On August 27, the Securities and Exchange Commission voted to update and modernize disclosure requirements for foreign companies offering securities in U.S. markets, making it easier for U.S. investors to gain access to timely financial information and make better informed investment decisions.
First, the SEC’s rule amendments require foreign private issuers to assess their eligibility to use the special forms and rules available to them once a year, on the last day of their second fiscal quarter, rather than on a continuous basis.These rules require that issuers who no longer qualify as foreign private issuers on the last day of their second fiscal quarter comply with the use of forms prescribed for domestic issuers beginning on the first day of the fiscal year following that determination.
Second, the SEC’s rule amendments accelerate the reporting deadline for annual reports filed on Form 20-F by foreign private issuers from six months to four months after the issuer’s fiscal year end, consistent with most countries’ filing requirements. The SEC adopted this requirement with a three-year transition period so that it will apply for fiscal years ending on or after December 15, 2011.
Third, the SEC amended Item 17 of Form 20-F to eliminate an instruction permitting certain foreign private issuers to omit segment data from the U.S. GAAP financial statements and to have a qualified U.S. GAAP report. The SEC also adopted a requirement for foreign private issuers to report changes in or disagreements with their certifying accountant in their annual reports on Form 20-F, to require disclosure of fees paid in connection with American Depository Receipt facilities, including annual fees and payments made from the depositary to the issuer on Form 20-F, and to disclose significant differences between the issuer’s home country’s and the U.S.’s corporate governance practices on Form 20-F.
Finally, the SEC adopted technical amendments to Rule 13e-3 of the Securities Exchange Act of 1934 to reference recently adopted deregistration and termination of reporting rules applicable to foreign private issuers.