Foreign Private Issuers (FPI) Archives

SEC’s Fall 2024 Flex Regulatory Agenda

The SEC has published its semi-annual Fall 2024 regulatory agenda (“Agenda”) and plans for rulemaking. The Agenda is published twice a year, and for several years I have blogged about each publication. Although items on the Agenda can move from one category to the next, be dropped off altogether, or new items pop up in any of the categories (including the final rule stage), the Agenda provides valuable insight into the SEC’s plans and the influence that comments can make on the rulemaking process.

The Agenda is broken down by (i) Proposed Rule Stage; (ii) Final Rule Stage; and (iii) Long-term Actions. The Proposed and Final Rule Stages are intended to be completed within the next 12 months and Long-term Actions are anything beyond that. The number of items to be completed in a 12-month time frame is 30, down from 34 on the Spring 2024 Agenda and 43 on the Fall 2023 Agenda. Many in the industry believe the

February 25, 2025

Registration Statement Undertakings

Every four years we go through a regulatory dead zone as the SEC prepares for a change in administration with new priorities, new interpretations, and a whole new rulemaking agenda, including the potential unwinding of the prior administration’s rules. While waiting for the significant changes to come, I’ll continue to dive into the endless detailed topics of disclosure and other requirements of the federal securities laws. This week I’ll cover the ongoing requirements associated with an effective registration statement – known as “Undertakings.”

Every registration statement filed pursuant to the Securities Act of 1933 (“Securities Act”), whether by a domestic company or foreign private issuer (“FPI”) requires the registrant to include a statement as to certain affirmative undertakings by such company. Item 512 of Regulation S-K sets forth the undertakings, and registration statements on Forms S-1, S-3, F-1 and F-3 must include all items set forth in Item 512. Registration Statements on Form S-8 need only include the undertakings in

December 31, 2024

Foreign Private Issuers – SEC Registration And Reporting And Nasdaq Corporate Governance – Part 3

Although many years ago I wrote a high-level review of foreign private issuer (FPI) registration and ongoing disclosure obligations, I have not drilled down on the subject until now. While I’m at it, in the multi part blog series, I will cover the Nasdaq corporate governance requirements for listed FPIs.

In Part 1 in this series, I covered the definition of a foreign private issuer (FPI), registration and ongoing reporting requirements – see HERE. In Part 2 I covered Rules 801 and 802 of the Securities Act, which give FPI’s registration exemptions for rights offerings and exchange offers, respectively – see HERE. In this Part 3, I discuss the Nasdaq corporate governance requirements for FPIs.

Nasdaq Corporate Governance

In addition to its quantitative listing standards, Nasdaq imposes certain corporate governance and board composition requirements as part of its listing standards. FPIs, however, are exempt from numerous of these standards and may instead opt to comply with home

October 22, 2024

Foreign Private Issuers – SEC Registration And Reporting And Nasdaq Corporate Governance – Part 2

In Part 1 in this series, I covered the definition of a foreign private issuer (FPI), registration and ongoing reporting requirements – see HERE. In this Part 2 I will cover Rules 801 and 802 of the Securities Act, which give FPI’s registration exemptions for rights offerings and exchange offers, respectively.

Rule 801 – Exemption in Connection with Rights Offerings

Rule 801 provides an exemption from registration for certain rights offerings by FPIs. A “rights offering” is defined for these purposes as the sale for cash of equity securities in which existing securities holders of a particular class (including holders of ADRs) are

October 15, 2024

Foreign Private Issuers – SEC Registration And Reporting And Nasdaq Corporate Governance – Part 1

Definition of a Foreign Private Issuer

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:

October 8, 2024

Related Party Transactions – Foreign Private Issuers

About a year ago, the SEC brought several enforcement proceedings targeting shortcomings in related party transactions disclosures, including by Lyft. The action provides a reminder that Item 404(a) is broadly construed and reminded me that related party transactions are a topic worthy of blogging about. Last week I published a blog on related party transaction disclosures for domestic companies (see HERE) and this week covers foreign private issuers (FPIs).

Item 404 of Regulation S-K sets forth the related party disclosure obligations for domestic companies that must be included in various periodic reports and registration statements under the Securities Exchange Act of 1934 (“Exchange Act”) and in registration statements under the Securities Act of 1933 (“Securities Act”). Foreign private issuers can comply with Item 404 by providing the information required by Item 7.B of Form 20-F plus any additional information required by its home.

Item 7.B of Form 20-F

General Disclosure

Item 7.B of Form 20-F requires certain disclosure

October 1, 2024

Terminating Reporting Obligations In An Abandoned IPO

It has been a tough few years for small cap (and all) initial public offerings (IPOs). Although I have been seeing a small up-tick in priced deals recently, we are not yet near the highs of 2020 – 2022. Among the various challenges facing IPO issuers, lengthy Nasdaq/NYSE review periods and trouble building out sufficient allocations have been especially difficult resulting in a lengthier IPO process than expected.
An increased IPO timeline adds significant expense to the process. A registration statement cannot go effective with stale financial statement. Financial statements for domestic issuers go stale every 135 days requiring either a new quarterly review or annual audit and an amended registration statement. Likewise, financial statements for foreign private issuers (FPIs) go stale every nine months. When an issuer is nearing the end date for financial statements, and it appears that a closing of an IPO may be imminent, they sometimes choose to go effective and rely on Rule 430A.

September 17, 2024

F-3 Eligibility

The ability to utilize a shelf registration statement on Form F-3 or S-3 offers significant advantages to publicly traded companies. A Form F-3/S-3 allows for variably priced offerings – that is offerings made either at-the-market or at other than fixed prices. Only companies that are eligible for F-3/S-3 can complete primary (or indirect primary) offerings at prices other than a fixed price (for more on primary offerings see HERE).

I have previously written a detailed blog related to S-3 eligibility (see HERE) and although the requirements for an F-3 are substantially similar, there are some key differences due to the different regulatory framework applicable to foreign private issuers (“FPIs”) – i.e. “F Filers.” Like an S-3, F-3 eligibility is comprised of both registrant or company requirements and transaction requirements.

Moreover, like Form S-3, a Form F-3 specifies generally that the Form may not be used for an offering of asset-backed securities.

Registrant Requirements

Companies that meet the

July 16, 2024

SEC Suspends New Share Repurchase Disclosure Rules

In a win for conservatives, the recent amendments to the share repurchase rules are officially on hold. Adopted on May 3, 2023 (see HERE) the new disclosure requirements would have taken effect for inclusion in the upcoming 10-K season. Following a successful court challenge, on November 22, 2023, the SEC issued an order postponing the effective date of the new rules pending further SEC action.

Background

The SEC allows for limited methods that an issuer can utilize to show confidence in its own stock and assist in maintaining or increasing its stock price. One of those methods is Exchange Act Rule

December 19, 2023

SEC Adopts New Share Repurchase Disclosure Rules

On May 3, 2023, the SEC adopted amendments to Securities Exchange Act Rule 10b-18, which provides issuers and affiliates with a non-exclusive safe harbor from liability for market manipulation under Sections 9(a)(2) and 10(b) and Rule 10b-5 under the Securities Exchange Act of 1934, as amended (“Exchange Act”) when issuers bid for or repurchase their common stock. The proposed rules were part of a broader SEC initiative aimed at market manipulation and insider trading, including the recently adopted amendments related to Rule 10b5-1 Insider Trading Plans (see HERE).

Following publishing the proposed rules, on December 7, 2022, the SEC re-opened the comment period for an additional 30 days after publication in the federal register. The reason for re-opening the comment period was that the Inflation Reduction Act of 2022 added a corporate non-deductible excise tax equal to one percent of the fair market value of any stock of the corporation repurchased by such corporation during the taxable year (see

June 20, 2023

Climate Disclosure Guidance

Ahead of the imminent publication of updated climate disclosure rules, the SEC has published a sample comment letter providing companies with guidance as to the regulator’s current focus and expectations under the rules. The last official SEC guidance on climate-related guidance was published in 2010; however, the SEC, and individual top brass, have been vocal about the need for updated regulations. In that regard, in March 2021, the SEC published a statement requesting public input on climate change disclosures. It is expected that either a rule proposal or temporary final rules are forthcoming. For more information on differing views following the March 2021 request for public comment, including from regulators, industry groups and individual SEC Commissioners, see HERE.

In 2010 as today, companies were and are required to report material information that can impact financial conditions and operations (see most recent amendments to MD&A disclosures: HERE). In addition to MD&A, climate-change-related disclosures, including risks and opportunities, may

October 12, 2021

SEC Approves Nasdaq Board Diversity Rule

On August 6, 2021, the SEC approved Nasdaq’s board diversity listing standards proposal. Not surprisingly, the approval vote was divided with Commissioner Hester Peirce dissenting and Commissioner Elad Roisman dissenting in part. On the same day as the approval, Chair Gary Gensler and Commissioners Peirce, Roisman and Allison Herren Lee and Caroline Crenshaw issued statements on the new Rules.

As more fully explained below, new Nasdaq Rule 5605(f) requires Nasdaq listed companies, subject to certain exceptions, to: (i) to have at least one director who self identifies as a female, and (ii) have at least one director who self-identifies as Black or African American, Hispanic or Latino, Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander, two or more races or ethnicities, or as LGBTQ+, or (iii) explain why the company does not have at least two directors on its board who self-identify in the categories listed above. The rule changes also made headlines in most major

September 7, 2021

Section 12(g) Registration

Unlike a Securities Act of 1933 (“Securities Act”) registration statement, a Securities Exchange Act of 1934 (“Exchange Act”) Section 12(g) registration statement does not register securities for sale or result in any particular securities becoming freely tradeable. Rather, an Exchange Act registration has the general effect of making a company subject to the Exchange Act reporting requirements under Section 13 of that Act. Registration also subjects the company to the tender offer and proxy rules under Section 14 of the Act, its officers, directors and 10%-or-greater shareholders to the reporting requirements and short-term profit prohibitions under Section 16 of the Act and its 5%-or-greater shareholders to the reporting requirements under Sections 13(d) and 13(g) of the Act.

A company may voluntarily register under Section 12(g) at any time and, under certain circumstances, may also terminate such registration (see HERE).

In addition, unless an exemption is otherwise available, a company must register under Section 12(g), if as of the

April 20, 2021

ESG Matters – What a Difference A Year Makes

What a difference a year makes – or should I say – what a difference an administration makes! Back in September 2019, when I first wrote about environmental, social and governance (ESG) matters (see HERE), and through summer 2020 when the SEC led by Chair Jay Clayton was issuing warnings about making ESG metric induced investment decisions, I was certain ESG would remain outside the SEC’s disclosure based regulatory regime. Enter Chair Allison Herron Lee and in a slew of activity over the past few weeks, the SEC appointed a senior policy advisor for climate and ESG; the SEC Division of Corporation Finance (“Corp Fin”) announced it will scrutinize climate change disclosures; Corp Fin has called for public comment on ESG disclosures and suggested a framework for discussion on the matter; the SEC has formed an enforcement task force focused on climate and ESG issues; the Division of Examinations’ 2021 examination priorities included an introduction about how this year’s

March 23, 2021

Audit Committees – NYSE American

Like Nasdaq, I’ve written several times about the NYSE American listing requirements including the general listing requirements (see HERE) and annual compliance guidelines (see HERE). As an aside, although the Nasdaq recently enacted significant changes to its initial listing standards, the NYSE American has not done the same and no such changes are currently anticipated. I suspect that the NYSE American will see a large uptick in new company applicants as a result.

I recently drilled down on audit committee requirements and director independence standards for Nasdaq and in this and the next blog, I will do the same for the NYSE American. As required by SEC Rule 10A-3, all exchange listed companies are required to have an audit committee consisting of independent directors. NYSE American Company Guide Rule 803 delineates the requirements independent directors and audit committees. Rule 803 complies with SEC Rule 10A-3 related to audit committees for companies listed on a national securities exchange.

January 26, 2021

SEC Modernizes Auditor Independence Rules

On October 16, 2020, the SEC adopted amendments to codify and modernize certain aspects of the auditor independence framework. The rule proposal was published in December 2019 (see HERE).

The current audit independence rules were created in 2000 and amended in 2003 in response to the financial crisis facilitated by the downfall of Enron, WorldCom and auditing giant Arthur Andersen, and despite evolving circumstances have remained unchanged since that time. The regulatory structure lays out governing principles and describes certain specific financial, employment, business, and non-audit service relationships that would cause an auditor not to be independent. Like most SEC rules, the auditor independence rules require an examination of all relevant facts and circumstances. Under Rule 2-01(b), an auditor is not independent if that auditor, in light of all facts and circumstances, could not reasonably be capable of exercising objective and impartial judgment on all issues encompassed within the audit duties. Rule 2-01(c) provides a non-exclusive list

January 5, 2021

SEC Adopts Amendments To Management Discussion And Analysis

It has been a very busy year for SEC rule making, guidance, executive actions and all matters capital markets. Continuing its ongoing disclosure effectiveness initiative on November 19, 2020, the SEC adopted amendments to the disclosures in Item 303 of Regulation S-K – Management’s Discussion & Analysis of Financial Conditions and Operations (MD&A). The proposed rule had been released on January 30, 2020 (see HERE). Like all recent disclosure effectiveness rule amendments and proposals, the rule changes are meant to modernize and take a more principles-based approach to disclosure requirements. In addition, the rule changes are intended to reduce repetition and disclosure of information that is not material.

The new rules eliminate Item 301 – Selected Financial Data – and amend Items 302(a) – Supplementary Financial Information and Item 303 – MD&A. In particular, the final rules revise Item 302(a) to replace the current tabular disclosure with a principles-based approach and revise MD&A to: (i) to

December 8, 2020

SEC Adopts Amendments To Business Descriptions, Risk Factors And Legal Proceedings

Just eight months following the rule proposal (see HERE), on August 26, 2020, the SEC adopted final amendments to Item 101 – description of business, Item 103 – legal proceedings, and Item 105 – Risk Factors of Regulation S-K. The amendments make a more principles-based approach to business descriptions and risk factors, recognizing the significant changes in business models since the rule was adopted 30 years ago. The amendments to disclosures related to legal proceedings continue the current prescriptive approach. In addition, the rule changes are intended to improve the readability of disclosure documents, as well as discourage repetition and disclosure of information that is not material.

The Item 101 and Item 103 amendments only apply to domestic companies and foreign private issuer that elect to file using domestic company forms. The forms generally used by foreign private issuers (F-1, F-3, 20-F, etc.) do not have references to Items 101 and 103 of Regulation S-K but rather refer

November 3, 2020

SEC Proposed To Modernize Auditor Independence Rules

As is usual, there are times where I find there are fewer current events to write about in the world of capital markets and I go back to the basics of this regulatory regime I find so fascinating, and others where I have 30 current topics in my writing queue and then a global pandemic occurs adding daily new topics to my list and poof! – six months goes by. Although they were bumped down the list, many of the proposed and completed regulatory changes, and other events, that were on the list remain worthy of attention.

In December 2019, the SEC proposed amendments to codify and modernize certain aspects of the auditor independence framework. The current audit independence rules were created in 2000 and amended in 2003 in response to the financial crisis facilitated by the downfall of Enron, WorldCom and auditing giant Arthur Andersen, and despite evolving circumstances have remained unchanged since that time. The new rules

October 6, 2020

Drill Down On NASDAQ Audit Committee Requirements

I’ve written several times about Nasdaq listing requirements including the general listing requirements (see HERE) and the significant listing standards changes enacted in August of this year (see HERE). This blog will drill down on audit committees which are part of the corporate governance requirements for listed companies. Nasdaq Rule 5605 delineates the requirements for a Board of Directors and committees. The Nasdaq rule complies with SEC Rule 10A-3 related to audit committees for companies listed on a national securities exchange.

SEC Rule 10A-3

SEC Rule 10A-3 requires that each national securities exchange have initial listing and ongoing qualification rules requiring each listed company to have an audit committee comprised of independent directors. Although the Nasdaq rules detail its independence requirements, the SEC rule requires that at a minimum an independent director cannot directly or indirectly accept any consulting, advisory or other compensation or be affiliated with the company or any of its subsidiaries. The prohibition against compensation

December 17, 2019

SEC Rules For Disclosure Of Hedging Policies

In December 2018, the SEC approved final rules to require companies to disclose practices or policies regarding the ability of employees or directors to engage in certain hedging transactions, in proxy and information statements for the election of directors. The new rules implement Section 14(j) of the Securities Exchange Act of 1934 (“Exchange Act”) as mandated by the Dodd-Frank Act and will require the robust disclosure on hedging policies and practices including a description of any hedging transactions that are specifically permitted or disallowed. The proposed rules had initially been published on February 9, 2015 – see HERE.

Smaller reporting companies and emerging growth companies must comply with the new disclosure requirements in their proxy and information statements during fiscal years beginning on or after July 1, 2020. All other companies must comply in fiscal years beginning July 1, 2019. As foreign private issuers (FPI) are not subject to the proxy statement requirements under Section 14 of the Exchange Act,

March 12, 2019

OTC Markets Amends Listing Standards For OTCQB To Allow Non-Reporting Issuers

Effective May 18, 2017, the OTC Markets has amended its qualification rules for the OTCQB to allow quotation by companies that follow its alternative reporting standard (“Alternative Reporting Standard”). OTC Markets aligned the new requirements with the existing OTCQX Alternative Reporting Standard requirements. In addition, the OTC Markets made clarifying amendments to its rules, amended the rules related to the timing of removal for delinquent filers, and revised the rules for international reporting companies.

Highlights of Changes

To qualify for the OTCQB using the Alternative Reporting Standard, a company must file audited financial statements prepared in accordance with U.S. GAAP by a PCAOB qualified auditor, have a minimum bid price of $0.01, not be subject to bankruptcy or reorganization proceedings, and maintain corporate governance including (i) have a board of directors that includes a minimum of two independent directors, and (ii) have an audit committee comprised of a majority of independent directors.

The cure period for delinquent filings has

June 27, 2017

OTC Markets Amends Listing Standards For OTCQB To Include Regulation A+ Issuers

OTC Markets has unveiled changes to the quotations rule and standards for the OTCQB, which changes become effective July 10, 2015. The OTC Markets rule amendments will allow a company to use its required Regulation A+ ongoing reporting requirements to satisfy the initial and ongoing OTCQB disclosure requirements.

Concurrently with this substantive amendment, OTCQB has made clarifying general amendments to its listing standards for all listed and prospective OTCQB companies. OTC Markets has invited comments on the proposed changes.

To summarize, the Regulation A related amendment to the OTCQB rules and regulations includes:

The addition of definitions for “Regulation A” and “Regulation A Reporting Company”
Initial Disclosure Obligations – a Regulation A Reporting Company can meet the OTCQB initial disclosure obligations by having filed all required reports on EDGAR, including annual audited financial statements;
OTCQB Certification – clarifying amendment to the OTCQB Certification including that a Regulation A Reporting Company is required to file periodic reports with the SEC under

July 7, 2015

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Foreign Private Issuers (FPI)

Registration Statement Undertakings

Foreign Private Issuers – SEC Registration And Reporting And Nasdaq Corporate Governance – Part 3

Foreign Private Issuers – SEC Registration And Reporting And Nasdaq Corporate Governance – Part 2

Foreign Private Issuers – SEC Registration And Reporting And Nasdaq Corporate Governance – Part 1

Terminating Reporting Obligations In An Abandoned IPO

F-3 Eligibility

SEC Approves Nasdaq Board Diversity Rule

Section 12(g) Registration

Audit Committees – NYSE American

SEC Modernizes Auditor Independence Rules

SEC Adopts Amendments To Management Discussion And Analysis

SEC Proposed To Modernize Auditor Independence Rules

Drill Down On NASDAQ Audit Committee Requirements

SEC Rules For Disclosure Of Hedging Policies

OTC Markets Amends Listing Standards For OTCQB To Allow Non-Reporting Issuers

OTC Markets Amends Listing Standards For OTCQB To Include Regulation A+ Issuers

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