SEC Proposes Amendments to Foreign Private Issuer Reporting

On February 13, 2008, the Securities and Exchange Commission proposed to amend foreign issuer reporting requirements on Form 20-F under the Securities Exchange Act of 1934. The SEC also proposed to amend the exemption for foreign issuers under Rule 12g3-2(b) of the Exchange Act. The following is a summary of the proposals, which will be subject to a 60-day comment period following their publication.

Foreign Issuer Reporting Amendments

The SEC’s proposed amendments would:

• Allow reporting foreign issuers to assess their foreign issuer status once a year, at the end of their second fiscal quarter, rather than on a continuous basis.
• Accelerate the deadline for annual reporting on Form 20-F from six months after the issuer’s fiscal year end to 90 days after fiscal year end, for large accelerated files and accelerated filers, and to 120 days after fiscal year end, for all other issuers.
• Eliminate an instruction to Item 17 of Form 20-F that allows certain issuers to omit segment data from their U.S. GAAP financial statements.
• Make the recently adopted deregistration and termination of reporting rules applicable to foreign private issuers apply to going private transactions by reporting issuers or their affiliates under Rule 13e-3.

The SEC also solicited comment on:

• Requiring foreign issuers to disclose in their annual reports on Form 20-F: (1) any changes in and disagreements with the issuer’s certifying accountant; (2) the fees, payments and other charges relating to American Depositary Receipts; (3) certain corporate governance matters; and (4) information about highly-significant completed acquisitions.
• Eliminating the limited U.S. GAAP reconciliation option in Item 17 of Form 20-F.

Rule 12g3-2(b) Exemption

Rule 12g3-2(b) exempts from the registration requirements of Section 12(g) of the Exchange Act certain foreign issuers that trade on a limited basis in the over-the-counter market in the United States. Issuers relying on the current exemption must furnish the SEC with (1) a list of the issuer’s non-U.S. disclosure obligations, (2) paper copies of all such information published since the beginning of its last completed fiscal year, and (3) information concerning its U.S. shareholders.

As proposed, the amended exemption would be automatically granted to an issuer that meets certain conditions, regardless of the number of the issuer’s U.S. shareholders, provided that the issuer:

• does not have any Section 13(a) or 15(d) reporting obligations;
• maintains a listing of the subject securities on one or more exchanges in one or two foreign jurisdictions comprising its primary trading market;
• has a U.S. trading volume for the subject securities that is no greater than 20 percent of its worldwide trading volume for its most recently completed fiscal year, or is claiming the Rule 12g3-2(b) exemption in connection with its deregistration under Rule 12h-6; and
• publishes specified non-U.S. disclosure documents in English, required since the beginning of its most recently completed fiscal year, on its web site or through an electronic information delivery system that is generally available to the public in its primary trading market, unless claiming the exemption in connection with or recently following its deregistration.

Under the proposals, issuers claiming the Rule 12g3-2(b) exemption would no longer be required to initially submit paper materials. However, the SEC staff would continue to process paper submissions for three months following the effective date of the proposed amendments.

To maintain the 12g3-2(b) exemption under the proposals, the issuer must:

• electronically publish specified non-U.S. disclosure documents in English for subsequent fiscal years on an ongoing basis;
• continue to maintain its foreign listing;
• continue to meet the trading volume threshold for its most recently completed year other than the year in which it first claims the exemption; and
• not otherwise incur any Exchange Act reporting obligations.

A currently exempt issuer that would not satisfy the trading volume threshold would have to register under Section 12 no later than three years from the effective date of the rule amendments, if it could not qualify for the amended exemption.