysis.147 These additional
disclosures are required in the Form 20–
F annual reports that foreign private
issuers file with the Commission.
Based on a sample of Form 20–F
annual reports filed with the
Commission in the past few years, we
estimate that approximately one-third of
all such filers currently file Form 20–F
annual reports with us within 120 days
after their fiscal year-end. The adopted
amendment to accelerate the due date
for Form 20–F annual reports will thus
affect a majority of the foreign private
issuers that file on Form 20–F. As a
result of the accelerated deadline,
investors may be better able to compare
the performance of foreign and domestic
issuers, since information about both
will be provided on a more
contemporaneous basis.
The adopted amendments to require
additional disclosure in Form 20–F
annual reports should help investors
better compare foreign and domestic
issuers. Currently, domestic issuers
provide disclosure about changes in and
disagreements with their certifying
accountant on a Form 8–K current
report. Listed domestic issuers are also
required to comply with the corporate
governance requirements of the U.S.
exchange on which their securities are
listed, although foreign private issuers
whose securities are listed on the same
exchange are exempt. The adopted
amendments will provide investors with
more comparable information about
foreign private issuers regarding
possible audit opinion shopping and
corporate governance practices.
The adopted amendments to require
disclosure about ADR fees and
payments made by depositaries to the
foreign issuers whose securities
underlie the ADRs will make this
information more readily available to
investors. The placement of this
disclosure in annual reports and Form
147 In Form 20–F, this disclosure item is
contained in Item 5 (Operating and Financial
Review and Prospects).
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20–F registration statements should
assist investors in determining the fees
related to their investments in ADRs,
including indirect costs that may be
imposed on them if the depositary bank
passes along the cost of its payments to
foreign issuers to ADR holders. This
should better enable investors to
determine whether to invest in the
ADRs of foreign issuers.
Several of the adopted amendments to
Item 17 of Form 20–F may also help
ensure that all foreign private issuers
provide the same level of financial
information, thereby facilitating a
readier comparison across all issuers.
This could, as a consequence, increase
the attractiveness of these companies to
investors. For example, the adopted
amendments will eliminate the
availability of the limited U.S. GAAP
reconciliation option in Item 17 of Form
20–F for annual reports, registration
statements on Form 20–F that do not
involve a public offering, and Securities
Act registration statements for certain
non-capital raising transactions.
Currently, most foreign private issuers
that provide U.S. GAAP reconciliation
disclose financial information according
to Item 18 of Form 20–F. The adopted
amendment will require that all foreign
private issuers provide this level of
disclosure. Another adopted
amendment will eliminate the
instruction to Item 17 of Form 20–F that
permits certain foreign private issuers to
omit segment data from their U.S. GAAP
financial statements. Although we
estimate that less than 10 foreign private
issuers use this instruction, the
instruction creates an anomaly whereby
an issuer is permitted to provide a
qualified U.S. GAAP audit report.
2. Expected Costs
Foreign private issuers could incur
costs from the adopted amendments to
Form 20–F, and the related amendments
to the Securities Act registration
statements available to foreign private
issuers. In order to comply with the
adopted accelerated due dates, many
foreign private issuers will likely have
to implement new systems for preparing
information during the transition period
to the new rules. They could be required
to prepare annual reports on a dual
track, one for the annual report filed
with their home country regulator and
the Form 20–F annual report. According
to a sample of Form 20–F annual reports
filed with us, approximately one-third
of all such filers file their Form 20–F
annual reports within 120 days of their
fiscal year-end. The cost of preparing
filings on an accelerated basis may
therefore vary among issuers. In
addition, because of the Commission’s
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integrated disclosure system, in which
issuers provide approximately the same
disclosures to both the primary and
secondary markets, the disclosures
required in Form 20–F are more
substantial than the information
required for annual reports in many
foreign jurisdictions. The amendments
could thus result in increased costs for
foreign private issuers.
The amendments to provide
additional disclosures in Form 20–F
may also impose additional costs on
foreign private issuers. With respect to
the adopted disclosure regarding ADR
fees and payments made by
depositaries, we note that the
information about ADR fees is provided
in the deposit agreement and form of
receipt that are attached as exhibits to
the Form F–6 used to register the ADRs
under the Securities Act, as well as in
the Securities Act registration statement
related to the offering of the securities
underlying the ADRs. Because the
information is already required by the
Commission, albeit in filings that most
retail investors are not familiar with, we
do not believe that the requirement to
include this information in the foreign
private issuer’s annual report on Form
20–F will involve significant
compliance costs.
In addition, the information about the
payments made by depositaries to
foreign private issuers will provide
important new information to investors
about incentives used by depositaries
that may encourage foreign private
issuers to sell their securities in ADR
form and with a particular depositary
bank. If foreign issuers are reluctant to
disclose this information, they could be
discouraged from entering the U.S.
markets, or, if they already have
established ADR facilities in the United
States, from maintaining their ADR
facilities. This could reduce the
opportunities for investors to invest in
foreign securities in the United States.
Foreign private issuers could incur
some costs related to the proposal to
include information about differences in
corporate governance practices for listed
foreign private issuers. However, the
U.S. exchanges already require that this
information be prepared. For foreign
private issuers that are listed on U.S.
exchanges, the amendment will not
involve the collection of new
information or preparation of new
disclosure, but will simply require that
the information also be made available
in the annual report, where many
investors may expect to see it. As a
result, we believe the compliance costs
of this amendment will be relatively
small. Corporate governance
information elicited by the amendment
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will not be required for issuers that are
not listed on a U.S. exchange.
The amendments to eliminate the
availability of the limited U.S. GAAP
reconciliation contained in Item 17 of
Form 20–F could result in costs for the
affected foreign private issuers because
they will now need to collect this
information and to prepare additional
disclosure in their Form 20–F annual
reports. Some commenters expressed
concern about the potential compliance
burdens associated with the amendment
to eliminate the availability of the Item
17 reconciliation, especially because
they believe that other countries are
gradually requiring footnote disclosures
comparable in scope to U.S. GAAP and
Regulation S–X. However, based on our
review of Form 20–F annual report
filings made with us for fiscal year 2006,
we estimate that most foreign private
issuers already provide financial
information according to Item 18 of
Form 20–F. In addition, we believe that
a reconciliation that includes the
footnote disclosures required by U.S.
GAAP and Regulation S–X can provide
important additional information to
investors. Some commenters also noted
that foreign private issuers that provide
the Item 17 reconciliation in their
annual reports tend to be smaller
companies, and that these companies
would face significant burdens on their
financial accounting and reporting
system if they are required to provide
the additional Item 18 disclosures and
also comply with the accelerated due
date for filing Form 20–F annual reports
at the same time. To reduce the
potential burdens on these issuers, we
are providing a three-year transaction
period before the amendment takes
effect, which will align the compliance
date for the adopted amendments with
the date on which many countries will
be adopting IFRS.
The amendment to require segment
data in U.S. GAAP financial statements
could also result in costs for the affected
foreign private issuers because of the
need to collect this information and to
prepare additional disclosure in their
Form 20–F annual reports. However, we
note that approximately five foreign
private issuers will be affected by the
requirement to provide segment data.
Foreign private issuers will also incur
costs in connection with the
amendment to require disclosure about
any changes in and disagreements with
the registrant’s certifying accountant in
Form 20–F annual reports and in
Securities Act registration statements
filed by registrants. In addition to the
preparation costs of including this
information in the Form 20–F, the
foreign private issuer could also incur
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58319
certain costs associated with the
requirement to obtain a letter from its
former accountant stating whether it
agrees with the disclosure provided by
the issuer in the document filed with
the Commission.
Investors may incur costs to the extent
that the amendments to Form 20–F
discourage foreign private issuers from
registering or maintaining their
registration with the Commission. If
foreign private issuers deregister or do
not register their securities under the
Securities Act or the Exchange Act,
there may be reduced opportunities for
investment by U.S. investors in the
securities of foreign issuers. Although
each of the adopted amendments will
affect a different number of foreign
private issuers, for purposes of the
Paperwork Reduction Act, we estimate
that these new disclosures will result in
an increased paperwork burden of 25
hours for all respondents and
$4,606,800 for Form 20–F.
C. Exchange Act Rule 13e–3
1. Expected Benefits
We believe that the amendment to
Exchange Act Rule 13e–3, which
pertains to going private transactions by
reporting issuers or their affiliates, to
reflect the recently adopted rules
pertaining to the ability of foreign
private issuers to terminate their
Exchange Act registration and reporting
obligations will benefit investors. By
amending this Rule, the test for
determining when a domestic issuer
undertakes a going private transaction
will also change. The amendment will
help ensure that Rule 13e–3 covered the
types of transactions that were intended
when the Commission first adopted the
Rule. Investors will benefit because
more foreign private issuers are
expected to be able to terminate their
registration and reporting obligations
under the Exchange Act as a result of
these recently adopted amendments. If
more foreign private issuers decide to
conduct going private transactions to
terminate their registration or reporting
obligations, the amendment to Rule
13e–3 will require more foreign private
issuers to comply with that Rule and to
file a Schedule 13E–3, as required by
that Rule. Similarly, modernizing Rule
13e–3 to apply equally to domestic
issuers when a transaction identified in
the Rule results in the issuer becoming
eligible to terminate or suspend its
reporting obligations is consistent with
the policy purpose supporting the
Rule’s initial adoption. Investors will
benefit from the additional disclosures
that will be provided.
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2. Expected Costs
Foreign private issuers and domestic
issuers may incur additional costs in
connection with the adopted
amendment to Rule 13e–3(a)(3)(ii)(A) if
Rule 13e–3 is more easily triggered
because of the reference to the new
termination of registration and reporting
requirements that apply to foreign
private issuers. These costs will include,
for example, the cost of preparing, filing
and disseminating a Schedule 13E–3, as
well as any required amendments to
that Schedule, with the Commission.
VI. Consideration of Impact on the
Economy, Burden on Competition, and
Promotion of Efficiency, Competition,
and Capital Formation
When engaging in rulemaking that
requires us to consider or determine
whether an action is necessary or
appropriate in the public interest,
Section 2(b) of the Securities Act 148 and
Section 3(f) of the Exchange Act 149
require us to consider whether the
action will promote efficiency,
competition and capital formation.
When adopting rules under the
Exchange Act, Section 23(a)(2) of the
Exchange Act 150 requires us to consider
the impact that any new rule will have
on competition. In addition, Section
23(a)(2) prohibits us from adopting any
rule that will impose a burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Exchange Act.
In the Proposing Release, we
considered the proposed amendments
in light of the standards set forth in the
above referenced statutory sections. We
solicited comment on whether, if
adopted, the proposed rule amendments
would result in any anti-competitive
effect or would promote efficiency,
competition and capital formation. In
addition, we encouraged commenters to
provide empirical data or other facts to
support their views on any anticompetitive effects or any burdens on
efficiency, competition or capital
formation that may result from adoption
of the proposed amendments.
We did not receive any empirical data
in this regard concerning the proposed
amendments. However, with respect to
our amendment to require more
disclosure about payments made by
depositaries in connection with ADR
facilities, one commenter suggested that
disclosure of the aggregate amount of
incentive payments made by
depositaries to foreign private issuers
whose securities underlie the ADRs,
148 15
U.S.C. 77b(b).
U.S.C. 78c(f).
150 15 U.S.C. 78w(a)(2).
149 15
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rather than disclosure about each
payment, would avoid undermining
competition among depositaries. We
believe that information about the types
of payments made by depositaries to
issuers would be useful to investors
because it would enable them to
understand the purpose of the
payments, and that the disclosure of
that information on an aggregate basis
would undercut the value of the
disclosure. Accordingly, we continue to
believe the new rules will contribute to
efficiency, competition and capital
formation.
The purpose of the amendments to
Securities Act Rule 405 and Exchange
Act Rule 3b–4, which will permit
foreign issuers to assess their eligibility
to use the special forms and rules
available to foreign private issuers once
a year, are expected to facilitate capital
formation by foreign issuers in the U.S.
capital markets. The adopted
amendments should reduce regulatory
compliance burdens for foreign private
issuers that rely on the adopted
amendments because of the reduction in
monitoring costs. Reduced compliance
burdens are expected to lower the cost
of raising capital in the Unites States for
those issuers. In addition, the
competitiveness of the U.S. markets may
be enhanced because the reduced
monitoring costs may make the markets
more attractive to them. The reduction
in compliance burdens may also
promote efficiency because foreign
issuers will no longer need to
continuously test their qualification as
foreign private issuers.
The amendments to Form 20–F will
accelerate the reporting deadline for
annual reports on Form 20–F. The
amendments to Exchange Act Rules
13a–10 and 15d–10, which pertain to
transition reports filed on Form 20–F,
and the amendments to Exchange Act
Rule 15d–2, which pertain to special
financial reports filed by foreign private
issuers, will conform the due dates for
these reports with the new due date for
annual reports on Form 20–F. Several of
the adopted amendments to Form 20–F
will require more disclosure in the
annual reports filed by foreign private
issuers. The disclosures required will
include information about any changes
in and disagreements with the
registrant’s certifying accountant, ADR
fees and payments made by depositaries
to the foreign issuers whose securities
underlie the ADR, and information
about corporate governance. In addition,
the amendments will eliminate the
availability of the limited U.S. GAAP
reconciliation option contained in Item
17 of Form 20–F, and will eliminate an
instruction to Item 17 of that Form,
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which permits certain foreign private
issuers to omit segment data from their
U.S. GAAP financial statements.
These amendments will create a more
level playing field between foreign
private issuers and U.S. issuers because
they will require disclosures from
foreign private issuers that are currently
required of domestic issuers. Foreign
private issuers that file annual reports
on Form 20–F will also be required to
provide these annual reports in a
timeframe that is closer to the annual
report due dates imposed on domestic
issuers. As a result, the amendments
should put foreign private issuers and
domestic issuers in a more similar
position with respect to their
compliance obligations under the
Commission’s regulations, although the
incremental costs of complying with
these amendments may also create a
disincentive for some foreign private
issuers to enter the U.S. capital markets.
The amendments may also facilitate
capital formation by foreign companies
in the U.S. capital markets by enabling
investors to obtain more information
about these companies in a timeframe
that will make the information useful to
them and in a manner that will allow for
greater comparability to domestic
issuers. This could affect the allocation
of capital between foreign private
issuers and domestic issuers.
The amendments to Exchange Act
Rule 13e–3, which reflect the newly
adopted rules pertaining to the
termination and deregistration of the
reporting obligations of foreign private
issuers, could require more foreign
private issuers and domestic issuers to
comply with that Rule and to file a
Schedule 13E–3 as a result if more
issuers decide to conduct going private
transactions to terminate their
registration and reporting obligations.
This additional compliance obligation
could create a disincentive for foreign
private issuers to enter the U.S. markets.
VII. Regulatory Flexibility Act
Certification
Under Section 605(b) of the
Regulatory Flexibility Act,151 the
Commission certified that the proposed
amendments to Rule 405 of Regulation
C, Form F–1, Form F–3, and Form F–4
under the Securities Act, and Form 20–
F, Rule 3b–4, Rule 13a–10, Rule 13e–3
and Rule 15d–10 under the Exchange
Act contained in this release, if adopted,
will not have a significant economic
impact on a substantial number of small
entities. It included this certification in
Part VIII of the Proposing Release. While
the Commission encouraged written
151 5
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comments regarding this certification,
no commenters responded to this
request.
VIII. Statutory Authority and Text of
Final Amendments
We are adopting amendments to the
rules and forms pursuant to the
authority set forth in Sections 6, 7, 10
and 19 of the Securities Act, as
amended, and Sections 3, 12, 13, 15, 23
and 36 of the Exchange Act, as
amended.
List of Subjects in 17 CFR Parts 230,
239, 240 and 249
Reporting and recordkeeping
requirements, Securities.
Text of the Amendments
For the reasons set out in the
preamble, the Commission is amending
Title 17, Chapter II of the Code of
Federal Regulations as follows:
■
PART 230—GENERAL RULES AND
REGULATIONS, SECURITIES ACT OF
1933
30 days prior to the issuer’s filing of an
initial registration statement under
either the Act or the Securities
Exchange Act of 1934.
(3) Once an issuer qualifies as a
foreign private issuer, it will
immediately be able to use the forms
and rules designated for foreign private
issuers until it fails to qualify for this
status at the end of its most recently
completed second fiscal quarter. An
issuer’s determination that it fails to
qualify as a foreign private issuer
governs its eligibility to use the forms
and rules designated for foreign private
issuers beginning on the first day of the
fiscal year following the determination
date. Once an issuer fails to qualify for
foreign private issuer status, it will
remain unqualified unless it meets the
requirements for foreign private issuer
status as of the last business day of its
second fiscal quarter.
*
*
*
*
*
‘‘investment grade securities,’’ as
defined below, or the only securities to
be registered are to be offered:
1. upon the exercise of outstanding
rights granted by the issuer of the
securities to be offered, if such rights are
granted on a pro rata basis to all existing
security holders of the class of securities
to which the rights attach and there is
no standby underwriting in the United
States or similar arrangement; or
2. pursuant to a dividend or interest
reinvestment plan; or
3. upon the conversion of outstanding
convertible securities or upon the
exercise of outstanding transferable
warrants issued by the issuer of the
securities to be offered, or by an affiliate
of such issuer.
(d) For the registrant’s fiscal years
ending on or after December 15, 2009,
information required by Item 16F of
Form 20–F.
*
*
*
*
*
PART 239—FORMS PRESCRIBED
UNDER THE SECURITIES ACT OF 1933
Item 4A. Material Changes.
3. The authority citation for part 239
continues to read in part as follows:
■
1. The authority citation for Part 230
continues to read in part as follows:
■
Authority: 15 U.S.C. 77b, 77c, 77d, 77f,
77g, 77h, 77j, 77r, 77s, 77z–3, 77sss, 78c, 78d,
78j, 78l, 78m, 78n, 78o, 78t, 78w, 78ll(d),
78mm, 80a–8, 80a–24, 80a–28, 80a–29, 80a–
30, and 80a–37, unless otherwise noted.
*
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s,
77z–2, 77z–3, 77sss, 78c, 78l, 78m, 78n,
78o(d), 78u–5, 78w(a), 78ll, 78mm, 80a–2(a),
80a–3, 80a–8, 80a–9, 80a–10, 80a–13, 80a–
24, 80a–26, 80a–29, 80a–30, and 80a–37,
unless otherwise noted.
*
*
*
*
*
2. Section 230.405 is amended by
revising the definition of ‘‘foreign
private issuer’’ to read as follows:
■
§ 230.405
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*
*
*
*
Foreign private issuer. (1) The term
foreign private issuer means any foreign
issuer other than a foreign government
except an issuer meeting the following
conditions as of the last business day of
its most recently completed second
fiscal quarter:
(i) More than 50 percent of the
outstanding voting securities of such
issuer are directly or indirectly owned
of record by residents of the United
States; and
(ii) Any of the following:
(A) The majority of the executive
officers or directors are United States
citizens or residents;
(B) More than 50 percent of the assets
of the issuer are located in the United
States; or
(C) The business of the issuer is
administered principally in the United
States.
(2) In the case of a new registrant with
the Commission, the determination of
whether an issuer is a foreign private
issuer shall be made as of a date within
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*
*
*
*
4. Form F–1 (referenced in § 239.31)
Part I is amended by:
■ a. Revising paragraph (c) of Item 4;
■ b. Adding paragraph (d) to Item 4; and
■ c. Revising the Instruction to Item 4A.
The revisions and addition read as
follows:
■
Definition of terms.
*
58321
Note: The text of Form F–1 does not, and
the amendments thereto will not, appear in
the Code of Federal Regulations.]
FORM F–1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
*
*
*
*
*
*
*
*
PART I
*
*
*
*
*
*
Instruction.
For the registrant’s fiscal years ending
before December 15, 2011, financial
statements or information required to be
furnished by this Item shall be
reconciled pursuant to either Item 17 or
Item 18 of Form 20–F, whichever is
applicable to the primary financial
statements. For the registrant’s fiscal
years ending on or after December 15,
2011, financial statements or
information required to be furnished by
this Item shall be reconciled pursuant to
Item 18 of Form 20–F.
■ 5. Form F–3 (referenced in § 239.33) is
amended by:
■ a. Revising General Instruction I.B.2.;
■ b. Revising General Instruction I.B.3.;
■ c. Revising General Instruction I.B.4.;
and
■ d. Revising the Instruction to Item 5.
The revisions read as follows:
Note: The text of Form F–3 does not, and
the amendments thereto will not, appear in
the Code of Federal Regulations.
FORM F–3
Item 4. Information with Respect to the
Registrant and the Offering.
Furnish the following information
with respect to the Registrant.
*
*
*
*
*
(c) For the registrant’s fiscal years
ending before December 15, 2011,
information required by Item 17 of Form
20–F may be furnished in lieu of the
information specified by Item 18 thereof
if the only securities being registered are
non-convertible securities that are
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*
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REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
*
*
*
*
*
GENERAL INSTRUCTIONS
I. * * *
*
*
*
*
*
B. Transaction Requirements
*
*
*
*
*
2. Primary Offerings of Nonconvertible Investment Grade Securities.
Non-convertible securities to be offered
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for cash if such securities are
‘‘investment grade securities.’’ A nonconvertible security is an ‘‘investment
grade security’’ if, at the time of sale, at
least one nationally recognized
statistical rating organization (as that
term is used in Rule 15c3–1(c)(2)(vi)(F)
under the Exchange Act (§ 240.15c3–
1(c)(2)(vi)(F) of this chapter)) has rated
the security in one of its generic rating
categories that signifies investment
grade; typically, the four highest rating
categories (within which there may be
subcategories or gradations indicating
relative standing) signify investment
grade. For the registrant’s fiscal years
ending before December 15, 2011, in the
case of securities registered pursuant to
this paragraph, the financial statements
included in this registration statement
may comply with Item 17 or 18 of Form
20–F. For the registrant’s fiscal years
ending on or after December 15, 2011,
in the case of securities registered
pursuant to this paragraph, the financial
statements included in this registration
statement must comply with Item 18 of
Form 20–F.
3. Transactions Involving Secondary
Offerings. Outstanding securities to be
offered for the account of any person
other than the issuer, including
securities acquired by standby
underwriters in connection with the call
or redemption by the issuer of warrants
or a class of convertible securities. In
the case of such securities, the financial
statements included in this registration
statement may comply with Item 17 or
18 of Form 20–F for a registrant’s fiscal
years ending before December 15, 2011;
and for the registrant’s fiscal years
ending on or after December 15, 2011,
the financial statements included in this
registration statement must comply with
Item 18 of Form 20–F. In addition, Form
F–3 may be used by affiliates to register
securities for resale pursuant to the
conditions specified in General
Instruction C to Form S–8 (§ 239.16b of
this chapter). In the case of such
securities, the financial statements
included in this registration statement
must comply with Item 18 of Form 20–
F (§ 249.220f of this chapter).
4. Rights Offerings, Dividend or
Interest Reinvestment Plans, and
Conversions or Warrants. Securities to
be offered: (a) Upon the exercise of
outstanding rights granted by the issuer
of the securities to be offered, if such
rights are granted pro rata to all existing
security holders of the class of securities
to which the rights attach; or (b)
pursuant to a dividend or interest
reinvestment plan; or (c) upon the
conversion of outstanding convertible
securities or upon the exercise of
outstanding transferable warrants issued
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by the issuer of the securities to be
offered, or by an affiliate of such issuer.
In the case of securities registered
pursuant to this paragraph, the financial
statements included in this registration
statement may comply with Item 17 or
18 of Form 20–F for the registrant’s
fiscal years ending before December 15,
2011; and for the registrant’s fiscal years
ending on or after December 15, 2011,
the financial statements included in this
registration statement must comply with
Item 18 of Form 20–F. The registration
of securities to be offered or sold in a
standby underwriting in the United
States or similar arrangement is not
permitted pursuant to this paragraph.
See paragraphs B.1., B.2., and B.3. of
this Instruction.
*
*
*
*
*
Item 5. Material Changes
*
*
*
*
*
Instructions.
1. For a registrant’s fiscal years ending
before December 15, 2011, financial
statements or information required to be
furnished by this Item shall be
reconciled pursuant to either Item 17 or
18 of Form 20–F, whichever is
applicable to the primary financial
statements. For a registrant’s fiscal years
ending on or after December 15, 2011,
financial statements or information
required to be furnished by this Item
shall be reconciled pursuant to Item 18
of Form 20–F.
2. Material changes to be disclosed
pursuant to Item 5(a) include changes in
and disagreements with registrant’s
certifying accountant. For the
registrant’s fiscal years ending on or
after December 15, 2009, disclosure
pursuant to Item 16F of Form 20–F
should be provided as of the date of the
registration statement or prospectus.
*
*
*
*
*
■ 6. Form F–4 (referenced in § 239.34) is
amended by:
■ a. Revising Instruction 1 to Item 11;
■ b. Revising Item 12(b)(2) introductory
text;
■ c. In Item 12(b)(3)(vi)(B), removing the
period and adding in its place a
semicolon;
■ d. Revising Item 12(b)(3)(vii);
■ e. In Item 12(b)(3)(viii), removing the
period and adding in its place ‘‘; and’’
and adding Item 12(b)(3)(ix);
■ f. Revising Instruction 1 to Item 13;
■ g. Revising Item 14(h);
■ h. In Item 14(i), removing the period
and adding in its place ‘‘; and’’;
■ i. Adding Item 14(j); and
■ j. In Item 17(b)(5)(ii), removing the
period and adding in its place ‘‘; and’’
and adding Item 17(b)(6).
The revisions and additions read as
follows:
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[Note: The text of Form F–4 does not, and
the amendments thereto will not, appear in
the Code of Federal Regulations.]
FORM F–4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
*
*
*
*
*
Item 11. Incorporation of Certain
Information by Reference
*
*
*
*
*
Instructions
1. For the registrant’s fiscal years
ending before December 15, 2011, all
annual reports or registration statements
incorporated by reference pursuant to
Item 11 of this Form shall contain
financial statements that comply with
Item 18 of Form 20–F, except that
financial statements of the registrants
may comply with Item 17 of
Form 20–F if the only securities being
registered are investment grade
securities as defined in the General
Instructions to Form F–3. For the
registrant’s fiscal years ending on or
after December 15, 2011, all annual
reports or registration statements
incorporated by reference pursuant to
Item 11 of this Form shall contain
financial statements that comply with
Item 18 of Form 20–F.
*
*
*
*
*
Item 12. Information With Respect to F–
3 Registrants
*
*
*
*
*
(b) * * *
(2) For the registrant’s fiscal years
ending before December 15, 2011,
include financial statements and
information as required by Item 18 of
Form 20–F, except that financial
statements of the registrant may comply
with Item 17 of Form 20–F if the only
securities being registered are
investment grade securities as defined
in the General Instructions to Form F–
3. For the registrant’s fiscal years ending
on or after December 15, 2011, include
financial statements and information as
required by Item 18 of Form 20–F. In
addition, provide:
(3) * * *
(vii) For the registrant’s fiscal years
ending before December 15, 2011,
financial statements required by Item 18
of Form 20–F, except that financial
statements of the registrant may comply
with Item 17 of Form 20–F if the only
securities being registered are
investment grade securities as defined
in the General Instructions to Form F–
3, and financial information required by
Rule 3–05 and Article 11 of Regulation
S–X with respect to transactions other
than that pursuant to which the
securities being registered are to be
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issued. (Schedules required under
Regulation S–X shall be filed as
‘‘Financial Statement Schedules’’
pursuant to Item 21 of this Form, but
need not be provided with respect to the
company being acquired if information
is being furnished pursuant to Item
17(a) of this Form.) For the registrant’s
fiscal years ending on or after December
15, 2011, financial statements required
by Item 18 of Form 20–F, and financial
information required by Rule 3–05 and
Article 11 of Regulation S–X with
respect to transactions other than that
pursuant to which the securities being
registered are to be issued;
*
*
*
*
*
(ix) For the registrant’s fiscal years
ending on or after December 15, 2009,
Item 16F of Form 20–F, change in
registrant’s certifying accountant.
required by Regulation S–X shall be
filed as ‘‘Financial Statement
Schedules’’ pursuant to Item 21 of this
Form.);
*
*
*
*
*
(j) For the registrant’s fiscal years
ending on or after December 15, 2009,
Item 16F of Form 20–F, change in
registrant’s certifying accountant.
*
*
*
*
*
Item 13. Incorporation of Certain
Information by Reference
PART 240—GENERAL RULES AND
REGULATIONS, SECURITIES
EXCHANGE ACT OF 1934
*
*
*
*
*
Instructions
1. For the registrant’s fiscal years
ending before December 15, 2011, all
annual reports incorporated by
reference pursuant to Item 13 of this
Form shall contain financial statements
that comply with Item 18 of Form 20–
F, except that financial statements of the
registrants may comply with Item 17 of
Form 20–F if the only securities being
registered are investment grade
securities as defined in the General
Instructions to Form F–3. For the
registrant’s fiscal years ending on or
after December 15, 2011, all annual
reports incorporated by reference
pursuant to Item 13 of this Form shall
contain financial statements that
comply with Item 18 of Form 20–F.
*
*
*
*
*
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*
*
*
*
(b) * * *
(6) For the registrant’s fiscal years
ending on or after December 15, 2009,
Item 16F of Form 20–F, change in
registrant’s certifying accountant.
*
*
*
*
*
7. The authority citation for Part 240
continues to read in part as follows:
■
Authority: 15 U.S.C. 77c, 77d, 77g, 77j,
77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn,
77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j,
78j–1, 78k, 78k–1, 78l, 78m, 78n, 78o, 78p,
78q, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 80a–
20, 80a–23, 80a–29, 80a–37, 80b–3, 80b–4,
80b–11, and 7201 et seq.; and 18 U.S.C. 1350,
unless otherwise noted.
*
*
*
*
*
8. Section 240.3b–4 is amended by:
a. Revising paragraph (c) introductory
text;
■ b. Adding paragraphs (d) and (e); and
■ c. Removing the authority citations
following the section.
The revision and addition read as
follows:
■
■
*
*
*
*
*
(h) For the registrant’s fiscal years
ending before December 15, 2011,
financial statements required by Item 18
of Form 20–F, except that financial
statements of the registrants may
comply with Item 17 of Form 20–F if the
only securities being registered are
investment grade securities as defined
in the General Instructions to Form F–
1; and for the registrant’s fiscal years
ending on or after December 15, 2011,
financial statements required by Item 18
of Form 20–F. In addition, financial
information required by Rule 3–05 and
Article 11 of Regulation S–X with
respect to transactions other than that
pursuant to which the securities being
registered are to be issued. (Schedules
VerDate Aug<31>2005
*
§ 240.3b–4 Definition of ‘‘foreign
government,’’ ‘‘foreign issuer’’ and ‘‘foreign
private issuer’’.
Item 14. Information With Respect to
Foreign Registrants Other Than F–3
Registrants
*
Item 17. Information With Respect to
Foreign Companies Other Than F–3
Companies
*
*
*
*
(c) The term foreign private issuer
means any foreign issuer other than a
foreign government except for an issuer
meeting the following conditions as of
the last business day of its most recently
completed second fiscal quarter:
*
*
*
*
*
(d) Notwithstanding paragraph (c) of
this section, in the case of a new
registrant with the Commission, the
determination of whether an issuer is a
foreign private issuer will be made as of
a date within 30 days prior to the
issuer’s filing of an initial registration
statement under either the Act or the
Securities Act of 1933.
(e) Once an issuer qualifies as a
foreign private issuer, it will
immediately be able to use the forms
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58323
and rules designated for foreign private
issuers until it fails to qualify for this
status at the end of its most recently
completed second fiscal quarter. An
issuer’s determination that it fails to
qualify as a foreign private issuer
governs its eligibility to use the forms
and rules designated for foreign private
issuers beginning on the first day of the
fiscal year following the determination
date. Once an issuer fails to qualify for
foreign private issuer status, it will
remain unqualified unless it meets the
requirements for foreign private issuer
status as of the last business day of its
second fiscal quarter.
■ 9. Section 240.13a–10 is amended by
revising paragraph (g)(3) to read as
follows:
§ 240.13a–10
Transition reports.
*
*
*
*
*
(g) * * *
(3) The report for the transition period
shall be filed on Form 20–F responding
to all items to which such issuer is
required to respond when Form 20–F is
used as an annual report. The financial
statements for the transition period filed
therewith shall be audited. The report
shall be filed within the following
period:
(i) Within six months after either the
close of the transition period or the date
on which the issuer made the
determination to change the fiscal
closing date, whichever is later, for new
fiscal years ending before December 15,
2011; and
(ii) Within four months after either
the close of the transition period or the
date on which the issuer made the
determination to change the fiscal
closing date, whichever is later, for new
fiscal years ending on or after December
15, 2011.
*
*
*
*
*
■ 10. Section 240.13e–3 is amended by
revising paragraph (a)(3)(ii)(A) to read as
follows:
§ 240.13e–3 Going private transactions by
certain issuers or their affiliates.
(a) * * *
(3) * * *
(ii) * * *
(A) Causing any class of equity
securities of the issuer which is subject
to section 12(g) or section 15(d) of the
Act to become eligible for termination of
registration under Rule 12g–4
(§ 240.12g–4) or Rule 12h–6 (§ 240.12h–
6), or causing the reporting obligations
with respect to such class to become
eligible for termination under Rule 12h–
6 (§ 240.12h–6); or suspension under
Rule 12h–3 (§ 240.12h–3) or section
15(d); or
*
*
*
*
*
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11. Section 240.15d–2 is amended by
revising paragraph (a) and removing the
authority citations following the section
to read as follows:
fiscal years ending on or after December
15, 2011.
*
*
*
*
*
§ 240.15d–2
PART 249—FORMS, SECURITIES
EXCHANGE ACT OF 1934
■
Special financial report.
(a) If the registration statement under
the Securities Act of 1933 did not
contain certified financial statements for
the registrant’s last full fiscal year (or for
the life of the registrant if less than a full
fiscal year) preceding the fiscal year in
which the registration statement became
effective, the registrant shall, within 90
days after the effective date of the
registration statement, file a special
report furnishing certified financial
statements for such last full fiscal year
or other period, as the case may be,
meeting the requirements of the form
appropriate for annual reports of the
registrant. If the registrant is a foreign
private issuer as defined in § 230.405 of
this chapter, then the special financial
report shall be filed on the appropriate
form for annual reports of the registrant
and shall be filed within the following
period:
(1) By the later of 90 days after the
date on which the registration statement
became effective, or six months
following the end of the registrant’s full
fiscal year, for fiscal years ending before
December 15, 2011; and
(2) By the later of 90 days after the
date on which the registration statement
became effective, or four months
following the end of the registrant’s
latest full fiscal year, for fiscal years
ending on or after December 15, 2011.
*
*
*
*
*
■ 12. Section 240.15d–10 is amended by
revising paragraph (g)(3) to read as
follows:
§ 240.15d–10
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*
*
*
*
(g) * * *
(3) The report for the transition period
shall be filed on Form 20–F responding
to all items to which such issuer is
required to respond when Form 20–F is
used as an annual report. The financial
statements for the transition period filed
therewith shall be audited. The report
shall be filed within the following
period:
(i) Within six months after either the
close of the transition period or the date
on which the issuer made the
determination to change the fiscal
closing date, whichever is later, for new
fiscal years ending before December 15,
2011; and
(ii) Within four months after either
the close of the transition period or the
date on which the issuer made the
determination to change the fiscal
closing date, whichever is later, for new
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18:12 Oct 03, 2008
Jkt 217001
Authority: 15 U.S.C. 78a et seq. and 7201
et seq.; and 18 U.S.C. 1350, unless otherwise
noted.
*
*
*
*
*
14. Form 20–F (referenced in
§ 249.220f) is amended by:
■ a. Revising General Instructions A.(b)
and E.(c);
■ b. Revising Item 12.D introductory
text, Item 12.D.3, and Instruction 1 to
Item 12;
■ c. Revising Item 12.D to revise the
phrase ‘‘American depositary receipts’’
to read ‘‘American Depositary Receipts’’
and adding Item 12.D.4;
■ d. Adding Item 16F and Instructions
to Item 16F;
■ e. Adding Item 16G and an Instruction
to Item 16G;
■ f. Revising Instruction 3 to Item 17;
and
■ g. Revising Instruction 1 to Item 18.
The additions and revisions read as
follows:
[Note: The text of Form 20–F does
not, and the amendments thereto will
not, appear in the Code of Federal
Regulations.]
■
FORM 20–F
*
*
*
*
*
GENERAL INSTRUCTIONS
A. Who May Use Form 20–F and When
It Must Be Filed.
*
Transition reports.
*
13. The authority citation for Part 249
continues to read in part as follows:
■
*
*
*
*
(b) A foreign private issuer must file
its annual report on this Form within
the following period:
(1) Within six months after the end of
the fiscal year covered by the report for
fiscal years ending before December 15,
2011; and
(2) Within four months after the end
of the fiscal year covered by the report
for fiscal years ending on or after
December 15, 2011.
*
*
*
*
*
E. Which Items to Respond to in
Registration Statements and Annual
Reports.
*
*
*
*
*
(c) Financial Statements.
(1) For an issuer’s fiscal years ending
before December 15, 2011, an Exchange
Act registration statement or annual
report filed on this Form must contain
the financial statements and related
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information specified in Item 17 of this
Form. We encourage you to provide the
financial statements and related
information specified in Item 18 of this
Form in lieu of Item 17, but the Item 18
statements and information are not
required. In certain circumstances,
Forms F–1, F–3 or F–4 for the
registration of securities under the
Securities Act require that you provide
the financial statements and related
information specified in Item 18 in your
annual report on Form 20–F. Consult
those Securities Act forms for the
specific requirements and consider the
potential advantages of complying with
Item 18 instead of Item 17 of this Form.
Note that Items 17 and 18 may require
you to file financial statements of other
entities in certain circumstances. These
circumstances are described in
Regulation S–X.
(2) For the issuer’s fiscal years ending
on or after December 15, 2011, an
Exchange Act registration statement or
annual report filed on this Form must
contain the financial statements and
related information specified in Item 18
of this Form. Note that Items 17 and 18
may require you to file the financial
statements of other entities in certain
circumstances. These circumstances are
described in Regulation S–X.
(3) The financial statements must be
audited in accordance with U.S.
generally accepted auditing standards,
and the auditor must comply with the
U.S. standards for auditor
independence. If you have any
questions about these requirements,
contact the Office of Chief Accountant
in the Division of Corporation Finance
at (202) 551–3400.
*
*
*
*
*
Item 12. Description of Securities Other
than Equity Securities.
*
*
*
*
*
D. American Depositary Shares. If you
are registering securities represented by
American Depositary Receipts in a
sponsored facility, provide the
following information.
*
*
*
*
*
3. Describe all fees and charges that a
holder of American Depositary Receipts
may have to pay, either directly or
indirectly. Indicate the type of service,
the amount of the fees or charges and to
whom the fees or charges are paid. In
particular, provide information about
any fees or charges in connection with
(a) depositing or substituting the
underlying shares; (b) receiving or
distributing dividends; (c) selling or
exercising rights; (d) withdrawing an
underlying security; (e) transferring,
splitting or grouping receipts; and (f)
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general depositary services, particularly
those charged on an annual basis.
Provide information about the
depositary’s right, if any, to collect fees
and charges by offsetting them against
dividends received and deposited
securities.
4. In addition, describe all fees and
other direct and indirect payments
made by the depositary to the foreign
issuer of the deposited securities.
Instructions to Item 12:
1. You do not need to provide the
information called for by this Item if
you are using the form as an annual
report for your fiscal years ending before
December 15, 2009. For your fiscal years
ending on or after December 15, 2009,
except for Item 12.D.3. and Item 12.D.4.,
you do not need to provide the
information called for by this Item if you
are using this form as an annual report.
*
*
*
*
*
Item 16F. Change in Registrant’s
Certifying Accountant.
(a)(1) If during the registrant’s two
most recent fiscal years or any
subsequent interim period, an
independent accountant who was
previously engaged as the principal
accountant to audit the registrant’s
financial statements, or an independent
accountant who was previously engaged
to audit a significant subsidiary and on
whom the principal accountant
expressed reliance in its report, has
resigned (or indicated it has declined to
stand for re-election after the
completion of the current audit) or was
dismissed, then the registrant shall:
(i) State whether the former
accountant resigned, declined to stand
for re-election or was dismissed and the
date thereof.
(ii) State whether the principal
accountant’s report on the financial
statements for either of the past two
years contained an adverse opinion or a
disclaimer of opinion, or was qualified
or modified as to uncertainty, audit
scope, or accounting principles; and
also describe the nature of each such
adverse opinion, disclaimer of opinion,
modification, or qualification.
(iii) State whether the decision to
change accountants was recommended
or approved by:
(A) Any audit or similar committee of
the board of directors, if the issuer has
such a committee; or
(B) The board of directors, if the
issuer has no such committee.
(iv) State whether during the
registrant’s two most recent fiscal years
and any subsequent interim period
preceding such resignation, declination
or dismissal there were any
disagreements with the former
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accountant on any matter of accounting
principles or practices, financial
statement disclosure, or auditing scope
or procedure, which disagreement(s), if
not resolved to the satisfaction of the
former accountant, would have caused
it to make reference to the subject matter
of the disagreement(s) in connection
with its report. The disagreements
required to be reported in response to
this Item include both those resolved to
the former accountant’s satisfaction and
those not resolved to the former
accountant’s satisfaction. Disagreements
contemplated by this Item are those that
occur at the decision-making level, i.e.,
between personnel of the registrant
responsible for presentation of its
financial statements and personnel of
the accounting firm responsible for
rendering its report. Also:
(A) Describe each such disagreement;
(B) State whether any audit or similar
committee of the board of directors, or
the board of directors, discussed the
subject matter of each of such
disagreements with the former
accountant; and
(C) State whether the registrant has
authorized the former accountant to
respond fully to the inquiries of the
successor accountant concerning the
subject matter of each of such
disagreements and, if not, describe the
nature of any limitation thereon and the
reason therefor.
(v) Provide the information required
by paragraph (a)(1)(iv) of this Item for
each of the kinds of events (even though
the registrant and the former accountant
did not express a difference of opinion
regarding the event) listed in paragraphs
(a)(1)(v) (A) through (D) of this Item,
that occurred within the registrant’s two
most recent fiscal years and any
subsequent interim period preceding the
former accountant’s resignation,
declination to stand for re-election, or
dismissal (‘‘reportable events’’). If the
event led to a disagreement or difference
of opinion, then the event should be
reported as a disagreement under
paragraph (a)(1)(iv) of this Item and
need not be repeated under this
paragraph.
(A) The accountant’s having advised
the registrant that the internal controls
necessary for the registrant to develop
reliable financial statements do not
exist;
(B) The accountant’s having advised
the registrant that information has come
to the accountant’s attention that has led
it to no longer be able to rely on
management’s representations, or that
has made it unwilling to be associated
with the financial statements prepared
by management;
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(C)(1) The accountant’s having
advised the registrant of the need to
expand significantly the scope of its
audit, or that information has come to
the accountant’s attention during the
time period covered by Item
16F(a)(1)(iv), that if further investigated
may:
(i) Materially impact the fairness or
reliability of either: a previously issued
audit report or the underlying financial
statements; or the financial statements
issued or to be issued covering the fiscal
period(s) subsequent to the date of the
most recent financial statements
covered by an audit report (including
information that may prevent it from
rendering an unqualified audit report on
those financial statements); or
(ii) Cause it to be unwilling to rely on
management’s representations or be
associated with the registrant’s financial
statements; and
(2) Due to the accountant’s resignation
(due to audit scope limitations or
otherwise) or dismissal, or for any other
reason, the accountant did not so
expand the scope of its audit or conduct
such further investigation; or
(D)(1) The accountant’s having
advised the registrant that information
has come to the accountant’s attention
that it has concluded materially impacts
the fairness or reliability of either (i) a
previously issued audit report or the
underlying financial statements, or (ii)
the financial statements issued or to be
issued covering the fiscal period(s)
subsequent to the date of the most
recent financial statements covered by
an audit report (including information
that, unless resolved to the accountant’s
satisfaction, would prevent it from
rendering an unqualified audit report on
those financial statements); and
(2) Due to the accountant’s
resignation, dismissal or declination to
stand for re-election, or for any other
reason, the issue has not been resolved
to the accountant’s satisfaction prior to
its resignation, dismissal or declination
to stand for re-election.
(2) If during the registrant’s two most
recent fiscal years or any subsequent
interim period, a new independent
accountant has been engaged as either
the principal accountant to audit the
registrant’s financial statements, or as an
independent accountant to audit a
significant subsidiary and on whom the
principal accountant is expected to
express reliance in its report, then the
registrant shall identify the newly
engaged accountant and indicate the
date of such accountant’s engagement.
In addition, if during the registrant’s
two most recent fiscal years, and any
subsequent interim period prior to
engaging that accountant, the registrant
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Federal Register / Vol. 73, No. 194 / Monday, October 6, 2008 / Rules and Regulations
(or someone on its behalf) consulted the
newly engaged accountant regarding:
(i) Either: The application of
accounting principles to a specified
transaction, either completed or
proposed; or the type of audit opinion
that might be rendered on the
registrant’s financial statements, and
either a written report was provided to
the registrant or oral advice was
provided that the new accountant
concluded was an important factor
considered by the registrant in reaching
a decision as to the accounting, auditing
or financial reporting issue; or
(ii) Any matter that was either the
subject of a disagreement (as defined in
Item 16F(a)(1)(iv) and the related
instructions to this Item) or a reportable
event (as described in Item 16F(a)(1)(v),
then the registrant shall:
(A) So state and identify the issues
that were the subjects of those
consultations;
(B) Briefly describe the views of the
newly engaged accountant as expressed
orally or in writing to the registrant on
each such issue and, if written views
were received by the registrant, file
them as an exhibit to the annual report
requiring compliance with this Item
16F(a);
(C) State whether the former
accountant was consulted by the
registrant regarding any such issues, and
if so, provide a summary of the former
accountant’s views; and
(D) Request the newly engaged
accountant to review the disclosure
required by this Item 16F(a) before it is
filed with the Commission and provide
the new accountant the opportunity to
furnish the registrant with a letter
addressed to the Commission containing
any new information, clarification of the
registrant’s expression of its views, or
the respects in which it does not agree
with the statements made by the
registrant in response to Item 16F(a).
The registrant shall file any such letter
as an exhibit to the annual report
containing the disclosure required by
this Item.
(3) The registrant shall provide the
former accountant with a copy of the
disclosures it is making in response to
this Item 16F(a). The registrant shall
request the former accountant to furnish
the registrant with a letter addressed to
the Commission stating whether it
agrees with the statements made by the
registrant in response to this Item 16F(a)
and, if not, stating the respects in which
it does not agree. The registrant shall
file the former accountant’s letter as an
exhibit to the annual report or
registration statement containing this
disclosure. If the change in accountants
occurred less than 30 days prior to the
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18:12 Oct 03, 2008
Jkt 217001
filing of the annual report or registration
statement and the former accountant’s
letter is unavailable at the time of the
filing, then the registrant shall request
the former accountant to provide the
letter as promptly as possible so that the
registrant can file the letter with the
Commission within ten business days
after the filing of the annual report or
registration statement. In either case, the
former accountant may provide the
registrant with an interim letter
highlighting specific areas of concern
and indicating that a more detailed
letter will be forthcoming. If not filed
with the annual report or registration
statement containing the registrant’s
disclosure under this Item 16F(a), then
the interim letter, if any, shall be filed
by the registrant by amendment
promptly.
(b) If: (1) In connection with a change
in accountants subject to paragraph (a)
of this Item 16F, there was any
disagreement of the type described in
paragraph (a)(1)(iv) or any reportable
event as described in paragraph (a)(1)(v)
of this Item;
(2) During the fiscal year in which the
change in accountants took place or
during the subsequent fiscal year, there
have been any transactions or events
similar to those which involved such
disagreement or reportable event; and
(3) Such transactions or events were
material and were accounted for or
disclosed in a manner different from
that which the former accountants
apparently would have concluded was
required, the registrant shall state the
existence and nature of the
disagreement or reportable event and
also state the effect on the financial
statements if the method had been
followed which the former accountants
apparently would have concluded was
required. These disclosures need not be
made if the method asserted by the
former accountants ceases to be
generally accepted because of
authoritative standards or
interpretations subsequently issued.
Instructions to Item 16F:
1. Item 16F applies to all annual
reports and registration statements filed
on Form 20–F for the issuer’s fiscal
years ending on or after December 15,
2009.
2. The disclosure called for by
paragraph (a) of this Item need not be
provided if it has been previously
reported, as that term is defined in Rule
12b–2 under the Exchange Act
(§ 240.12b–2 of this chapter). The
disclosure called for by paragraph (b) of
this Item must be furnished, where
required, notwithstanding any prior
disclosure about accountant changes or
disagreements.
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Fmt 4701
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3. The information required by
paragraph (a) of this Item need not be
provided for a company being acquired
by the registrant in a transaction being
registered on Form F–4 that is not
subject to the filing requirements of
either Section 13(a) or 15(d) of the
Exchange Act.
4. The term ‘‘disagreements’’ as used
in this Item shall be interpreted broadly
to include any difference of opinion
concerning any matter of accounting
principles or practices, financial
statement disclosure, or auditing scope
or procedure which (if not resolved to
the satisfaction of the former
accountant) would have caused it to
make reference to the subject matter of
the disagreement in connection with its
report. It is not necessary for there to
have been an argument to have had a
disagreement, merely a difference of
opinion. For purposes of this Item,
however, the term ‘‘disagreements’’ does
not include initial differences of
opinion based on incomplete facts or
preliminary information that were later
resolved to the former accountant’s
satisfaction by, and providing the
registrant and the accountant do not
continue to have a difference of opinion
upon, obtaining additional relevant facts
or information.
5. In determining whether any
disagreement or reportable event has
occurred, an oral communication from
the engagement partner or another
person responsible for rendering the
accounting firm’s opinion (or his/her
designee) will generally suffice as the
accountant advising the registrant of a
reportable event or as a statement of a
disagreement at the ‘‘decision-making
level’’ within the accounting firm and
require disclosure under this Item.
6. The term ‘‘board of directors’’ as
used in this Item 16F has the meaning
set forth in § 240.10A–3(e)(2).
Item 16G. Corporate Governance
If the registrant’s securities are listed
on a national securities exchange,
provide a concise summary of any
significant ways in which its corporate
governance practices differ from those
followed by domestic companies under
the listing standards of that exchange.
Instruction to Item 16G:
A registrant must provide the
information required in Item 16G
beginning with the annual report that its
files for its first fiscal year ending on or
after December 15, 2008. Item 16G only
applies to annual reports, and not to
registration statements on Form 20–F.
Registrants should provide a brief and
general discussion, rather than a
detailed, item-by-item analysis.
E:\FR\FM\06OCR2.SGM
06OCR2
Federal Register / Vol. 73, No. 194 / Monday, October 6, 2008 / Rules and Regulations
Item 17. Financial Statements
*
*
*
*
Instructions:
*
*
*
*
*
3. For its fiscal years ending before
December 15, 2009, if the registrant
presents its financial statements
according to generally accepted
accounting principles in the United
States except for SFAS No. 131 and if
it furnishes the information relating to
categories of activity required by Items
4.B.1. and 4.B.2. of this Form, then such
mstockstill on PROD1PC66 with RULES2
*
VerDate Aug<31>2005
18:12 Oct 03, 2008
Jkt 217001
financial statements will be considered
to comply with this Item, even if the
auditor’s report is qualified for
noncompliance with SFAS No. 131.
Such report and financial statements,
however, must comply with all other
applicable requirements.
*
*
*
*
*
Item 18. Financial Statements
*
*
*
*
*
Instruction to Item 18:
1. For fiscal years ending before
December 15, 2009, all of the
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Sfmt 4700
58327
instructions to Item 17 also apply to this
Item, except Instruction 3 to Item 17,
which does not apply. For all fiscal
years ending on or after December 15,
2009, all of the instructions to Item 17
also apply to this Item.
*
*
*
*
*
Dated: September 23, 2008.
By the Commission.
Florence E. Harmon,
Acting Secretary.
[FR Doc.E8–22760 Filed 10–3–08; 8:45 am]
BILLING CODE 8011–01–P
E:\FR\FM\06OCR2.SGM
06OCR2
]]>Agencies
[Federal Register Volume 73, Number 194 (Monday, October 6, 2008)]
[Rules and Regulations]
[Pages 58300-58327]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-22760]
[[Page 58299]]
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Part II
Securities and Exchange Commission
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17 CFR Parts 230, 239, et al.
Foreign Issuer Reporting Enhancements; Final Rule
Federal Register / Vol. 73, No. 194 / Monday, October 6, 2008 / Rules
and Regulations
[[Page 58300]]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 230, 239, 240 and 249
[Release Nos. 33-8959; 34-58620; International Series Release No. 1310;
File No. S7-05-08]
RIN 3235-AK03
Foreign Issuer Reporting Enhancements
AGENCY: Securities and Exchange Commission.
ACTION: Final rule.
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SUMMARY: We are adopting a number of amendments to our rules relating
to foreign private issuers that are intended to enhance the information
that is available to investors. These amendments are part of a series
of initiatives that seek to effect changes in our disclosure and other
requirements applicable to foreign private issuers in light of market
developments, new technologies and other matters in a manner that
promotes investor protection and cross-border capital flows. We are
adopting amendments that would 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. We also are
adopting amendments to change the deadline for annual reports filed by
foreign private issuers and to eliminate an option under which foreign
private issuers are permitted to omit segment data from their U.S. GAAP
financial statements, and an amendment to the rule pertaining to going
private transactions to reflect the new termination of reporting and
deregistration rules for foreign private issuers. In addition, we are
adopting amendments that would revise the annual report and
registration statement forms used by foreign private issuers to improve
certain disclosures provided in these forms.
DATES: Effective Date: December 5, 2008.
Compliance Dates: The compliance dates are as follows:
A foreign private issuer must begin to comply with the
requirements to provide information pursuant to Item 16G of Form 20-F,
which pertains to corporate governance disclosures, for its first
fiscal year ending on or after December 15, 2008.
A foreign private issuer must begin to comply with the
amendment to eliminate Instruction 3 to Item 17 of Form 20-F, which
permits the omission of segment data in certain circumstances; to
provide disclosure pursuant to Item 16F of Form 20-F, which pertains to
a change in registrant's certifying accountant; and to provide
disclosure about American Depositary Receipts fees and payments for its
first fiscal year ending on or after December 15, 2009.
A foreign private issuer must begin to comply with the
requirement to file its Form 20-F annual report on an accelerated basis
for its first fiscal year ending on or after December 15, 2011. A
foreign private issuer must begin to comply with the requirements to
file transition reports pursuant to the amendments to Rules 13a-
10(g)(3) and 15d-10(g)(3), and special financial reports pursuant to
the amendments to Rule 15d-2(a) for its first fiscal year ending on or
after December 15, 2011. In addition, a foreign private issuer must
begin to comply with the requirement to prepare financial statements
according to Item 18 of Form 20-F in the annual report filed for its
first fiscal year ending on or after December 15, 2011.
FOR FURTHER INFORMATION CONTACT: Felicia H. Kung, Senior Special
Counsel, Office of International Corporate Finance, Division of
Corporation Finance, at (202) 551-3450, or Craig Olinger, Deputy Chief
Accountant, Division of Corporation Finance, at (202) 551-3400, or
Jeffrey J. Minton, Chief Counsel, Office of the Chief Accountant, at
(202) 551-5300, U.S. Securities and Exchange Commission, 100 F Street,
NE., Washington, DC 20549-3628.
SUPPLEMENTARY INFORMATION: We are adopting amendments to Rule 405 \1\
of Regulation C,\2\ Form F-1,\3\ Form F-3 \4\ and Form F-4 \5\ under
the Securities Act of 1933 (``Securities Act''),\6\ Form 20-F \7\ under
the Securities Exchange Act of 1934 (``Exchange Act''),\8\ and Exchange
Act Rules 3b-4,\9\ 13a-10,\10\ 13e-3,\11\ 15d-2,\12\ and 15d-10.\13\
The amendments will: (1) Permit foreign issuers to test their
qualification to use the forms and rules available to foreign private
issuers on an annual basis, rather than on the continuous basis that is
currently required; (2) Accelerate the filing deadline for annual
reports filed on Form 20-F by foreign private issuers under the
Exchange Act by shortening the filing deadline from six months to four
months after the foreign private issuer's fiscal year-end, after a
three-year transition period; (3) Eliminate an instruction to Item 17
of Form 20-F that permits certain foreign private issuers to omit
segment data from their U.S. GAAP financial statements; (4) Amend Rule
13e-3 under the Exchange Act by reflecting the new termination of
reporting and deregistration rules for foreign private issuers; \14\
(5) Require foreign private issuers that are required to provide a U.S.
GAAP reconciliation to do so pursuant to Item 18 of Form 20-F; and (6)
Amend Form 20-F to require foreign private issuers to disclose
information about changes in the issuer's certifying accountant, the
fees and charges paid by holders of American Depositary Receipts
(``ADRs''), the payments made by the depositary to the foreign issuer
whose securities underlie the ADRs, and, for listed issuers, the
differences in the foreign private issuer's corporate governance
practices and those applicable to domestic companies under the relevant
exchange's listing rules.
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\1\ 17 CFR 230.405.
\2\ 17 CFR 230.400 et seq.
\3\ 17 CFR 239.31.
\4\ 17 CFR 239.33.
\5\ 17 CFR 239.34.
\6\ 15 U.S.C. 77a et seq.
\7\ 17 CFR 249.220f.
\8\ 15 U.S.C. 78a et seq.
\9\ 17 CFR 240.3b-4.
\10\ 17 CFR 240.13a-10.
\11\ 17 CFR 240.13e-3.
\12\ 17 CFR 240.15d-2.
\13\ 17 CFR 240.15d-10.
\14\ Although amending Rule 13e-3 is consistent with other
Commission initiatives that seek to address changes in our
disclosure and other requirements applicable to foreign private
issuers, the amendment also will apply to transactions effected by
domestic issuers.
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Table of Contents
I. Summary
A. Proposed Amendments
B. Principal Comments Received
C. Summary of Adopted Amendments
II. Discussion of the Amendments
A. Annual Test for Foreign Private Issuer Status
B. Accelerating the Reporting Deadline for Form 20-F Annual
Reports
C. Segment Data Disclosure
D. Exchange Act Rule 13e-3
E. Requiring Item 18 Reconciliation in Annual Reports and
Registration Statements
F. Disclosure About Changes in a Registrant's Certifying
Accountant
G. Annual Disclosure About ADR Fees and Payments
H. Disclosure About Differences in Corporate Governance
Practices
III. Other Matters Considered
IV. Paperwork Reduction Act
V. Cost-Benefit Analysis
VI. Consideration of Impact on the Economy, Burden on Competition,
and Promotion of Efficiency, Competition, and Capital Formation
VII. Regulatory Flexibility Act Certification
VIII. Statutory Authority and Text of Final Amendments
[[Page 58301]]
I. Summary
A. Proposed Amendments
In February 2008, we published for comment proposed amendments to
rules and forms aimed at enhancing the disclosures that foreign private
issuers provide to investors in the U.S. public markets, and improving
the accessibility of our public markets to these issuers.\15\ The
proposed amendments reflect changes in the nature of the global capital
markets, as well as advances in technology with respect to the
gathering and processing of information, that have occurred since the
Commission's adoption of Form 20-F almost 30 years ago. When the
Commission adopted Form 20-F, the form used by foreign private issuers
\16\ to register a class of securities under the Exchange Act and to
file annual reports,\17\ our objective was to elicit disclosures from
foreign private issuers that were as equal as practicable to that
provided by domestic issuers.\18\ Because of differences in the
national laws and accounting regulations applicable to foreign private
issuers, we provided specified disclosure accommodations in Form 20-
F.\19\ However, we indicated that our assessment of the appropriate
disclosure requirements for foreign private issuers was part of an
ongoing evolutionary process.\20\
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\15\ Release No. 33-8900 (Feb. 29, 2008) [73 FR 13404]
(hereinafter ``Proposing Release'').
\16\ ``Foreign private issuer'' is defined in Exchange Act Rule
3b-4(c). A foreign private issuer is any foreign issuer other than a
foreign government, except for an issuer that (1) has more than 50%
of its outstanding voting securities held of record by U.S.
residents and (2) any of the following: (i) A majority of its
officers and directors are citizens or residents of the United
States, (ii) more than 50 percent of its assets are located in the
United States, or (iii) its business is principally administered in
the United States.
\17\ Form 20-F is the combined registration statement and annual
report form for foreign private issuers under the Exchange Act. It
also sets forth disclosure requirements for registration statements
filed by foreign private issuers under the Securities Act.
\18\ See Release No. 34-16371 (Nov. 29, 1979) [44 FR 70132]
(hereinafter ``Form 20-F Adopting Release'').
\19\ See id.
\20\ See id.
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As noted previously in the Proposing Release, there has been a
movement toward greater international agreement on the accounting and
other non-financial statement disclosures that should be provided by
issuers. The Commission has undertaken a number of initiatives that
recognize this. For example, we adopted rules last December to permit
foreign private issuers to file financial statements with the
Commission that are prepared in accordance with International Financial
Reporting Standards (``IFRS''), as issued by the International
Accounting Standards Board (``IASB''), without reconciliation to
generally accepted accounting principles (``GAAP'') used in the United
States.\21\ Those rules are part of our efforts to foster a single set
of globally accepted accounting standards. We also incorporated into
Form 20-F all of the International Organization of Securities
Commission's (``IOSCO'') \22\ International Disclosure Standards for
Cross-Border Offerings and Initial Listings by Foreign Issuers,\23\
which pertain to prospectuses prepared by foreign issuers for public
offerings and listing of equity securities.\24\
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\21\ Release No. 33-8879 (Dec. 21, 2007) [73 FR 986].
\22\ IOSCO consists of securities regulators from 109 countries
(``ordinary'' members) who are committed to working together ``to
promote high standards of regulation to maintain just, efficient and
sound markets.'' IOSCO, General Information About IOSCO, at https://
www.iosco.org/about/.
\23\ Available at https://www.iosco.org/library/pubdocs/pdf/
IOSCOPD81.pdf. The IOSCO Technical Committee recently published the
International Disclosure Principles for Cross-Border Offerings and
Listings of Debt Securities by Foreign Issuers (2007), available at
https://www.iosco.org/library/pubdocs/pdf/IOSCOPD242.pdf. These IOSCO
Principles apply to prospectuses used by foreign issuers for
offerings and listings of debt securities. The Commission's
prospectus disclosure requirements for debt securities offered by
foreign private issuers, which are contained in Form 20-F, are also
consistent with these IOSCO Principles.
\24\ Release No. 33-7745 (Sept. 28, 1999) [64 FR 53900].
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In addition, the Commission has sought to facilitate cross-border
capital flows. When implementing certain provisions of the Sarbanes-
Oxley Act of 2002 (``Sarbanes-Oxley Act''),\25\ we also provided
several significant accommodations to foreign private issuers relating
to the requirements on internal control over financial reporting \26\
and audit committee independence.\27\ These accommodations recognized
non-U.S. practices and requirements. In March 2007, we also adopted
rules that made it easier for foreign private issuers to terminate
their reporting obligations and deregister their securities.\28\ We
adopted these rules to address concerns that the burdens and
uncertainties associated with terminating their registration and
reporting obligations under the Exchange Act could serve as a
disincentive to foreign private issuers accessing the U.S. public
capital markets.\29\ In a related release,\30\ we are adopting
amendments to Exchange Act Rule 12g3-2(b) \31\ to expand the
availability of this exemption from registration under Section 12(g)
\32\ of the Exchange Act for foreign private issuers, so that a
qualified foreign private issuer that meets specified conditions can
claim the exemption automatically without regard to the number of its
U.S. shareholders. In another related release, we are adopting
amendments that expand and enhance the utility of the cross-border
exemptions for business combination transactions.\33\ These amendments
are expected to encourage offerors and issuers in cross-border business
combinations, and rights offerings by foreign private issuers to permit
U.S. security holders to participate in these transactions in the same
manner as other holders.
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\25\ 15 U.S.C. 7201 et seq.
\26\ We permitted foreign private issuers to comply with the
requirement to include in their annual reports management's report
on the company's internal control over financial reporting and the
auditor's attestation on a delayed basis compared to some domestic
issuers. See Release No. 33-8392 (Feb. 24, 2004) [69 FR 9722]
(extending the original compliance dates for accelerated filers to
fiscal years ending on or after November 15, 2004, and for companies
that are not accelerated filers and for foreign private issuers, to
fiscal years ending on or after July 15, 2005); Release No. 33-8545
(Mar. 2, 2005) [70 FR 11528] (adopting an additional one-year
extension of the compliance dates for companies that are non-
accelerated filers and for foreign private issuers filing annual
reports on Forms 20-F or 40-F); Release No. 33-8730A (Aug. 9, 2006)
[71 FR 47056] (extending for one year the date by which a foreign
private issuer that is an accelerated filer and that files annual
reports on Forms 20-F or 40-F must begin to comply with the
requirement to provide the auditor's attestation report on internal
control over financial reporting). Foreign private issuers also are
permitted to report changes in their internal controls over
financial reporting on an annual basis, rather than on a quarterly
basis as is required of domestic issuers. Release No. 33-8238 (June
5, 2003) [68 FR 36636].
\27\ See Release No. 33-8220 (Apr. 9, 2003) [68 FR 18788].
\28\ Release No. 34-55540 (Mar. 27, 2007) [72 FR 16934].
\29\ Id.
\30\ Release No. 34-58465 (Sept. 5, 2008).
\31\ 17 CFR 240.12g3-2(b).
\32\ 15 U.S.C. 78l(g).
\33\ See Release No. 34-58597 (Sept. 19, 2008).
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As part of our continuous assessment of our rules pertaining to
foreign private issuers, we proposed amendments to rules and forms last
February that reflected our view that some of the disclosure
accommodations that we provided to foreign private issuers almost 30
years ago may no longer be appropriate or necessary in light of global
market developments and advancements in technology.\34\ These proposed
rule and form amendments sought to balance our dual objectives of
enhancing the reporting of information by foreign private issuers,
including the timeframe within which investors can have access to that
information, and improving the accessibility of our public markets to
these issuers. Among other things, we proposed amendments that would
permit reporting foreign issuers
[[Page 58302]]
to assess their eligibility to use the special forms and rules
available to foreign private issuers once a year, rather than on a
continuous basis. We also proposed amendments to change the deadline
for annual reports filed by foreign private issuers and to eliminate an
option under which foreign private issuers may omit segment data from
their U.S. GAAP financial statements, and an amendment to the rule
pertaining to going private transactions to reflect the new termination
of reporting and deregistration rules for foreign private issuers. In
addition, we proposed amendments that would revise Form 20-F to improve
certain disclosures provided in that form.
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\34\ See Proposing Release, supra note 15.
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B. Principal Comments Received
We received 52 comment letters in response to our proposed rule and
form amendments from a variety of market participants.\35\ The
respondents included businesses, financial and legal associations, law
firms, accounting firms, depositary banks, financial services
providers, and one securities exchange. The comments received on most
of the proposed amendments were supportive, although commenters
provided useful suggestions on several of the proposals. Almost all of
the comments received on the proposal to permit foreign issuers to test
their status as foreign private issuers once a year, rather than
continuously, were very positive. Commenters noted that this proposal
would reduce compliance burdens on foreign private issuers, as well as
align the testing and transition requirements for foreign private
issuer status with the requirements applicable to determining
accelerated filer and small reporting company status.
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\35\ These comment letters are available on the Commission's
Internet Web site, located at https://www.sec.gov/comments/s7-05-08/
s70508.shtml, and in the Commission's Public Reference Room in its
Washington, DC headquarters.
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We also received mainly positive comments about the proposed
amendments to require foreign private issuers to disclose in their Form
20-F annual reports changes in and disagreements with their certifying
accountant, and significant differences in the corporate governance
practices of listed foreign private issuers compared to the corporate
governance practices applicable to domestic companies under the
relevant exchange's listing standards. While several commenters
believed the proposed disclosure would be more useful if it was made on
a more timely basis, commenters generally noted that the proposal
regarding disclosure of a change in a registrant's certifying
accountant would provide investors with useful information, and would
be consistent with the disclosure currently required of domestic
issuers. With respect to the corporate governance proposal, commenters
noted the usefulness of having all of a foreign private issuer's
corporate governance information in one location.
In addition, we received primarily positive feedback on our
proposed amendments to eliminate the option permitting foreign private
issuers to omit segment data from their U.S. GAAP financial statements,
to reference the new termination of reporting and deregistration rules
applicable to foreign private issuers in Exchange Act Rule 13e-3, and
to require annual disclosure in Form 20-F about ADR fees and payments.
These proposals were supported as providing useful information to
investors, and in the case of Rule 13e-3, providing regulatory
consistency with the new deregistration and termination of reporting
provisions.
We received a wide range of comments on some of the other proposed
amendments. In particular, many commenters opposed the proposal to
accelerate the reporting deadline for Form 20-F annual reports. We had
proposed amendments to accelerate the filing deadline for Form 20-F
annual reports by shortening the filing deadline from 6 months to
within 90 days after the foreign private issuer's fiscal year-end in
the case of large accelerated and accelerated filers, and to within 120
days after a foreign private issuer's fiscal year-end for all other
issuers, after a two-year transition period. Commenters expressed
concern that many foreign private issuers must prepare financial
statements according to local GAAP under their home country's laws and
regulations, and would need additional time to prepare their financial
statements in accordance with U.S. GAAP or IFRS as issued by the IASB,
or to reconcile their financial statements to U.S. GAAP for the Form
20-F. Commenters also noted that many foreign private issuers need
additional time to translate information into English for Form 20-F,
and to provide the additional non-financial statement disclosures that
are required in Form 20-F compared to their home country annual
reports. Other commenters noted that the proposed acceleration
deadlines could well result in filing dates that override annual report
filing deadlines in some issuers' home countries, and that, in any
case, foreign private issuers provide their home country annual reports
to U.S. investors through the submission of those reports on Form 6-K.
We also received a wide range of responses to our proposed
amendments to require foreign private issuers that are required to
provide a U.S. GAAP reconciliation to do so pursuant to Item 18 of Form
20-F. Although some commenters noted that the proposal to require Item
18 information would provide investors with more complete financial
information, others expressed concern about the necessity of the
proposed amendments, since many countries are gradually requiring
footnote disclosures comparable to U.S. GAAP and Regulation S-X.
C. Summary of Adopted Amendments
We have carefully considered the comments received regarding the
proposed amendments and have concluded that it is appropriate to adopt
the amendments, substantially as proposed in the case of most of the
amendments. Some of the amendments have been modified to reflect
suggestions offered by commenters in response to questions posed in the
Proposing Release.
The adopted amendments will:
Permit reporting foreign issuers 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 a continuous basis, which is currently
required;
Accelerate the reporting deadline for annual reports filed
on Form 20-F by foreign private issuers from six months to four months
after the issuer's fiscal year-end, after a three-year transition
period;
Amend Form 20-F by eliminating an instruction to Item 17
of that Form that permits certain foreign private issuers to omit
segment data from their U.S. GAAP financial statements;
Amend Exchange Act Rule 13e-3, which pertains to going
private transactions by reporting issuers or their affiliates, to
reflect the recently adopted deregistration and termination of
reporting rules applicable to foreign private issuers;
Eliminate the availability of the limited U.S. GAAP
reconciliation option that is contained in Item 17 of Form 20-F for
foreign private issuers that are only listing a class of securities on
a U.S. national securities exchange, or only registering a class of
equity securities under Section 12(g) of the Exchange Act, and not
conducting a public offering. We also are eliminating this limited
reconciliation option for annual reports filed on Form 20-F, and for
certain non-capital raising offerings, such as offerings pursuant to
reinvestment plans, offerings upon the
[[Page 58303]]
conversion of securities, or offerings of investment grade securities.
Thus, all foreign private issuers that are required to provide a U.S.
GAAP reconciliation must do so pursuant to Item 18 of Form 20-F,
although required third party financial statements could continue to be
prepared pursuant to Item 17 of Form 20-F;
Amend Form 20-F to require disclosure in annual reports
filed on that Form about any changes in the registrant's certifying
accountant;
Amend Form 20-F to require annual disclosure of the fees
and other charges paid by holders of ADRs to depositaries, as well as
any payments made by depositaries to the foreign private issuers whose
securities underlie the ADRs; and
Amend Form 20-F to require annual disclosure of the
significant differences in the corporate governance practices of listed
foreign private issuers compared to the corporate governance practices
applicable to domestic companies under the relevant exchange's listing
standards.
II. Discussion of the Amendments
A. Annual Test for Foreign Private Issuer Status
The Commission's longstanding policy of facilitating the access of
foreign issuers to the U.S. capital markets is evidenced by the various
accommodations to foreign practices and policies it has provided to
foreign issuers that qualify as ``foreign private issuers.'' \36\ For
many companies, the determination of whether they qualify as a foreign
private issuer is important because of these accommodations and
exemptions.\37\ However, to make sure that it qualifies for these
accommodations, a foreign private issuer that has close to 50% of its
outstanding voting securities held of record by U.S. residents may find
that it must monitor on a continuous basis the different factors used
to assess foreign private issuer status.\38\ This can result in
uncertainty for these issuers as to which reporting and regulatory
requirements will apply to them within a given period of time, as well
as increase their compliance burdens.\39\ This also can result in
confusion for investors if the issuer needs to switch between foreign
and domestic reporting forms within the same fiscal year.
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\36\ See supra note 16 for the definition of ``foreign private
issuer.''
\37\ For example, Exchange Act Rule 3a12-3(b) [17 CFR 240.3a12-
3(b)] exempts foreign private issuers from the Commission's proxy
rules [17 CFR 240.14a-1 et seq.], and from the insider stock trading
reports and short-swing profit recovery provisions under Section 16
[15 U.S.C. 78p] of the Exchange Act. Foreign private issuers also
provide any interim reports on the basis of home country regulatory
and stock exchange practices, rather than the quarterly reports that
are required of U.S. issuers, and executive compensation disclosure
on an aggregate basis if the information is reported on such a basis
in the issuer's home country. See Item 6.B. of Form 20-F.
\38\ See note 16 above for a description of the factors that
foreign issuers must monitor. The Commission's staff has taken the
position that, for the purpose of the exemptions contained in
Exchange Act Rule 3a12-3(b), foreign private issuers need to assess
their status at the end of each fiscal quarter. In addition, they
must assess their status at the completion of any purchase or sale
by the issuer of its equity securities (other than in connection
with an employee benefit plan or compensation arrangement,
conversion of outstanding convertible securities, or exercise of
outstanding options, warrants or rights), any purchase or sale of
assets by the issuer other than in the ordinary course of business,
and any purchase of equity securities of the issuer in a public
tender offer or exchange offer by a non-affiliate. Foreign Private
Issuers Relying on Rule 3a12-3(b) under the Exchange Act, SEC No-
Action Letter, [1993 Transfer Binder] Fed. Sec. L. Rep. (CCH) ]
76,667 (Mar. 30, 1993). This letter will be superseded by the
amendments.
\39\ For example, if a foreign issuer concludes that it does not
qualify as a foreign private issuer in the middle of its fiscal
year, it may find it difficult to change its basis of accounting to
U.S. GAAP in order to comply on a timely basis with the reporting
requirements applicable to domestic issuers under the Exchange Act.
These issuers also face the challenge of modifying their information
and processing systems to comply with the domestic reporting and
registration regime, as well as the executive compensation
disclosure requirements, proxy rules and Section 16 reporting
requirements that are applicable to domestic issuers.
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We proposed amendments to permit foreign private issuers to assess
their status once a year on the last business day of their second
fiscal quarter as a means of providing greater certainty to both
issuers and investors as to the status of these foreign issuers within
a given period of time. This is the same date used to determine
accelerated filer status under Exchange Act Rule 12b-2 \40\ and smaller
reporting company status in Item 10(f)(2)(i) \41\ of Regulation S-
K.\42\
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\40\ 17 CFR 240.12b-2.
\41\ 17 CFR 229.10(f)(2)(i).
\42\ 17 CFR 229.10 et seq. See also Release No. 33-8876 (Dec.
19, 2007) [73 FR 934] (adopting amendments to the disclosure and
reporting requirements under the Securities Act and the Exchange Act
to expand the number of companies that qualify for the scaled
disclosure requirements for smaller reporting companies).
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The vast majority of comments received on the proposed amendments
were highly supportive. Commenters noted that the proposed amendments
would benefit investors by eliminating confusion in the markets as to
an issuer's status if an issuer needs to move between foreign and
domestic reporting forms in the same fiscal year. Commenters also noted
that the proposed amendments would also eliminate uncertainty for
issuers, and possibly reduce accounting, audit and information
technology fees that would otherwise result if an issuer changed its
status mid-year. They noted that substantial incremental effort is
often required to comply with the Commission's domestic issuer
requirements. Commenters also pointed out that the proposed amendments
would simplify compliance with the Commission's regulations because
this approach would be more consistent with our approach to determining
accelerated filer and smaller reporting company status. One commenter
suggested that the proposal would increase certainty and predictability
for foreign companies with respect to their reporting obligations,
which should in turn enhance the attractiveness of the U.S. capital
markets by removing a disincentive to register with the Commission.\43\
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\43\ See comment letter by Organization for International
Investment.
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After considering the comments received, we are adopting the
amendments as proposed. In addition, we are adopting the proposed
amendments that would require a foreign private issuer that determines
that it no longer qualifies as a foreign private issuer on the last
business day of its second fiscal quarter to comply with the reporting
requirements and use the forms prescribed for domestic companies
beginning on the first day of the fiscal year following the
determination date. We proposed this amendment to give these issuers
six months' advance notice that they will need to transition to the
domestic forms and applicable reporting requirements. All of the
comments that we received on this aspect of the proposal were highly
supportive. Under the amendments as adopted, a foreign issuer that does
not qualify as a foreign private issuer as of the end of its second
fiscal quarter in 2009 would file a Form 10-K in 2010 for its 2009
fiscal year. The issuer would also begin complying with the proxy rules
and Section 16, and become subject to reporting on Forms 8-K and 10-Q
on the first day of its 2010 fiscal year.
We also are adopting amendments to permit a reporting company that
qualifies as a foreign private issuer to avail itself of the foreign
private issuer accommodations, including use of the foreign private
issuer forms and reporting requirements, beginning on the determination
date on which it establishes its eligibility as a foreign private
issuer. Although the majority of comments received on this aspect of
the proposal were positive, one
[[Page 58304]]
commenter \44\ contended that the disclosure provided in domestic forms
was important enough to require the issuer to file on such forms for
the balance of the fiscal year. Nonetheless, we are adopting this
distinction because we believe the new foreign private issuer, who
would be eligible to file its annual report for that fiscal year on
Form 20-F, need not continue to provide reports on Form 8-K and 10-Q
for the remainder of that fiscal year. An issuer that qualifies as a
foreign private issuer should be allowed to enter the foreign reporting
system immediately and furnish reports on Form 6-K,\45\ especially
because it will be subject to the reporting requirements of its home
regulator. Any reports that it files with its home regulator will be
available to the Commission and the public through its Form 6-K
submission. We note that the approach that we are taking here is
consistent with our approach to smaller reporting companies.\46\
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\44\ See comment letter from CFA Institute Centre for Financial
Market Integrity (``CFA Institute'').
\45\ Foreign private issuers submit current reports to the
Commission on Form 6-K [17 CFR 249.306]. Unlike Form 8-K [17 CFR
249.308], which is the current report form used by domestic issuers,
there are no specific substantive disclosures that are required by
Form 6-K. Instead, foreign private issuers furnish under cover of
Form 6-K whatever information that they (i) make or are required to
make public pursuant to the law of the jurisdiction of their
domicile or in which they are incorporated or organized, or (ii)
file or are required to file with a stock exchange on which their
securities are traded and which was made public by that exchange, or
(iii) distribute or are required to distribute to their security
holders. These reports are required to be furnished promptly after
the material contained in the report is made public.
\46\ 17 CFR 229.10(f)(2)(i).
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A few commenters supported requiring a foreign issuer to notify the
market, either in the form of a press release and/or via notification
on the issuer's Web site, when it has determined that it has switched
its status from domestic issuer to foreign private issuer, or vice
versa. Currently, however, foreign private issuers do not provide a
notice when they switch from domestic issuer to foreign private issuer
status. Moreover, such a notice requirement would be an anomaly in our
regulations. In similar contexts, such as with respect to accelerated
filers or smaller reporting companies, we do not require issuers to
notify the market when they have switched status. Therefore, we are not
adopting a notice requirement, although we note that by furnishing a
current report on Form 6-K rather than Form 8-K after it changes
status, a foreign issuer in essence will be providing notice that it
has switched status. Of course, issuers may voluntarily provide
explicit notice to the market when they switch from domestic to foreign
private issuer status in order to provide enhanced transparency to
investors. We note that issuers that lose their foreign private issuer
status would be required to file quarterly reports on Form 10-Q or
current reports on Form 8-K immediately, thereby effectively providing
prompt notice of their new status because of the change in the forms
used.
In addition to the amendments noted above, we are adopting
amendments requiring a Canadian issuer that files registration
statements and Exchange Act reports using the multijurisdictional
disclosure system (``MJDS'') \47\ to test its status as a foreign
private issuer only as of the last business day of its second fiscal
quarter. Currently, a Canadian issuer that is eligible to file a Form
40-F \48\ annual report at the end of a fiscal year is presumed to be
eligible to use Form 40-F, as well as Form 6-K, from the date of filing
until the end of its next fiscal year.\49\ The amendments would require
a Canadian issuer that plans to use the MJDS to test its foreign
private issuer status earlier in the year. However, it would continue
to have to test its eligibility to file annual reports on Form 40-F
based on all of the other requirements of that Form, such as public
float, at the end of the fiscal year.\50\ The amendments would not
change the responsibility of the Canadian issuer to check its
eligibility to use Forms 40-F and 6-K at the end of its fiscal year.
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\47\ 17 CFR 239.37 to 17 CFR 239.41 and 17 CFR 249.240f.
\48\ 17 CFR 249.240f. MJDS filers file annual reports on Form
40-F and current reports on Form 6-K.
\49\ See Release No. 33-6902 (June 21, 1991) [56 FR 30036]
(adopting the MJDS system).
\50\ See id.
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With respect to MJDS filings made pursuant to the Securities Act, a
Canadian issuer must test its ability to use the MJDS registration
statement forms at the time of filing. As a result of the amendments, a
Canadian MJDS filer that does not qualify as a foreign private issuer
on the last day of its second fiscal quarter would immediately not be
able use the MJDS forms for Securities Act offerings. However, the
issuer would still be able to use the other foreign private issuer
registration statement forms, such as Form F-3, until the end of its
fiscal year.\51\
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\51\ Form F-3 permits a foreign private issuer to incorporate by
reference its latest Form 40-F. See Item 6(a) of Form F-3.
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Although we received many comments generally supporting this
approach to MJDS filers, several commenters had additional
recommendations. A few commenters suggested that a registrant that did
not qualify for MJDS status on the testing date should be permitted to
use the MJDS registration statement forms until the end of its fiscal
year. Some commenters also suggested that MJDS filers be permitted to
test their MJDS status on the last business day of their second fiscal
quarter, rather than at the end of the year. Other commenters argued
that the foreign private issuer eligibility test should be conducted at
the end of the year in conjunction with the test for MJDS eligibility,
or alternatively, that MJDS filers should be required to test their
foreign private issuer eligibility status twice a year.
After carefully considering all of these comments, we have decided
to adopt the MJDS-related amendments as proposed because we believe
this approach takes into account the substantial accommodations that
have been provided to MJDS filers, including significant disclosure
accommodations.\52\ As a result of the amendments, the new foreign
private issuer testing date will provide MJDS filers with advance
notice that they may need to switch to the domestic issuer forms after
the end of the fiscal year. Even if an MJDS filer determines that it no
longer qualifies as a foreign private issuer as of the test date, it
will be permitted to use the Securities Act registration statement
forms, although not the MJDS forms, available to foreign private
issuers for the remainder of that fiscal year. The new date for testing
foreign private issuer status will provide a substantial accommodation
for MJDS filers because, currently, these filers are required to use
the domestic forms as soon as they lose their foreign private issuer
status.
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\52\ Under the MJDS, eligible Canadian issuers may satisfy
certain securities registration and reporting requirements of the
Commission by providing disclosure documents prepared in accordance
with the requirements of the Canadian securities regulatory
authorities. The MJDS also allows certain cash tender and exchange
offers for securities of Canadian issuers to proceed in accordance
with Canadian and provincial or territorial tender offer
requirements, instead of in accordance with the Commission's tender
offer requirements. For more specific information about the
accommodations provided to MJDS issuers, see Release No. 33-6902,
supra note 49.
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B. Accelerating the Reporting Deadline for Form 20-F Annual Reports
We proposed amendments to the filing due date for Form 20-F to
reflect technological and other developments that have occurred in the
nearly 30 years that have elapsed since Form 20-
[[Page 58305]]
F was first adopted. Our proposed amendments would have accelerated the
reporting due date for annual reports filed on Form 20-F by foreign
private issuers from six months to 90 days after the issuer's fiscal
year-end in the case of large accelerated filers and accelerated
filers, and to 120 days after the issuer's fiscal year-end for all
other issuers, after a two-year transition period. We also proposed
similar conforming amendments for transition reports filed on Form 20-F
when a foreign private issuer changes its fiscal year.
In the Proposing Release, we noted that technological advances have
made it easier for companies to process and disseminate information
quickly. Investors also evaluate and react to information in a shorter
timeframe, and many now expect to receive information on a faster
basis. Although some information about foreign private issuers is
available through their earnings releases and other announcements,
investors currently may not have access to the more complete disclosure
contained in an issuer's Form 20-F annual report until six months after
the end of the issuer's fiscal year. Although the longer filing due
date for these reports was initially established as an accommodation to
the different disclosure requirements in the foreign private issuers'
home jurisdictions,\53\ many companies that operate globally gather and
evaluate information on a vastly expedited basis compared to almost 30
years ago, when Form 20-F was adopted. As a result, such a delayed
filing date for these reports is no longer necessary. In the Proposing
Release, we also noted that foreign private issuers in many
jurisdictions are expected to file annual reports with their home
securities regulator on a faster timetable.\54\
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\53\ Form 20-F Adopting Release, supra note 18 (noting that the
Commission decided not to adopt a filing due date for Form 20-F
annual reports of four months after the registrant's fiscal year-end
in deference to commenters' concerns about the need for more time to
comply with applicable foreign regulations, which at that time often
permitted annual reports to be furnished to shareholders more than
four months after the issuer's fiscal year-end).
\54\ For example, the European Union's (``EU'') Transparency
Directive requires companies listed on an EU regulated market to
file their annual financial reports four months after the end of
each financial year at the latest. Directive 2004/109/EC of the
European Parliament and of the Council (Dec. 15, 2004). All EU
member states were required to implement the Transparency Directive
by January 20, 2007. Canadian issuers are also required to file
their annual financial statements within a similar timeframe. Under
National Instrument 51-102 Continuous Disclosure Obligations, a
reporting Canadian issuer must file its annual financial statements
within 90 to 120 days after its most recently completed financial
year-end, depending on its status as a ``venture issuer''. Israeli
companies are required to file their annual reports within three
months of the end of their reporting year, provided that the report
is submitted 14 days or more before the date fixed for convening the
general meeting at which the company's financial statements will be
presented, or within three days of the date when the company's
accountant signed his audit opinion, whichever is earlier.
Regulation 7, Israeli Securities Regulations (Periodic and Immediate
Reports).
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We received 49 comment letters on the proposed amendments. Some
commenters expressed support for the accelerated deadlines as proposed.
One of these commenters, a professional association of investment
professionals,\55\ urged the Commission to move toward requiring the
same filing requirements for foreign private issuers as for domestic
issuers. This commenter noted that the value of information in
financial statements decreases as the gap between the date of the
financial statements and the date of their release increases. This
commenter also noted that recently the financial position of some
companies has deteriorated significantly over relatively short periods
of time. Outdated financial information may make it more likely that
investors will misjudge both the viability of the issuer and the value
of its securities. Another supportive commenter, an accounting
firm,\56\ noted that accelerating the deadline for Form 20-F would
provide investors with timelier and more useful information. It also
noted that the overwhelming majority of foreign private issuers' home
country securities regulators already have annual report deadlines of
either three or four months. However, this commenter pointed out that
although a 90-day reporting deadline for accelerated and large
accelerated filers would be earlier than their home country deadlines
for some issuers, this would still be an accommodation compared to the
deadlines of 75 or 60 days faced by their same-sized U.S. counterparts,
respectively. This commenter also acknowledged that for foreign private
issuers that are still required to reconcile home country GAAP to U.S.
GAAP, a 90-day reporting deadline could impose additional, significant
burdens. As a result, it recommended accelerating the deadline for
these issuers to within 120 days after the foreign private issuer's
fiscal year-end. Another commenter, a foreign private issuer,\57\
supported the proposed amendments and indicated that it believed that
the amendments would not impose any unreasonable burdens on foreign
registrants. However, it also expressed concern about accelerating the
reporting deadline for financial statements of non-registrants that are
included in the Form 20-F, especially those required to be filed
pursuant to Rule 3-09 \58\ of Regulation S-X.
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\55\ See comment letter from CFA Institute.
\56\ See comment letter from Ernst & Young (``E&Y'').
\57\ See comment letter from Vodafone.
\58\ 17 CFR 210.3-09.
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We received many more comments expressing concerns about the
proposed due dates. Several commenters noted that the burdens faced by
foreign issuers in producing Form 20-F was not related to size (i.e.,
accelerated or non-accelerated filer), but to whether the issuer needs
to produce a second set of full financial statements in accordance with
U.S. GAAP, or a reconciliation from their home country accounts to U.S.
GAAP.\59\ Commenters noted that the proposal could create a burden for
many issuers that are still required to prepare their financial
statements in accordance with local GAAP, especially those from some of
the emerging markets.\60\ In addition, in certain jurisdictions, bank
issuers are required to prepare their primary financial statements in
accordance with local GAAP.\61\ We also received comments that Industry
Guide 3, Statistical Disclosure by Bank Holding Companies, calls for
additional disclosures, as well as the classification and disclosure of
certain information under different standards than required in the
foreign private issuer's home country.\62\
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\59\ See, e.g., comment letters from American Bar Association
(``ABA'') and Linklaters LLP (``Linklaters'').
\60\ See, e.g., comment letter from Linklaters.
\61\ See comment letters from Mitsubishi UFJ Financial Group,
Inc. (``Mitsubishi'') and Mizuho.
\62\ See comment letter from Institute of International Bankers,
Mitsubishi, and Paul, Weiss, Rifkind, Wharton & Garrison LLP (``Paul
Weiss'').
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Commenters also noted that many foreign private issuers need more
time than provided under the proposed amendments to translate local
financial information into English for Form 20-F; \63\ to provide the
additional disclosures of Form 20-F, such as Item 5 (Operating and
Financial Review and Prospects) and the Commission's industry guide
disclosures; and to satisfy certain requirements of the Sarbanes-Oxley
Act.\64\ Commenters noted that many foreign private issuers have
limited resources, and must use the same staff to comply with both
local filing requirements and the Commission's filing requirements. As
a result of the proposed amendments, the staff of these issuers would
have to
[[Page 58306]]
produce financial information for home country purposes on the same
timetable as for Form 20-F, rather than in seriatim, as is currently
the case.
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\63\ See, e.g., comment letters from Cleary Gottlieb Steen &
Hamilton (``Cleary Gottlieb''), Mitsubishi, Mizuho, and Sociedad
Quimica y Minera de Chile S.A.
\64\ These requirements, which are generally not required in
home country reporting, include the Section 302 and 906 officer
certifications and the review of internal controls over financial
reporting.
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In addition, commenters indicated that in some cases the proposed
due dates would require foreign private issuers to file their Form 20-F
before they are required to file their annual reports in their home
country. The proposed due dates would in effect override domestic
filing requirements.\65\ Commenters noted that when foreign private
issuers complete their annual reports for home country filing purposes,
they furnish significant financial information to the Commission on
Form 6-K, often within 90 days after their fiscal year-end. These
commenters asserted that investors typically make investment decisions
based on the fiscal year-end financial results disclosed in Form 6-K or
through the issuer's press releases, rather than through the Form 20-F.
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\65\ See, e.g., comment letters from Linklaters (noting that the
90-day due date is earlier than the annual report due dates required
by the EU Member States, China and Brazil) and Gold Fields Limited
(noting that the Johannesburg Stock Exchange requires listed issuers
to publish annual financial statements within six months after the
end of the issuer's financial year).
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Several commenters recommended that the Commission adopt a deadline
that was linked to the foreign private issuer's home country
requirements for filing annual reports. These commenters suggested that
foreign private issuers be required to file Form 20-F annual reports
within a specified period after the issuer's home country report is
filed.\66\ Others, recognizing that such a deadline would be difficult
to implement and confusing to investors, recommended that the
Commission accelerate the due date for Form 20-F for all foreign
private issuers to five months after the issuer's fiscal year-end.\67\
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\66\ See comment letters from The Royal Bank of Scotland Group
(recommending a due date two to three weeks after the annual report
deadline in the issuer's home jurisdiction), European Issuers
(recommending a due date that is one month after the due date for
annual reports in the issuer's home country), PetroChina Company
Limited (recommending a due date that is two months after the
issuer's annual report due date in its home country).
\67\ See, e.g., comment letters from Cleary Gottlieb and
Mitsubishi.
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After carefully considering all of the comments, as well as the
benefits to investors of timelier annual reports, we are adopting
amendments to accelerate the due date for annual reports filed on Form
20-F, but with modifications from the proposed amendments that respond
to some of the concerns that were expressed. Under the amendments as
adopted, all foreign private issuers will be required to file their
annual reports on Form 20-F within four months after their fiscal year-
end, regardless of their size, after a three-year transition
period.\68\ As discussed above, commenters indicated that the size of
the issuer would not affect its ability to file Form 20-F on an
expedited basis. Rather, the issue was whether the foreign private
issuer was required to prepare a second set of full financial
statements in accordance with U.S. GAAP, or a reconciliation from their
home country accounts to U.S. GAAP.\69\ In determining that a four-
month due date would be appropriate, we note that in the next several
years a majority of the foreign private issuers who file annual reports
with the Commission will have incentives to use IFRS as issued by the
IASB as more countries adopt IFRS as their basis of accounting, or
permit companies to use IFRS as issued by the IASB as their basis of
accounting. Our recent rule amendments that allow foreign private
issuers to file financial statements in accordance with IFRS, as issued
by the IASB, without a U.S. GAAP reconciliation should make it easier
for many foreign private issuers to prepare their annual reports on
Form 20-F.\70\ As indicated in the Proposing Release, we did not
propose amendments to change the age of financial statement
requirements for registration statements under the Securities Act or
Exchange Act.\71\
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\68\ We are not adopting a similar acceleration in the filing
deadline for annual reports filed on Form 40-F, which is used by
eligible Canadian issuers under the MJDS. Under the MJDS, issuers
who file annual reports on Form 40-F must comply with the
substantive disclosure requirements and filing deadlines established
by the relevant Canadian securities regulator. In keeping with the
purpose of MJDS, which is to facilitate cross-border capital flows
between the United States and Canada by streamlining the
registration and periodic reporting process for cross-border
issuers, the Form 40-F must continue to be filed with the Commission
on the same day that the information is due to be filed with the
relevant Canadian securities regulatory authority, as set forth in
General Instruction D.(3) of Form 40-F. However, we note that a
reporting Canadian issuer that is not a ``venture issuer'' must file
its annual financial statements on or before 90 days after its most
recently completed financial year-end, while all other Canadian
issuers must file their annual financial statements on or before 120
days after their most recently completed financial year-end. See
supra note 54.
\69\ See, e.g., comment letters from ABA, E&Y, and Linklaters.
\70\ Release No. 33-8879, supra note 21.
\71\ Under Item 8.A.4. of Form 20-F, the last year of audited
financial statements may not be older than 15 months at the time of
the offering or listing.
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The new due date also reflects our observation that many foreign
private issuers registered with the Commission have a three-month due
date for filing annual reports in their home country, and would be
accorded an additional month after their home country due dates to
prepare the Form 20-F under the new amendments. We note that, based on
a review of recent filings, a number of foreign private issuers already
file their annual reports on Form 20-F well before the current six-
month deadline. In addition, the new due date for Form 20-F will still
provide a substantial accommodation to many foreign private issuers,
since large accelerated and accelerated domestic filers are required to
file annual reports on Form 10-K \72\ within 60 days and 75 days,
respectively, of their fiscal year-ends.\73\ All other domestic issuers
are required to file annual reports on Form 10-K within 90 days after
their fiscal year-end.\74\ We will continue to monitor market
developments to consider whether it would be appropriate to accelerate
further the due date for Form 20-F annual reports.
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\72\ 17 CFR 249.310.
\73\ See General Instructions A.(2)(a) and (b) of Form 10-K. At
the time that we first adopted rule and form amendments to
accelerate the filing of the quarterly and annual reports of
reporting U.S. issuers, we noted that those amendments would
increase the discrepancy in the due dates for filing annual reports
between foreign private issuers and larger seasoned U.S. issuers,
and indicated that we would continue to consider this issue. Release
No. 33-8128 (Sept. 5, 2002) [67 FR 58480]
\74\ See General Instruction A.(2)(c) of Form 10-K.
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The amendments that we are adopting today reflect our view that
annual reports that are filed on a faster basis would not only provide
investors with more timely access to these filings, but also improve
the delivery and flow of reliable information to investors and the
capital markets, thereby helping to improve the efficiency of the
markets. The accelerated deadline for Form 20-F should enable investors
in the U.S. markets to get annual reports on a more current basis. As
the Commission noted when it adopted the accelerated filing dates for
periodic reports filed by domestic issuers,\75\ investors and analysts
evaluate the more extensive information provided in periodic reports
against the incremental disclosures that are made by an issuer. The
accelerated due date will enable this analysis to take place at an
earlier time.
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\75\ See Release No. 33-8128, supra note 73.
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Although various commenters recommended that the Form 20-F annual
report due date be linked in some manner to the foreign private
issuer's annual report due date in its home country, we concluded that
this would be confusing for investors and
[[Page 58307]]
would be difficult to implement.\76\ We also concluded that a due date
that is five months after the foreign private issuer's fiscal year-end
would not address our concerns about providing more timely information
to investors.
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\76\ This difficulty would be especially evident for foreign
private issuers that are listed only in the United States and are
not subject to another securities regulatory reporting regime.
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As discussed previously, we received several comments about the
potential burdens placed on foreign private issuers that provide
disclosures under Industry Guide 3, which relates to bank holding
companies. We note that the Commission's staff will consider what
accommodations with regard to Industry Guide 3 would be appropriate.
When we proposed the amendments, we proposed a two-year transition
period for implementation of the accelerated deadline, but also
solicited comments on whether a different transition period would be
more appropriate. While we received several comments supporting a two-
year transition period, several commenters noted that a three-year
transition period would ease the burden on many foreign private issuers
that will be required to adopt IFRS for home country reporting purposes
in 2011. After considering all of the comments received, we have
decided to provide a three-year transition period for implementation of
the accelerated Form 20-F due date. As adopted, foreign private issuers
will be required to file their annual report on Form 20-F within four
months after their fiscal year-end for fiscal years ending on or after
December 15, 2011. Of course, foreign private issuers may file their
Form 20-F annual reports earlier than the current deadline, as numerous
issuers now do.
In addition to these amendments, we are adopting amendments that
conform the deadline for transition reports filed on Form 20-F, and for
the filing of special financial reports \77\ pursuant to Rule 15d-2 of
the Exchange Act. The deadlines for these reports were based on the
annual report deadlines for foreign private issuers.\78\ We are
amending the due dates for each of these reports so that they are
consistent with the new deadline for annual reports filed on Form 20-
F.\79\
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\77\ Under Exchange Act Rule 15d-2, a special financial report
must be filed if a registrant's Securities Act registration
statement did not contain certified financial statements for its
last full fiscal year preceding the fiscal year in which the
registration statement became effective. Currently, foreign private
issuers must file this special financial report by the later of 90
days after the date on which the registration statement became
effective, or six months after the end of the registrant's latest
full fiscal year (consistent with the current due date of Form 20-F
annual reports).
\78\ See Release No. 33-7026 (Nov. 3, 1993) [58 FR 60304].
\79\ We also took this approach when we adopted amendments to
accelerate the periodic report filing dates for domestic companies.
See Release No. 33-8128, supra note 73; Release No. 33-8644 (Dec.
21, 2005) [70 FR 7662
