There has been a shift away from the Securities and Exchange Commission’s (“SEC”) traditional approach of encouraging foreign issuers to access the U.S. capital markets by making available certain disclosure, reporting and corporate governance accommodations. Despite the increased visibility, enhanced access to the U.S. capital markets and other important benefits that foreign (non-U.S. domiciled) issuers that list a class of their equity securities in the United States (the foreign private issuers, “FPI[MB1] s”) enjoy, choosing to become a U.S. public company is expensive and time-consuming and may require changing an FPI’s operations in ways that it would not necessarily choose if it were not required to do so.
The SEC has adopted amendments to many of its rules that effectively dilute “sensible accommodations” for FPIs, such as those relating to abbreviated buyback disclosure timing, the new “cooling-off” period for directors and officers relying on Rule 10b5-1’s affirmative defense, the amended “clawback” listing standards, heightened disclosures for China-based issuers, a requirement that Nasdaq-listed FPIs have at least two diverse directors and EDGAR submission of “glossy” annual reports. Several proposed rules to be considered later this year (based on the SEC’s spring rulemaking agenda), if approved as proposed, may impose additional burdens for FPIs.
Some SEC Commissioners publicly remarked that the “overly aggressive and very expensive rule-making agenda” and the “shift in regulatory philosophy” from the SEC’s “long-standing and bipartisan approach of largely deferring to the disclosures made by FPIs pursuant to their home-country reporting requirements” may “sacrifice principles of mutual recognition and international comity to impose [SEC’s] own views on the rest of the world [and] may ultimately harm U.S. investors and companies.” Read more in this article, click here.