In June 2025 the SEC published a concept release and request for comment on the definition of a foreign private issuer (“FPI”). For a review of the current definition, information regarding SEC registration and reporting and Nasdaq corporate governance related to FPIs, see my three part blog here HERE; HERE; and HERE.
FPI’s face unique challenges when accessing U.S. capital markets and as such over years the SEC has developed regulatory flexibilities allowing FPIs to follow the corporate governance rules of their home country and providing them with a modified disclosure regime. However, the SEC has noticed that the composition of FPI’s has changed over the last few decades and that most FPI’s almost exclusively trade in the U.S.
That is, at the time the current definition and accommodations for FPIs was established, the SEC through that most eligible FPI’s would be subject to meaningful disclosure and other regulatory requirements in their home country jurisdictions and would trade in foreign markets. As discussed below, the majority of FPI’s now tend to be China based businesses exclusively trading in the U.S. with lower average market caps. The SEC believes that the rules no longer have the intended benefit and as such has issued a concept release and request for comment.
In this first blog on the concept release I cover the current definition and regulatory framework for FPIs and the SECs general findings on the composition of FPIs. In the next blog, I will cover the SEC’s reassessment of the FPI definition.
Current FPI Definition and Regulatory Framework
Both the Securities Act of 1933, as amended (“Securities Act”) and the Securities Exchange Act of 1934, as amended (“Exchange Act”) contain definitions of a “foreign private issuer” (“FPI). Generally, if a company does not meet the definition of an FPI, it is subject to the same registration and reporting requirements as any U.S. company.
The determination of FPI status is not just dependent on the country of domicile, though a U.S. company can never qualify regardless of the location of its operations, assets, management and subsidiaries. There are generally two tests of qualification as a foreign private issuer, as follows: (i) relative degree of U.S. share ownership; and (ii) level of U.S. business contacts.
As with many securities law definitions, the overall definition of foreign private issuer starts with an all-encompassing “any foreign issuer” and then carves out exceptions from there. In particular, an FPI is any foreign issuer, except one that meets the following as of the last day of its second fiscal quarter (or if registering with the SEC for the first time, within 30 days of filing such initial registration statement under either the Securities Act or Exchange Act):
(i) a foreign government;
(ii) more than 50% of its voting securities are directly or indirectly held by U.S. residents; and any of the following: (a) the majority of the executive officers or directors are U.S. citizens or residents; (b) more than 50% of the assets are in the U.S.; or (c) the principal business is in the U.S. Principal business location is determined by considering the company’s principal business segments or operations, its board and shareholder meetings, its headquarters, and its most influential key executives.
That is, if fewer than a foreign company’s shareholders are located in the U.S., it qualifies as an FPI. If more than 50% of the record shareholders are in the U.S., the company must further consider the location of its officers and directors, assets and business operations.
Subject to the exemption under Exchange Act Rule 12g3-2(b) for OTC Markets, when an FPI desires to trade on a U.S. exchange or the OTC Markets, it must register a class of securities under either Section 12(b) or 12(g) of the Exchange Act. Likewise, when an FPIs worldwide assets and worldwide/U.S. shareholder base reaches a certain level ($10 million in assets and total shareholders of 2,000 or greater, or 500 unaccredited with U.S. shareholders being 300 or more), it is required to register with the SEC under Section 12(g) of the Exchange Act unless it is already registered under Section 12(b).
Once registered, an FPI must file periodic reports. A Form 20-F is used for an annual report and is due within four months of fiscal year-end. Quarterly reports are not required. A Form 6-K is used for periodic reports and captures: (i) the information that would be required to be filed in a Form 8-K; (ii) information the company makes or is required to make public under the laws of its country of domicile; and (iii) information it files or is required to file with a U.S. and foreign stock exchange.
All filings with the SEC must be made in English. Where a document or contract is being translated from a different language, the SEC has rules to ensure the translation is fair and accurate.
The SEC has adopted several rules applicable only to FPIs and maintains an Office of International Corporate Finance to review filings and assist in registration and reporting questions. Of particular significance:
(i) An FPI may elect to use either U.S. GAAP; International Financial Reporting Standards (“IFRS”); or home country accounting standards with a reconciliation to U.S. GAAP in the preparation and presentation of its financial statements. Regardless of the accounting standard used, the audit firm must be registered with the PCAOB;
(ii) FPIs are exempt from the Section 14 proxy rules;
(iii) Insiders of FPIs are exempt from the Section 16 reporting requirements and short swing trading prohibitions; however, they must comply with Section 13 (for a review of Section 13 see HERE and HERE and for Section 16 see HERE);
(iv) FPI’s are not required to file quarterly reports (though Nasdaq and NYSE require semi-annual financial statements be filed in a 6-K);
(v) An FPI’s annual report is not due until 120 days following its year end;
(vi) FPIs are exempt from Regulation FD (for a review of Regulation FD see HERE);
(vii) FPIs may use separate registration and reporting forms and are not required to file quarterly reports (for example, Form F-1 registration statement and Forms 20-F and 6-K for annual and periodic reports). Moreover, the disclosure rules related to registration statements and reports often reference specific items in Form 20-F as an alternative to Regulation S-K and S-X and the specific FPI disclosures are generally less demanding;
(viii) As examples of less demanding disclosure obligations, an FPI has fewer specific requirements for a description of business; disclosure of executive compensation may be in the aggregate; and disclosures of related party transactions are far less arduous (see HERE);
(ix) Periodic reports on Form 6-K are “furnished” (U.S. Form 8-K’s are generally “filed”) (for more see HERE);
(x) FPIs have a separate exemption from the Section 12(g) registration requirements (Rule 12g3-2(b)) allowing the trading of securities on the OTC Markets without being subject to the SEC reporting requirement;
(xi) FPI’s are subject to different corporate governance requirements when trading on a national exchange such as Nasdaq or the NYSE;
(xii) FPIs are exempt from say-on-pay rules (for more on say-on-pay see HERE);
(xiii) Financial statements for an FPI go stale more slowly than for a U.S. company. Financial statements for a U.S. company go stale every 135 days. Financial statements for an FPI cannot be older than 9 months and the audit cannot be older than 12 months in an IPO and 15 months for follow on registration statements. Interim financial statements must cover at least six months, as opposed to three months for U.S. companies;
(xiv) Non-GAAP financial measures are exempt from Regulation G if certain conditions are met (for more on non-GAAP reporting see HERE);
(xv) FPIs may file Securities Act registration statements on Forms F-1, F-3, and F-4, 52 which differ in structure and disclosure requirements from the corresponding Forms S-1, S-3, and S-4;
(xvi) FPIs have additional exclusions for offers and sales of securities such as Rules 801 and 802 (see HERE); and
(xvii) An FPI can terminate its section 15(d) reporting obligations, whereas domestic issuers may only suspend their duty to file reports under section 15(d).
The SEC rules do not have scaled disclosure requirements for FPIs. That is, all companies, regardless of size, must report the same information. An FPI that would qualify as a smaller reporting company or emerging growth company should consider whether it should use and be subject to the regular U.S. reporting requirements and registration and reporting forms.
Recent Developments in the FPI Population
The SEC recently conducted a review of Form 20-F SEC reporting FPIs from 2003 through 2023 (this would exclude MJDS Canadian filers). From a high level, the review revealed: (i) the total number of FPIs increased from 146 to 967; (ii) the most common jurisdiction of business operations in 2023 was China (but incorporated in the Cayman Islands) and in 2003 was Canada and the UK; and (iii) the average FPI out of China is smaller by market cap than the average.
The SEC did a similar study focusing on global trading volume occurring in the U.S. and for the years 2014-2-23. The study revealed: (i) the global trading of FPIs’ equity securities has become increasingly concentrated in U.S. capital markets, whereby a majority of FPIs now have their equity securities almost exclusively traded in U.S. capital markets; (ii) U.S. exclusively traded FPIs have a lower market cap; and (ii) U.S. exclusive FPIs tend to be China based businesses.
The Author
Laura Anthony, Esq.
Founding Partner
Anthony, Linder & Cacomanolis
A Corporate and Securities Law Firm
Securities attorney Laura Anthony and her experienced legal team provide ongoing corporate counsel to small and mid-size private companies, public companies as well as private companies going public on the Nasdaq, NYSE American or over-the-counter market, such as the OTCQB and OTCQX. For more than two decades Anthony, Linder & Cacomanolis, PLLC has served clients providing fast, personalized, cutting-edge legal service. The firms reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker-dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions, securities token offerings and initial coin offerings, Regulation A/A+ offerings, as well as registration statements on Forms S-1, S-3, S-8 and merger registrations on Form S-4; compliance with the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers; applications to and compliance with the corporate governance requirements of securities exchanges including Nasdaq and NYSE American; general corporate; and general contract and business transactions. Ms. Anthony and her firm represent both target and acquiring companies in merger and acquisition transactions, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. The ALC legal team assists Pubcos in complying with the requirements of federal and state securities laws and SROs such as FINRA for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the small-cap and middle market’s top source for industry news, and the producer and host of LawCast.com, Corporate Finance in Focus. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
Ms. Anthony is a member of various professional organizations including the Crowdfunding Professional Association (CfPA), Palm Beach County Bar Association, the Florida Bar Association, the American Bar Association and the ABA committees on Federal Securities Regulations and Private Equity and Venture Capital. She is a supporter of several community charities including the American Red Cross for Palm Beach and Martin Counties, Susan Komen Foundation, Opportunity, Inc., New Hope Charities, the Society of the Four Arts, the Norton Museum of Art, Palm Beach County Zoo Society, the Kravis Center for the Performing Arts and several others.
Ms. Anthony is an honors graduate from Florida State University College of Law and has been practicing law since 1993.
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