TheCorporateCounsel.net

At its open meeting yesterday, the SEC announced publication of this 71-page Concept Release – which seeks feedback on whether the Commission should amend the definition of “foreign private issuer” to better balance investor protection and capital formation.

Dave has blogged about “the plight of foreign private issuers” – as recent rulemaking hasn’t afforded as many accommodations as FPIs might hope for. Yesterday’s 2-page fact sheet highlights that the FPI population has changed over the last two decades:

• The two jurisdictions most frequently represented among Exchange Act reporting FPIs in fiscal year 2003 were Canada and the United Kingdom, both in terms of incorporation and the location of headquarters. In contrast, the most common jurisdiction of incorporation for Exchange Act reporting FPIs in fiscal year 2023 was the Cayman Islands, and the most common jurisdiction of headquarters in fiscal year 2023 was mainland China. The Commission staff also found a substantial increase in Exchange Act reporting FPIs with differing jurisdictions of incorporation and of headquarters, from 7% in fiscal year 2003 to 48% in fiscal year 2023.

• The Commission staff found that the global trading of Exchange Act reporting FPIs’ equity securities has become increasingly concentrated in U.S. capital markets over the last decade. As of fiscal year 2023, approximately 55% of Exchange Act reporting FPIs appear to have had no or minimal trading of their equity securities on any non U.S. market and appear to maintain listings of their equity securities only on U.S. national securities exchanges. As a result, the United States is effectively those issuers’ exclusive or primary trading market.

In light of these changes to the FPI population, and in line with remarks that Commissioner Uyeda made almost exactly a year ago, the concept release seeks input on the following possible approaches to amending the FPI definition:

• Updating the existing FPI eligibility criteria;

• Adding a foreign trading volume requirement;

• Adding a major foreign exchange listing requirement;

• Incorporating an SEC assessment of foreign regulation applicable to the FPI;

• Establishing new mutual recognition systems; or

• Adding an international cooperation arrangement requirement.

The comment period will be open for 90 days following publication of the comment request in the Federal Register. You can submit comments here. Each of the Commissioners also published statements on the concept release, which provide more color on their views.

– Liz Dunshee