Foreign Private Issuers (FPI) Archives

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

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Terminating Reporting Obligations In An Abandoned IPO

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