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
Foreign Private Issuers – SEC Registration And Reporting And Nasdaq Corporate Governance – Part 2
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 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
Foreign Private Issuers – SEC Registration And Reporting And Nasdaq Corporate Governance – Part 1
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.
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:
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
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
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
SEC Expands Ability To File Confidential Registration Statements
Nominate Us For ABA Journal’s Top Blog- HERE
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On June 19, 2017, the SEC announced that the Division of Corporation Finance will permit all companies to submit draft registration statements, on a confidential basis. Confidential draft submissions will now be available for all Section 12(b) Exchange Act registration statements, initial public offerings (IPO’s) and for secondary or follow-on offerings made in the first year after a company becomes publicly reporting.
The SEC has adopted the change by staff prerogative and not a formal rule change. On June 29, 2017, the SEC issued guidance on the change via new FAQs. The new policy is effective July 10, 2017.
Title I of the JOBS Act initially allowed for confidential draft submissions of registration statements by emerging growth companies but did not include any other companies, such as smaller reporting companies. Regulation A+ as enacted on June 19, 2015, also allows for confidential submissions of an offering circular by companies completing their
SEC Completes Inflation Adjustment Under Titles I And III Of The Jobs Act; Adopts Technical Amendments
On March 31, 2017, the SEC adopted several technical amendments to rules and forms under both the Securities Act of 1933 (“Securities Act”) and Securities Exchange Act of 1934 (“Exchange Act”) to conform with Title I of the JOBS Act. On the same day, the SEC made inflationary adjustments to provisions under Title I and Title III of the JOBS Act by amending the definition of the term “emerging growth company” and the dollar amounts in Regulation Crowdfunding.
Title I of the JOBS Act, initially enacted on April 5, 2012, created a new category of issuer called an “emerging growth company” (“EGC”). The primary benefits to an EGC include scaled-down disclosure requirements both in an IPO and periodic reporting, confidential filings of registration statements, certain test-the-waters rights in IPO’s, and an ease on analyst communications and reports during the EGC IPO process. For a summary of the scaled disclosure available to an EGC as well as the differences in
Changes In India’s Laws Related To Foreign Direct Investments- A U.S. Opportunity; Brief Overview For Foreign Private Issuers
In June 2016, the Indian government announced new rules allowing for foreign direct investments into Indian owned and domiciled companies. The new rules continue a trend in laws supporting India as an open world economy. A large portion of the U.S. public marketplace is actually the trading of securities of foreign owned or held businesses. Foreign businesses may register and trade directly on U.S. public markets as foreign private issuers, or they may operate as partial or wholly owned subsidiaries of U.S. parent companies that in turn quote and trade on either the OTC Markets or a U.S. exchange.
Brief Overview for Foreign Private Issuers
Definition of 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.” Generally, if a company does not meet the definition of a foreign private issuer, it is subject to the same registration and
