Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Wednesday, March 21, 2007

Atkins on Final Deregistration Rule

Excerpts from Comments on Final Deregistration Rules at the SEC March 21 Open Meeting by Commissioner Paul S. Atkins:

The finalization of this rulemaking is another significant, tangible step in the SEC's evolving perception of its role in a globalizing marketplace. By adopting these rule amendments today, we are remedying a problem that has been festering for decades. Our former deregistration rules, which required a nose-count of U.S. investors to determine if registration was required, was so beloved by our foreign brethren that it gave rise to such kindly monikers as "hotel California," or the "roach motel" or - one of my own creations -- the "Venus flytrap." Surely none of us at the SEC want to perpetuate such ill-famed requirements. And so it is with great relief that we are adopting much more flexible, realistic, and forward-looking rules with the new Exchange Act Rule 12h-6. Rule 12h-6 will measure trading volume instead of the number of U.S. investors. Although I continue to believe that measuring the percentage of a foreign private issuer's equity held by U.S. investors would be workable -- or even preferable -- if we excluded Qualified Institutional Buyers, the 12h-6 volume test is an excellent alternative.

Measuring U.S. trading volume to determine if registration is required simply makes sense - we should be weighing the domestic U.S. investor interest in an issuer, and should not be apply our laws to purely foreign transactions. This is consistent with the Commission's long-held "territorial approach" to regulation. Over the last 20 years, through Rule 144A, Reg. S, Rule 15a-6, and other rulemakings, the Commission has steadfastly proclaimed that we should not apply our regulations to transactions occurring outside the United States.

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