Securities Law Prof Blog

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

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Tuesday, February 19, 2008

Proposed SEC Rule Would Ease 12(g) Exemption For Foreign Private Issuers

The SEC has published, and solicited public comment on, amendments to Rule 12g3-2(b), which exempts foreign private issuers from section 12(g) if they meet certain requirements.  Once the foreign private issuer (FPI) obtains the Rule 12g3-2(b) exemption, its shares may trade on a limited basis in the U.S. OTC market.

Currently, in order to obtain the exemption under Rule 12g3-2(b), a non-reporting FPI must submit certain materials to the SEC in paper copies, including a list of information that the issuer has to disclose publicly in its home jurisdiction, along with paper copies of the documents.  In addition, at the time of the initial submission, the FPI must provide the SEC with information about the number of U.S. security holders, the percentage held by them, and how they acquired the securities. 

Under the proposed amendments, the FPI can claim the Rule 12g3-2(b) exemption automatically if: it is not otherwise subject to Exchange Act reporting, meets the foreign listing condition, has 20 percent or less of its worldwide trading market in the United States, and electronically publishes the specified non-U.S. disclosure documents,as required under the proposed amendments.

The release explains that "by requiring the electronic publication in English of specified non-U.S. disclosure documents for an issuer claiming the Rule 12g3-2(b) exemption, the proposed amendments should make it easier for U.S. investors to gain access to a foreign private issuer’s material non-U.S. disclosure documents, and make better informed decisions regarding whether to invest in that issuer’s equity securities through the over-the-counter market in the United States or otherwise. Thus, the proposed amendments should foster increased efficiency in the trading of the issuer's securities for U.S. investors."  SEC Rel. 34-57350, Exemption from Registration under section 12(g) for Foreign Private Issuers.

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