SEC posts rules proposal regarding termination of registration for foreign private issuers

By: Cydney Posner

The SEC has just posted its rule proposal regarding termination of registration and filing obligations under the Exchange Act.

The proposal would allow a foreign private issuer to terminate the registration of a class of equity securities under section 12(g) of the Exchange Act (and thus stop filing reports required as a result of registration) and to cease its reporting obligations regarding a class of equity or debt securities under section 15(d) of the Exchange Act. Particularly since SOX, foreign private issuers have been complaining that, under the current rules, it is difficult to terminate Exchange Act registration and reporting obligations even though there may be relatively little interest in the issuer's securities among U.S. investors. Moreover, currently a foreign private issuer can only suspend, and cannot permanently terminate, a duty to report arising under section 15(d). The proposed rules would permit the termination of Exchange Act reporting regarding a class of equity securities under either section 12(g) or section 15(d) by a foreign private issuer that meets specified criteria designed to measure U.S. market interest for that class of securities. The proposed rules would also permit a foreign private issuer to terminate, and not merely suspend, its section 15(d) reporting obligations regarding a class of debt securities as long as it meets conditions similar to the current requirements for suspending its reporting obligations relating to that class of debt securities. At the same time, the proposed rules would seek to provide U.S. investors with ready access through the Internet to material information about a foreign private issuer that is required by its home country on an ongoing basis after it has exited the Exchange Act reporting system.

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