Proposed Rule: Investment Companies: Investment Company Governance Practices Foreign Private Issuer's Termination of Registration

Thursday,
January 11, 2007
Part II
Securities and
Exchange
Commission
17 CFR Parts 200, 232, 240, 249
Termination of a Foreign Private Issuer’s
Registration of a Class of Securities
Under Section 12(g) and Duty To File
Reports Under Section 13(a) or 15(d) of
the Securities Exchange Act of 1934;
Proposed Rule
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1384 Federal Register / Vol. 72, No. 7 / Thursday, January 11, 2007 / Proposed Rules
SECURITIES AND EXCHANGE on an ongoing basis to material SUPPLEMENTARY INFORMATION: We are

COMMISSION information about a foreign private reproposing amendments to
issuer of equity securities that is Commission Rule 30–1,1 Rule 101 2 of
17 CFR Parts 200, 232, 240 and 249 required by its home country after it has Regulation S–T,3 and Rules 12g3–2,
[Release No. 34–55005; International Series
exited the Exchange Act reporting 12g–4 and 12h–3 4 under the Exchange
Release No. 1300; File No. S7–12–05] system. Act,5 and reproposing new Rule 12h–6 6
and Form 15F 7 under the Exchange Act.
RIN 3235–AJ38
DATES: Comments must be received on
or before February 12, 2007. Given the Table of Contents
Termination of a Foreign Private advanced stage of this rulemaking I. Executive Summary and Background
Issuer’s Registration of a Class of initiative, the Commission anticipates A. Introduction
Securities Under Section 12(g) and taking further action as expeditiously as B. Overview of the Current Exchange Act
possible after the end of the comment Exit Rules
Duty To File Reports Under Section
period. It therefore strongly encourages C. Concerns Regarding the Current
13(a) or 15(d) of the Securities Exchange Act Exit Rules
Exchange Act of 1934 the public to submit their comments
D. The Originally Proposed Rule
within the prescribed comment period. Amendments
AGENCY: Securities and Exchange Comments received after that point E. Principal Comments Regarding the
Commission. cannot be assured of full consideration Proposed Rule Amendments
ACTION: Reproposed rule. by the Commission. F. Summary of the Reproposed Rule
ADDRESSES: Comments may be Amendments
SUMMARY: We are reproposing II. Discussion
submitted by any of the following
amendments to the rules that govern A. Conditions for Equity Securities Issuers
methods: 1. Quantitative Benchmarks
when a foreign private issuer may
terminate the registration of a class of Electronic Comments a. Non-Record Holder Benchmark
equity securities under section 12(g) of i. One Year Ineligibility Period After
• Use the Commission’s Internet Delisting
the Securities Exchange Act of 1934
comment form (http://www.sec.gov/ ii. One Year Ineligibility Period After
(‘‘Exchange Act’’) and the corresponding Termination of ADR Facility
rules/proposed.shtml); or
duty to file reports required under b. Alternative 300 Holder Condition
• Send an e-mail to rule-
section 13(a) of the Exchange Act, and 2. Prior Exchange Act Reporting Condition
comments@sec.gov. Please include File
when it may cease its reporting 3. The One Year Dormancy Condition
Number S7–12–05 on the subject line;
obligations regarding a class of equity or 4. Foreign Listing Condition
or B. Debt Securities Provision
debt securities under section 15(d) of
the Exchange Act. Under the current • Use the Federal eRulemaking Portal C. Revised Counting Method
rules, a foreign private issuer may find (http://www.regulations.gov). Follow the D. Expanded Scope of Rule 12h–6
it difficult to terminate its Exchange Act instructions for submitting comments. 1. Application of Rule 12h–6 to Successor
Issuers
registration and reporting obligations Paper Comments 2. Application of Rule 12h–6 to Prior Form
despite the fact that there is relatively 15 Filers
• Send paper comments in triplicate
little interest in the issuer’s U.S.- E. Public Notice Requirement
to Nancy M. Morris, Secretary,
registered securities among United F. Form 15F
Securities and Exchange Commission,
States investors. Moreover, currently a G. Amended Rules 12g–4 and 12h–3
100 F Street, NE., Washington, DC H. Amendment Regarding the Rule 12g3–
foreign private issuer can only suspend,
20549–9303. 2(b) Exemption
and cannot terminate, a duty to report
arising under section 15(d) of the All submissions should refer to File 1. Extension of the Rule 12g3–2(b)
Number S7–12–05. This file number Exemption Under Reproposed Rule
Exchange Act. Reproposed Exchange 12g3–2(e)
Act Rule 12h–6 would permit the should be included on the subject line
2. Electronic Publishing of Home Country
termination of Exchange Act reporting if e-mail is used. To help us process and
Documents
regarding a class of equity securities review your comments more efficiently, III. Paperwork Reduction Act Analysis
under either section 12(g) or section please use only one method. The IV. Cost-Benefit Analysis
15(d) of the Exchange Act by a foreign Commission will post all comments on V. Consideration of Impact on the Economy,
private issuer that meets a quantitative the Commission’s Internet Web site Burden on Competition and Promotion
benchmark designed to measure relative http://www.sec.gov/rules/ of Efficiency, Competition and Capital
U.S. market interest for that class of proposed.shtml. Comments also are Formation Analysis
available for public inspection and VI. Regulatory Flexibility Act Certification
securities, which does not depend on a VII. Statutory Basis and Text of Proposed
head count of the issuer’s U.S. security copying in the Commission’s Public
Rule Amendments
holders. The reproposed benchmark Reference Room, 100 F Street, NE.,
would require the comparison of the Washington, DC 20549. All comments I. Executive Summary and Background
average daily trading volume of an received will be posted without change;
we do not edit personal identifying A. Introduction
issuer’s securities in the United States
with that in its primary trading market. information from submissions. You On December 23, 2005, the
Because the Commission did not fully should submit only information that Commission issued proposed
address this approach when it originally you wish to make available publicly. amendments to its current rules
governing when a foreign private
proposed Rule 12h–6, and because of FOR FURTHER INFORMATION CONTACT:

other proposed changes to Rule 12h–6 Elliot Staffin, Special Counsel, at (202) 1 17 CFR 200.30–1.
not fully discussed in the original rule 551–3450, in the Office of International 2 17 CFR 232.101.
proposal, we are reproposing Rule 12h– Corporate Finance, Division of 3 17 CFR 232.10 et seq.
6 and the accompanying rule Corporation Finance, U.S. Securities 4 17 CFR 240.12g3–2, 240.12g–4 and 240.12h–3.
amendments. These rule amendments and Exchange Commission, 100 F 5 15 U.S.C. 78a et seq.
would seek to provide U.S. investors Street, NE., Washington, DC 20549– 6 17 CFR 240.12h–6, as reproposed.
with ready access through the Internet 3628. 7 17 CFR 249.324, as reproposed.
Federal Register / Vol. 72, No. 7 / Thursday, January 11, 2007 / Proposed Rules 1385
issuer 8 may exit the Exchange Act ability of a foreign issuer to delist from permitting the termination of Exchange
reporting regime.9 The Commission those markets and to terminate all Act registration and reporting only by
proposed these rule amendments out of reporting and other compliance foreign registrants in whose U.S.
concern that, due to several trends, obligations in those markets.12 In the registered securities relative U.S. market
including the increased United States, foreign companies are interest is low. We believe the proposed
internationalization of the U.S. generally able to delist their securities conditions governing eligibility to use
securities markets in recent decades, it from exchanges without significant the trading volume-based measure,
has become difficult for a foreign private restrictions.13 However, although a along with the other proposed
issuer to exit the Exchange Act reporting foreign private issuer is able to delist its conditions concerning prior Exchange
system even when there is relatively securities from U.S. exchanges, it may Act reporting, the prohibition against
little U.S. investor interest in its U.S.- continue to have reporting obligations recent registered U.S. offerings, and
registered securities.10 under the Exchange Act. required foreign listing should further
We recognized that U.S. investors The rules we are reproposing today serve to protect U.S. investors.
benefit from the investment are intended to provide foreign private We believe the reproposed rules will
opportunities provided by foreign issuers with methods by which they can provide foreign private issuers,
private issuers registering their exit the U.S. public securities markets regardless of size, with the meaningful
securities with the Commission and without significant burdens when U.S. option of terminating their Exchange
listing and publicly offering those market interest in the issuers’ securities Act reporting obligations when, after
securities in the United States. is relatively low. For foreign registrants electing to access the U.S. public capital
However, because of the burdens and of equity securities, that method would markets, they find that there is relatively
uncertainties associated with be based on a comparison of the average little U.S. investor interest in their U.S.-
terminating registration and reporting daily trading volume of its class of registered securities. As a result, foreign
under the Exchange Act, the current exit securities in the United States with that private issuers should be more willing
process may serve as a disincentive to in its primary trading market.14 initially to register their securities with
foreign private issuers accessing the Although we expressed some the Commission, to the benefit of U.S.
U.S. public capital markets. In order to reservation about relying solely on investors who will have more
remove this disincentive, we proposed trading volume data as the basis for investment choices.
to amend the current Exchange Act exit measuring U.S. regulatory interest in the
rules for foreign private issuers. Proposing Release, in light of the B. Overview of the Current Exchange
We received over 50 letters comments received, we are Act Exit Rules
commenting on the proposed rule reconsidering our position. We believe Exchange Act Rule 12g–4 currently
amendments.11 While most of the that a standard based on trading volume governs whether an issuer may
commenters supported the purpose and may in fact be superior to the originally terminate its registration of a class of
general framework of the proposed proposed standard, which was based securities under section 12(g) of the
rulemaking, many expressed concern primarily on a comparison of an issuer’s Exchange Act 15 and its corresponding
that the rule proposals would unduly U.S. public float with its worldwide section 13(a) reporting obligations.16
restrict a significant portion of U.S.- public float, because it is a direct Under this rule, a foreign private issuer
registered foreign private issuers from measure of the issuer’s nexus with the may seek termination of its registration
terminating their Exchange Act U.S. market, and because trading of a class of securities under section
registration and reporting obligations. volume data is easier to obtain than 12(g) by certifying in Form 15 17 that the
We have carefully considered public float or record holder data. In subject class of securities is held of
commenters’ suggestions regarding the applying an exit standard based on record by less than 300 residents in the
rule proposals, and have incorporated trading volume data for the U.S. and an United States or by less than 500 U.S.
many of them into the rules that we are issuer’s primary trading market, issuers residents when the issuer’s total assets
reproposing today. will face reduced costs when have not exceeded $10 million on the
A number of commenters have noted determining whether they can terminate last day of each of the issuer’s most
that many non-U.S. securities markets their registration and reporting recent three fiscal years.18 To determine
impose relatively few restrictions on the obligations under the Exchange Act,
compared to the earlier proposed 15 This statutory section only applies to equity
8 As defined in Rule 3b–4(c) (17 CFR 240.3b– measures that would have required an securities. See Exchange Act Section 12(g)(1) [15
4(c)), a foreign private issuer is a corporation or
other organization incorporated or organized in a
issuer to assess the U.S. residence of its U.S.C. 78l (g)(1)]. An issuer may register a class of
security holders. equity securities under section 12(g) either
foreign country that either has 50 percent or less of voluntarily or because it had 500 or more security
its outstanding voting securities held of record by We believe the reproposed rules holders of record and more than $10 million in total
United States residents or, if more than 50 percent appropriately provide meaningful assets and, if a foreign private issuer, more than 300
of its voting securities are held by U.S. residents, protection of U.S. investors by shareholders resident in the United States on the
about which none of the following are true: last day of its most recently completed fiscal year.
(1) A majority of its executive officers or directors See Exchange Act Rules 12g–1 (17 CFR 12g–1) and
12 See, for example, the letter, dated February 9,
are U.S. citizens or residents; 12g3–2(a) (17 CFR 240.12g3–2(a)). However, a
2004, from the Association Francaise Des
(2) More than 50 percent of its assets are located foreign private issuer may avoid an Exchange Act
Entreprises Privees (AFEP) and other European
in the United States; and registration obligation under section 12(g) by
industry group representatives.
(3) The issuer’s business is administered 13 See, for example, Exchange Act Rule 12d2–2 establishing the exemption under Exchange Act
principally in the United States. Rule 12g3–2(b) (17 CFR 240.12g3–2(b)).
9 Release No. 34–53020 (December 23, 2005), 70
(17 CFR 240.12d2–2) and section 806.02 of the New 16 15 U.S.C. 78m(a).
York Stock Exchange (NYSE) Listed Company

FR 77688 (December 30, 2005) (Original Proposing Manual. 17 17 CFR 249.323.
Release). 14 As discussed in greater detail in Part II.A. of 18 Exchange Act Rule 12g–4(a)(2) (17 CFR
10 See Original Proposing Release, 70 FR at
this release, a foreign private issuer would be 240.12g–4(a)(2)). Alternatively, a foreign private
77689–77690. eligible to deregister a class of equity securities issuer may seek to terminate its section 12(g)
11 These comments are available on the registration under the Rule 12g–4 provision that
under reproposed Rule 12h–6 if the average daily
Commission’s Web site at http://www.sec.gov/rules/ trading volume in the United States was no greater applies to any issuer, whether domestic or foreign.
proposed/s71205.shtml and in the Commission’s than 5% of its average daily trading volume in its Under this provision, an issuer must certify on
Public Reference Room in its Washington, DC primary trading market over a recent 12-month Form 15 that its class of equity securities is held
headquarters. period. Continued
the number of U.S. resident whether there are any dormant or the benchmark for determining both
shareholders under this rule, a foreign suspended reporting obligations that when a foreign private issuer must
private issuer must use the method of would preclude the issuer from ceasing register a class of equity securities under
counting provided under Exchange Act its Exchange Act reporting. section 12(g) and when it may terminate
Rule 12g3–2(a).19 This method requires For example, an issuer may have that registration.29 Moreover, it has been
looking through the record ownership of active section 13(a) reporting obligations over two decades since the Commission
brokers, dealers, banks, depositaries or because it has a class of equity or debt adopted Form 15 under Rules 12g–4 and
other nominees on a worldwide basis securities listed on a national securities 12h–3.30 Since then, market
and counting the number of separate exchange and registered with the globalization, advances in information
accounts of customers resident in the Commission under section 12(b) of the technology, the increased use of
United States for which the securities Exchange Act.25 When attempting to American Depositary Receipt
are held.20 Under this rule, issuers are exit the Exchange Act reporting system, (‘‘ADR’’) 31 facilities by foreign
required to make inquiries of all the registrant not only must take steps companies to sell and list their
nominees, wherever located and to effect its delisting from the national securities in the United States, and
wherever in the chain of ownership, for securities exchange,26 but also must other factors have increased
the purpose of assessing the number of consider whether it has any dormant or significantly the number of foreign
U.S. resident holders. suspended reporting obligations under companies that have engaged in cross-
Rule 12h–3 21 is the Exchange Act rule section 12(g) or 15(d) 27 that will become border securities activities and sought
governing when an issuer may suspend operative once its section 12(b) listings in U.S. securities markets, as
its reporting obligations under section registration ceases.28 well as increased the amount of U.S.
15(d).22 While Rule 12h–3’s standards investor interest in the securities of
C. Concerns Regarding the Current
are substantially similar to those under foreign companies.
Exchange Act Exit Rules
Rule 12g–4,23 there are two important Representatives of foreign companies
differences. First, an issuer may It has been almost four decades since and foreign industry associations have
generally not suspend its section 15(d) the Commission first adopted the ‘‘300 voiced their concerns that the ‘‘300 U.S.
reporting obligations until it has filed U.S. resident shareholder’’ standard as resident shareholder’’ standard has
one Exchange Act annual report after become outdated and too easily
25 15 U.S.C. 78l(b).
the offering in question. Second, an exceeded by a foreign company that
26 To effect the delisting and subsequent
issuer cannot terminate its reporting may have engaged in very little recent
termination of an issuer’s registration of a class of
obligations under section 15(d) but can securities under section 12(b), the national selling activity in the United States.32
only suspend those obligations.24 securities exchange or issuer must file a Form 25 These representatives have further
Therefore, for as long as the subject (17 CFR 249.25) with the Commission pursuant to criticized the exit rules’ reliance on the
class of securities is outstanding, a Exchange Act Rule 12d2–2 (17 CFR 240.12d2–2).
We have adopted amendments to our rules and
number of U.S. resident shareholders
foreign private issuer must also Form 25 to streamline the procedures for removing because, with the advent of book-entry
determine at the end of each fiscal year from listing, and withdrawing from registration, recording,33 it is difficult and costly to
whether the number of U.S. resident securities under section 12(b). See Release No. 34– arrive at an accurate count of a foreign
security holders or total number of 52029 (July 14, 2005), 70 FR 42456 (July 22, 2005).
27 A registrant may have section 12(g) reporting
company’s U.S. resident shareholders.
record holders has increased enough to obligations following its termination of registration These representatives have also been
trigger anew its section 15(d) reporting of a class of equity securities under section 12(b): critical of Rule 12h–3 because it merely
obligations. (1) If it initially registered the class of securities suspends rather than terminates a
An issuer may be subject to Exchange under section 12(g) before listing the securities on
a national securities exchange; or (2) under
company’s section 15(d) reporting
Act reporting obligations under more Exchange Act Rule 12g–2 (17 CFR 240.12g–2). That obligations. As such, years after filing a
than one statutory section or rule. While rule provides that any class of securities that would Form 15, a foreign company may find
an issuer is deemed to have only one have been required to be registered under section
active set of reporting obligations, when 12(g), except for the fact that it was listed and 29 See Release No. 34–8066 (April 28, 1967).
registered on a national securities exchange, is
an issuer attempts to exit the Exchange deemed to be registered under section 12(g) upon
30 See Release No. 34–20784 (March 22, 1984), 49
Act reporting system, it must consider the termination of registration under section 12(b) FR 12688 (March 30, 1984).
31 An ADR is a negotiable instrument that
as long as the class of securities are not exempt
from registration under section 12 and are held of represents an ownership interest in a specified
of record on a worldwide basis by less than 300
record by 300 or more persons. Exchange Act number of securities, which the securities holder
persons or by less than 500 persons when the
section 15(d) automatically suspends the duty to has deposited with a designated bank depositary.
issuer’s total assets have not exceeded $10 million
file reports under that section regarding securities Use of an ADR facility makes it easier for a U.S.
on the last day of each of the issuer’s most recent
registered under an effective Securities Act resident to collect dividends in U.S. dollars.
three fiscal years. Exchange Act Rule 12g–4(a)(1)
registration statement once the issuer has registered Moreover, because the clearance and settlement
(17 CFR 240.12g–4(a)(1)).
19 17 CFR 240.12g3–2(a). the class of securities under section 12 of the process for ADRs generally is the same for securities
Exchange Act. of domestic companies that are traded in U.S.
20 See 17 CFR 240.12g3–2(a)(1).
28 Because compliance with Rule 12d2–2 does not markets, a U.S. holder of an ADR is able to hold
21 17 CFR 240.12h–3.
depend on the number of an issuer’s record holders, securities of a foreign company that trades, clears
22 The effectiveness of a registration statement and settles within automated U.S. systems and
termination of registration under section 12(b) does
under the Securities Act of 1933 (Securities Act) not raise the same concerns for an issuer as under within U.S. time periods.
triggers Section 15(d) reporting obligations. That section 12(g) or 15(d). As is currently the case, 32 See, for example, the letter from AFEP.
section provides that an issuer cannot suspend its under the rule amendments reproposed today, a 33 The last three decades have seen the
reporting obligations unless the subject class of foreign private issuer that has a class of securities development of a U.S. clearance and settlement
securities is held of record by less than 300 persons registered under section 12(b) will have to comply system that relies on electronic book-entry to settle
at the beginning of a fiscal year other than the year with Rule 12d2–2 before it can effect termination securities transactions and transfer ownership
in which the Securities Act registration statement of registration under section 12(g) or termination of rather than one dependent on the use of paper
became effective. its reporting obligations under section 13(a) or certificates. For an overview of this development,
23 See, in particular, Rule 12h–3(b)(2) (17 CFR
section 15(d). Moreover, as under the current see Release No. 33–8398 (March 11, 2004), 69 FR
240.12h–3(b)(2)). This provision imposes not only Exchange Act exit regime, a foreign private issuer 12922 (March 18, 2004), the text surrounding n.
the same record holder standards as under Rule will have to file a post-effective amendment to 104. This movement to electronic book-entry
12g–4 but also the same counting method required terminate the registration of any unsold securities clearance and settlement systems has taken place
under Rule 12g3–2(a). under an existing Securities Act registration on a global basis as well, as both developed and
24 Exchange Act Rule 12h–3(e) (17 CFR 240.12h– statement before it can terminate its registration and developing securities markets have sought to
3(e)). reporting under Rule 12h–6. improve efficiency.
that it has once again exceeded the 300 Under proposed Rule 12h–6, a foreign defined in Form 20–F,39 which
U.S. resident shareholder threshold, and private issuer would have been eligible constituted the primary trading market
thereupon again become subject to to terminate its Exchange Act reporting for the securities.
section 15(d) reporting duties, without obligations regarding a class of equity Finally, we also proposed to:
regard to its U.S. market activity.34 securities if it met one of a set of • Streamline the counting method
Finally, these representatives have alternative benchmarks, not based on a used to determine an issuer’s U.S.
objected to our current rule, which does record holder count, and which public float or the number of its U.S.
not permit a foreign private issuer to depended on whether the issuer was a shareholders by permitting the look-
obtain the Exchange Act Rule 12g3–2(b) well-known seasoned issuer through to be limited to the United
exemption 35 if, during the previous 18 (‘‘WKSI’’).37 As proposed, a foreign States, the issuer’s jurisdication, and, if
months, it has had a class of securities private issuer could have terminated its different, the jurisdiction of its primary
registered under section 12 or a Exchange Act registration and reporting trading market;
reporting obligation, suspended or obligations:
• If a WKSI, as long as the U.S. • Permit issuers to rely on the
active, under section 15(d) of the
average daily trading volume (‘‘ADTV’’) assistance of an independent
Exchange Act.36
of the subject class of securities had information services provider when
D. The Originally Proposed Rule been no greater than 5 percent of the calculating the number of their U.S.
Amendments ADTV of that class of securities in its resident holders; and
In light of the changes to U.S. capital primary trading market during a recent • Permit issuers to establish the Rule
markets caused primarily by market 12 month period, and U.S. residents 12g3–2(b) exemption for a class of
globalization and advances in held no more than 10 percent of the equity securities that was the subject of
information technology, the issuer’s worldwide public float as of a a Form 15F immediately upon
Commission proposed to amend the specified date; or termination of Exchange Act reporting,
rules allowing a foreign private issuer to • If a WKSI with greater than 5 so long as the issuer publishes its home
exit the Exchange Act registration and percent U.S. ADTV, or if a non-WKSI, country materials electronically.
reporting regime. We proposed to regardless of U.S. trading volume, U.S. E. Principal Comments Regarding the
amend Rules 12g–4 and 12h–3 to residents held no more than 5 percent Proposed Rule Amendments
eliminate the provisions that primarily of the issuer’s worldwide public float as
condition a foreign private issuer’s of a specified date.38 We received 54 comment letters in
eligibility to cease its Exchange Act Proposed Rule 12h–6 also would have response to our proposals. These letters
reporting obligations on whether the imposed the following conditions on a represented the views of over 80 distinct
number of its U.S. resident security foreign private issuer before it could entities, including business and legal
holders has fallen below the 300 or 500 terminate its registration and reporting associations, foreign companies,
person threshold. In their place, we obligations regarding a class of equity depositary banks, stock exchanges and
proposed new Exchange Act Rule 12h– securities: market operators, financial advisory and
6 that would permit a foreign private • The issuer must have been an accounting firms, law firms, foreign
issuer that meets the conditions Exchange Act reporting company for the governments, and academia. While most
discussed below to terminate: past two years, have filed or furnished commenters supported the purpose and
• Its registration of a class of equity all reports required for this period, and overall structure of the rule proposals,
securities under section 12(g) and its have filed at least two annual reports many also believed that the proposed
resulting section 13(a) reporting under section 13(a); rule amendments would be, like the
obligations; and • The issuer’s securities must not existing rules, unnecessarily restrictive.
• Its section 15(d) reporting have been sold in the United States in We received the most comments
obligations regarding a class of equity or either a registered or unregistered concerning the proposed quantitative
debt securities. offering under the Securities Act during benchmarks that would enable a foreign
the preceding 12 months except for a private issuer of equity securities to exit
34 Similarly, as some commenters have noted, few specified exempt securities or the Exchange Act reporting regime
after terminating its registration regarding a class of exempt transactions; and regardless of the number of its U.S.
securities under section 12(g), with little or no effort • For the preceding two years, the resident shareholders. Numerous
on its part, a foreign private issuer may discover at issuer must have maintained a listing of commenters urged the Commission to
the end of a subsequent fiscal year that it once again
has more than 300 U.S. resident shareholders and,
the subject class of securities on an increase significantly the proposed
therefore, must register the class of securities anew exchange in its home country, as benchmarks based on the calculation of
under that section of the Exchange Act. the percentage of an issuer’s worldwide
35 Rule 12g3–2(b) provides an exemption from 37 For purposes of proposed Rule 12h–6, a ‘‘well-
public float held by U.S. residents.
registration under section 12(g) with respect to a known seasoned issuer’’ would have meant a well-
foreign private issuer that submits to the known seasoned issuer as defined in Securities Act
Several commenters also urged the
Commission, on a current basis, the home country Rule 405 (17 CFR 230.405), which would have Commission to adopt the same
materials required by the rule. required the worldwide market value of an issuer’s quantitative standards for smaller
36 Exchange Act Rule 12g3–2(d)(1) (17 CFR 12g3– outstanding voting and non-voting common equity companies as for well-known seasoned
2(d)(1)). This exception to the Rule 12g3–2(b) held by non-affiliates to be $700 million or more.
issuers. Many commenters also
exemption does not apply to registered Securities 38 If a foreign private issuer was unable to meet
Act offerings filed by Canadian companies on one of these proposed benchmarks, but satisfied the suggested the adoption of a rule
certain Multijurisdictional Disclosure System other conditions of the rule, it could still have provision that would permit an issuer to
(‘‘MJDS’’) forms. The Rule 12g3–2(b) exemption is terminated its Exchange Act registration and exclude certain holders, such as
also not available for a foreign private issuer’s reporting obligations regarding a class of equity qualified institutional buyers
securities issued to acquire by merger or similar securities as long as that class of securities was held
transaction an issuer that had securities registered of record by less than 300 persons on a worldwide
under section 12 or a reporting obligation, basis or less than 300 persons resident in the United 39 17 CFR 249.220f. Form 20–F General
suspended or active, under section 15(d), except for States as of a specified date. Proposed Rule 12h– Instruction F defines ‘‘home country’’ as the
a transaction registered on specified MJDS forms. 6 also included a similar ‘‘300 U.S. resident or jurisdiction in which the issuer is legally organized,
See Exchange Act Rule 12g3–2(d)(2) (17 CFR worldwide holder’’ standard for debt securities incorporated or established and, if differnt, the
240.12g3–2(d)(2)). issuers. jurisdiction where it has its principal listing.
(‘‘QIBs’’),40 from its U.S. public float we are reproposing today. Major arrangement,47 and pursuant to
percentage determination, as an revisions to the proposed rules include: Securities Act Rules 801 and 802; 48
alternative to adopting significantly • Revising the quantitative • Expanding the types of registered
raised quantitative benchmarks. benchmark provision for an issuer of offerings that are excluded from the
Numerous commenters further favored equity securities by: dormancy condition’s prohibition
significantly raising the alternative Æ Applying the same quantitative against the sale of registered securities,
record holder threshold for equity benchmark, which does not require a so that, in addition to permitting
securities issuers and the record holder head count of security holders, to any registered securities sold to its
standard for debt securities issuers. issuer of equity securities, regardless of employees or by selling shareholders in
Other issues raised by commenters size; a non-underwritten offering, an issuer
included their request: Æ Permitting an issuer to terminate its may issue registered securities upon the
• To extend termination of Exchange Exchange Act registration and reporting exercise of outstanding rights that have
Act reporting under Rule 12h–6 to prior obligations regarding a class of equity been granted pro rata to all security
Form 15 filers whose termination of securities, assuming it meets all the holders, pursuant to a dividend or
registration or suspension of reporting other conditions of Rule 12h–6, if the interest reinvestment plan, or upon the
became effective before the effective U.S. ADTV of the subject class of conversion of outstanding convertible
date of the new rule; securities has been no greater than 5 securities;
• To require a shorter prior reporting percent of the ADTV of that class of • Revising the proposed home
period for some or all classes of issuers; securities in the issuer’s primary trading country listing condition for an issuer of
• To permit an issuer that has market during a recent 12 month period, equity securities by:
succeeded to the Exchange Act regardless of the size of its U.S. public Æ Shortening the minimum period of
reporting obligations of an acquired float; required non-U.S. listing to one year;
company under Exchange Act Rule 12g– Æ Requiring an issuer to wait 12 Æ Permitting an issuer to have
3 41 or Rule 15d–5 42 to take into account months before filing its Form 15F 43 in maintained that listing in a foreign
the reporting history of the acquired reliance on the trading volume standard jurisdiction that, either singly or
company for the purpose of meeting the if the issuer has delisted its class of together with one other foreign
prior reporting condition under Rule equity securities from a national jurisdiction, constitutes the primary
12h–6; securities exchange or automated inter- trading market for the issuer’s subject
• To exclude unregistered offerings dealer quotation system in the United class of securities;
from the one year dormancy condition; States,44 and, at the time of delisting, Æ Revising the definition of ‘‘primary
• To permit an issuer to meet the the U.S. ADTV of the subject class of trading market’’ to mean that at least 55
listing condition requirement if at least securities exceeded 5 percent of the percent of the trading in the foreign
55 percent of the trading volume of the ADTV of that class of securities in the private issuer’s subject class of
subject class of securities occurs in the issuer’s primary trading market for the securities took place in, on or through
aggregate in more than one non-U.S. preceding 12 months; and the facilities of a securities market or
market; Æ Further requiring an issuer to wait markets in no more than two foreign
• To increase the 300 record holder 12 months before filing its Form 15F in jurisdictions; and
standard, which is included in both the reliance on the trading volume standard Æ Requiring that, if an issuer
alternative record holder provision for if the issuer has terminated an American aggregates the trading of its securities in
equity securities issuers and the Depositary Receipts (ADR) facility; two foreign jurisdictions for the purpose
provision for debt securities issuers; • Shortening the prior reporting of Rule 12h–6, the trading market for the
• To extend the Exchange Act Rule period required for an issuer of equity issuer’s securities in at least one of the
12g3–2(b) exemption to prior Form 15 securities so that, under the reproposed two foreign jurisdictions must be larger
filers even if 18 months has not elapsed; rules, an issuer must have at least one than the U.S. trading market for the
• To extend the Rule 12g3–2(b) year of Exchange Act reporting, must be issuer’s securities;
exemption to successor issuers; current in reporting obligations for that • Revising the proposed counting
• To permit all issuers having the period, and have filed at least one method to apply only to an issuer’s
Rule 12g3–2(b) exemption to publish Exchange Act annual report; determination of its U.S. resident
electronically on their Web sites their • Permitting an issuer of equity holders under the reproposed 300
home country documents; and securities during the one year dormancy record holder standard for equity and
• To amend Exchange Act Rule 12g3– period to sell unregistered securities debt securities issuers, and to provide
2(a), which governs when a foreign exempted under the Securities Act, that an issuer that aggregates the trading
private issuer enters the Exchange Act including securities sold in section 4(2) volume of its securities in two foreign
registration and reporting regime under private placements,45 pursuant to jurisdictions for the purpose of meeting
section 12(g), so as to conform that rule Securities Act Rule 144A,46 under the listing condition under Rule 12h–6
to the amended exit thresholds under section 3(a)(10) schemes of would have to look through nominee
Rule 12h–6. accounts in both foreign jurisdictions,
F. Summary of the Reproposed Rule 43 Like current Rules 12g–4 and 12h–3, which which comprise its primary trading
Amendments require the filing of Form 15, reproposed Rule 12h– market, as well as in the United States
6 would require the filing of a form—Form 15F— and in its jurisdiction of incorporation
We have addressed many of the by which an issuer would certify that it meets the
conditions for ceasing its Exchange Act reporting if different from the two jurisdictions
commenters’ concerns in the rules that obligations. that comprise its primary trading
44 Neither the OTC Bulletin Board operated by the market;
40 A QIB is an entity specified under Securities NASD nor the market operated by the Pink Sheets • Revising the proposed scope of Rule
Act Rule 144A (17 CFR 230.144A) that in the LLC are deemed to be automated inter-dealer
aggregate owns at least $100 million in securities quotation systems. See Release 33–6862 (April 23,
12h–6 to extend termination of
of issuers that are not affiliated with the entity. 1999), n.22.
41 17 CFR 240.12g–3. 45 15 U.S.C. 77d(2). 47 15 U.S.C. 77c(a)(10).
42 17 CFR 240.15d–5. 46 17 CFR 230.144A. 48 17 CFR 230.801 and 230.802.
Exchange Act reporting to a successor reporting obligations, except that promotion of U.S. investor interest
issuer that meets specified conditions; instead of the proposed requirement through recent registered capital-raising
• Revising the proposed scope of Rule that the notice be published at least 15 before exiting our reporting system. The
12h–6 to extend termination of business days before the filing of the foreign listing condition and U.S.
Exchange Act reporting to a foreign Form 15F, we are reproposing to require trading volume benchmark support our
private issuer that filed a Form 15 and that an issuer publish the notice before view that, before a foreign private issuer
thereafter suspended or terminated its or at the time of filing of the Form 15F; may terminate its Exchange Act
Exchange Act reporting obligations • The automatic suspension of an reporting obligations under Rule 12h–6,
before the effective date of Rule 12h–6, issuer’s Exchange Act reporting it must be subject to an ongoing
as long as: obligations upon the filing of its Form disclosure and financial reporting
Æ Since the effective date of its 15F followed by a 90-day waiting period regime, and have a significant market
termination or suspension of reporting at the end of which, assuming the following, in its home market. The
under Form 15, the issuer has not Commission has no objections, the condition restricting the ability of an
engaged in any transaction or triggered suspension becomes a termination of issuer to rely on the trading volume
any threshold that, under the current reporting; standard under specified circumstances
rules, would require it to resume or • The form and content of Form 15F, should deter an issuer from excluding
assume anew Exchange Act reporting except that we have modified proposed U.S. investors, particularly retail
obligations; Form 15F to conform to the changes to investors, from investing in their
Æ The issuer files a Form 15F; and the proposed rule amendments that we securities when U.S. market interest is
Æ If its Form 15 applied to a class of are reproposing today; and still significant. The immediate
equity securities, the issuer has satisfied • The electronic furnishing of home availability of the exemption under Rule
Rule 12h–6’s ‘‘primary trading market’’ country information on the Internet Web 12g3–2(b) would foster access by U.S.
listing condition for that class of site of an issuer that has obtained the investors to ongoing home country
securities; Rule 12g3–2(b) exemption upon the information about an issuer after it
• Extending the Rule 12g3–2(b) termination of its Exchange Act terminates its Exchange Act registration
exemption to a foreign private issuer, reporting obligations under Rule 12h–6.
and reporting under Rule 12h–6.
including a successor issuer, We believe the rules we are
Finally, the conditions relating to the
immediately upon its termination of reproposing today are consistent with
the protection of U.S. investors. These filing of Form 15F and the publication
reporting under Rule 12h–6; of a press release or other notice would
• Extending the Rule 12g3–2(b) rules would establish a new benchmark
promote transparency in the exit
exemption to a foreign private issuer that reflects the balancing of potential
benefits to U.S. investors, in the form of process.
that previously filed a Form 15, and
thereafter terminated or suspended its increased investment opportunities in II. Discussion
Exchange Act reporting obligations foreign private companies listing in the
United States, and the potential loss of A. Conditions for Equity Securities
regarding a class of equity securities Issuers
before the effective date of Rule 12h–6, the full protections of the Exchange Act
immediately upon the effectiveness of for U.S. investors in foreign private 1. Quantitative Benchmarks
its termination of reporting under Rule issuers that elect to terminate their
Exchange Act registration and reporting a. Non-Record Holder Benchmark
12h–6; and
• Permitting a non-reporting under reproposed Rule 12h–6. As reproposed, Rule 12h–6 would
company that has received or will Compared to the current exit rules, the enable a foreign private issuer,
receive the Rule 12g3–2(b) exemption, reproposed rule amendments would regardless of size, to qualify for
upon application to the Commission establish a more clearly defined process termination of its Exchange Act
and not pursuant to Rule 12h–6, to with more appropriate benchmarks by reporting by meeting a quantitative
publish its ‘‘ongoing’’ home country which a foreign private issuer can benchmark provision that does not
documents required under Rule 12g3– terminate its Exchange Act reporting depend on the number of its U.S. record
2(b)(1)(iii) 49 on its Internet Web site obligations if, after a period of time, U.S. holders or the percentage of its
rather than submitting them in paper to market interest is not significant relative securities held by those holders.
the Commission. to non-U.S. market interest. As a result, Specifically, an issuer would be able to
We are reproposing other proposed we believe foreign private issuers terminate its Exchange Act registration
provisions with little to no change. should be more willing initially to and reporting obligations regarding a
These provisions include: register their securities with the class of equity securities, assuming it
• The alternative record holder Commission, to the benefit of investors. meets the other conditions of Rule 12h–
provision for equity issuers and the At the same time, we believe the 6, if the ADTV of the subject class of
provision for debt securities issuers, conditions that determine a foreign equity securities in the United States
both of which retain the current 300 private issuer’s eligibility to terminate has been 5 percent or less of the ADTV
record holder standard, as proposed; its Exchange Act registration and of that class of securities in the issuer’s
• The provision permitting an issuer reporting under reproposed Rule 12h–6 primary trading market during a recent
of equity or debt securities to rely on the will serve to protect U.S. investors. For 12-month period.50
assistance of an independent example, the prior reporting condition
information services provider when is intended to provide investors with at 50 Reproposed Rule 12h–6(a)(4)(i). When
calculating its U.S. ADTV, an issuer would have to

calculating the number of its U.S. least one complete year’s worth of
take into account all U.S. trading of its subject
resident security holders; Exchange Act reports, including an securities, whether occurring on a registered
• The requirement that a foreign annual report, upon which they can national securities exchange or elsewhere, as
private issuer publish a notice, such as base their investment decisions about a reported through the U.S. transaction reporting
a press release, which announces its particular foreign registrant before it plan. It would then divide its U.S. ADTV by the
ADTV in the one or two jurisdictions that comprise
intention to terminate its Exchange Act exits the Exchange Act reporting system. its primary trading market. For a discussion of how
The dormancy condition is designed to an issuer would make its primary trading market
49 17 CFR 240.12g3–2(b)(1)(iii). deter a foreign private issuer’s Continued
Although numerous commenters volume may more efficiently further the Many commenters opposed having
supported the adoption of a quantitative purposes of this rulemaking. different standards for WKSIs and
benchmark that is not based on the One advantage to a benchmark based smaller companies. Those commenters
number of an issuer’s U.S. shareholders, solely on trading volume is that it is a maintained that smaller companies
many commenters expressed concern fairly direct measure of U.S. market should benefit from the full range of
that, based on their projections, too few interest in a foreign private issuer’s options available to WKSIs under the
existing reporting foreign private issuers securities at a particular time. Another new rule since the costs of Exchange
would be eligible to terminate their factor in favor of a trading volume only Act reporting generally are
Exchange Act registration and reporting benchmark is that trading volume data disproportionately greater for smaller
obligations under the proposed for the U.S. and an issuer’s primary companies than for larger companies.60
benchmarks.51 The proposed market is easier to obtain and confirm These comments have persuaded us to
benchmarks were based either on a than is the data required for a U.S. propose the same trading volume
combination of U.S. public float and public float or record holder standard for smaller issuers as for larger
trading volume criteria or solely on U.S. determination. As commenters have issuers. Having the same benchmark for
public float data. According to these noted, it is difficult for a reporting any foreign private issuer of equity
commenters, the proposed rules, if foreign private issuer to determine securities, regardless of size, should add
adopted, would continue to discourage accurately the specific identities of its increased flexibility and simplification
foreign companies from entering U.S. U.S. investors.57 A public float to the Exchange Act deregistration
public capital markets.52 benchmark would require such a regime.61 Moreover, setting the
While many commenters supported determination to varying degrees, percentage of U.S. trading volume at a
significantly increasing the proposed particularly if classes of investors are low level, at 5% of trading volume in
U.S. shareholder standard to a 25 excluded. As a result, the reproposed the primary market, would serve to
percent threshold,53 there was less benchmark, based solely on trading protect U.S. investors.
agreement on whether a particular class volume, should result in reduced costs i. One Year Ineligibility Period After
of security holders should be included to issuers in determining whether they Delisting
when making the U.S. public float can terminate their Exchange Act Because the principal quantitative
determination. Some commenters reporting obligations. measure under proposed Rule 12h–6
suggested the possible exclusion of a Various markets may measure and would be based on a comparison of the
number of classes of investors, such as report trading volume differently. For trading volume in the United States and
qualified institutional buyers (‘‘QIBs’’), example, dealer interpositioning in in one or two foreign markets of a
the top five or ten U.S. shareholders of dealer markets may result in a higher foreign private issuer’s equity securities,
an issuer’s equity securities, and U.S. reported volume in securities the rule should be structured so as not
shareholders owning more than a transactions. In our other rules that use to create an incentive for a foreign
specified amount (for example, $10 ADTV as a measure, however, we have private issuer to delist its securities
million) of an issuer’s equity not found it necessary or appropriate to from a U.S. exchange for the purpose of
securities.54 Others supported the make distinctions based on the type of decreasing its U.S. trading volume.
inclusion of all U.S. investors, market on which a security is traded for Indeed, as one commenter suggested, if
regardless of type.55 purposes of determining ADTV.58 we were to adopt a measure based solely
Another commenter supported a Nonetheless, as noted below, we seek on trading volume, a foreign private
quantitative benchmark based solely on comment as to whether Rule 12h–6 issuer that delisted its securities from a
trading volume criteria because that should take into account in some U.S. exchange before its trading volume
would best indicate the impact of U.S. fashion the fact that ADTV may not be fell below the applicable percentage
deregistration on the broader market for measured uniformly across trading should not be eligible to terminate its
the foreign issuer’s securities.56 markets. registration under such a standard.62
Although we initially did not propose Reproposed Rule 12h–6 does not Companies should not be
such an approach, after reconsideration, mandate or expressly specify acceptable unnecessarily restricted in choosing the
we now believe that a new quantitative information sources for determining markets in which they wish their
benchmark based solely on trading ADTV. This is consistent with other securities to trade. As a result, we do
rules that use ADTV as a measure.59 not believe that delisting from a U.S.
determination under reproposed Rule 12h–6, see Issuers should have flexibility in exchange should result in a bar against
Part II.A.4. of this release. determining the ADTV of their
51 See, for example, the letter of Sullivan &
securities in the appropriate markets 60 See the letters from the European Commission,
Cromwell. PricewaterhouseCoopers and Cleary Gottlieb.
52 See, for example, the letter, dated February 28,
from information that is generally
61 In the Proposing Release, in support of separate
2006, of Cleary Gottlieb Steen & Hamilton LLP widely available from a number of
standards for WKSIs and non-WKSIs, we noted that
(‘‘Cleary Gottlieb letter’’). reliable sources. Nonetheless, as noted there typically is a greater flow of information about
53 See the letter from the European Commission,
below, we seek comment as to whether a WKSI, both from the issuer and its analysts, than
the letter, dated February 28, 2006, from the Rule 12h–6 should specify one or more about a smaller company, and that this flow of
European Association for Listed Companies and information is more likely to continue after the
other designated associations of publicly traded acceptable sources of ADTV
WKSI’s termination of reporting. After considering
European companies (‘‘EALIC’’), and the letters information. the numerous comments opposing a rule based on
from the American Bar Association, Section of As originally proposed, Rule 12h–6 WKSI status, we are of the view that the proposed
Business Law (‘‘ABA (Business)’’), Linklaters, would have established different rules, if adopted, could well discourage smaller
Cleary Gottlieb, and Cravath, Swaine and Moore foreign companies from entering U.S. public capital
deregistration thresholds for well-
(‘‘Cravath’’). markets, to the detriment of U.S. investors. In

54 See, for example, the letters from the European known seasoned issuers (‘‘WKSIs’’). addition, we note that both smaller and larger
Commission, EALIC and Cleary Gottlieb. companies will have to publish their material home
55 See the letters from the New York Stock 57 See, for example, the letter, dated March 18,
country documents on their Internet Web sites as
Exchange and Galileo Global Advisors. 2005, from Cleary Gottlieb. a condition to maintaining the Rule 12g3–2(b)
56 See the letter from Fried, Frank, Harris, Shriver 58 See Regulation M, 17 CFR 242.100–105, and exemption received upon termination of reporting
& Jacobson. Earlier letters from EALIC and Cleary Release No. 33–7375 (December 20, 1996). under Rule 12h–6.
Gottlieb, dated February 9, 2004, suggested a 59 See, for example, the definition of ADTV in 62 See the letter, dated February 9, 2004, from
similar approach. Regulation M at 17 CFR 242.100. Cleary Gottlieb.
a foreign private issuer from using the consequence, encourage foreign private investor protection, particularly of retail
reproposed rule. Nonetheless, we share issuers to terminate their ADR facilities investors?
the concern about a possible negative as they seek to have fewer than 300 U.S. • Would the proposed trading volume
impact stemming from a measure based resident holders of their securities.64 benchmark affect the OTC trading in the
solely on trading volume. In addition, When an issuer terminates its ADR securities of foreign issuers? If so, how
by requiring companies to remain facility, the holders of ADRs generally so? Would investors in those OTC
registered and reporting under the have the option to make arrangements to securities be adequately protected by
Exchange Act for a period of time after hold the underlying securities directly. the proposed trading volume
delisting when, before delisting, the However, if holders are unable or benchmark?
company had a relatively active U.S. unwilling to make these arrangements, • Is the proposed trading volume
market for its securities, U.S. investors or to pay the costs associated with these benchmark preferable to the originally
will have access to information arrangements, the holders will have proposed benchmarks that were based
prepared in accordance with the their investment cashed out, that is, the either, if a WKSI, on a combination of
Commission’s financial reporting and underlying securities will generally be trading volume and public float criteria,
disclosure requirements for a period of sold into the home market and the net or solely on public float criteria?
time during which, most likely, the U.S. proceeds (after deducting fees and • If the proposed trading volume
market will be diminishing. expenses of the selling broker and the threshold is preferable, is the threshold
To address these concerns, we are depositary bank) remitted to the former set at the appropriate level (5%)?
proposing, as a condition to the use of ADR holders. Should it be set, instead, at a lower
the trading volume standard of Rule We believe foreign issuers should be level, for example, 3% or 1%, or a
12h–6 and corresponding eligibility to encouraged to maintain their ADR higher level, for example, 7% or 10%? 65
file Form 15F, that if a foreign private facilities, even when they delist from a • Should the proposed trading
issuer has had its equity securities U.S. market and terminate their volume benchmark require the
delisted from a registered national Exchange Act reporting obligations. measurement of the issuer’s ADTV over
securities exchange or automated inter- After a foreign issuer delists and a recent 12 month period, as proposed?
dealer quotation system within one year deregisters, its ADRs should continue to Should it be measured over a shorter
before filing the Form 15F, it must have be able to be traded in the over-the- period, say, 6 months, 3 months, or two
satisfied the trading volume percentage counter market in the United States. The months, or over a longer period, for
as of the date of delisting, and as termination of ADR facilities has a example, 18 months or 24 months?
measured over the 12 months preceding detrimental impact on holders, Would a longer or shorter period be
the date of delisting. Under this imposing fees and other charges on more or less susceptible to manipulation
proposed condition: investors and, when investors are or other distorting effects regarding
• A listed foreign private issuer that certain transactions?
cashed out, subjecting investors to
satisfied the trading volume condition • Should the proposed trading
unplanned tax consequences. In
would be able to delist from its stock volume benchmark require an issuer to
addition, the termination of ADR
exchange and terminate its Exchange measure U.S. trading volume as a
facilities will effectively limit the ability
Act registration and reporting percentage of its worldwide trading
of many U.S. investors to purchase the
obligations concurrently; and volume, rather than as a percentage of
• A listed foreign private issuer that securities of the subject foreign
company. the trading volume in its primary
did not satisfy the trading volume
To address these concerns, we are market, as proposed? If so, should an
condition would be able to delist but
proposing, as a condition to the use of issuer only have to obtain trading
would not be eligible to file a Form 15F
Rule 12h–6 and eligibility to file Form volume data from foreign jurisdictions
and terminate its Exchange Act
15F in reliance on the trading volume in which it has listed its securities in
registration and reporting obligations
provision, that a foreign private issuer addition to the United States? If the
until one year after the date of delisting,
assuming that, at the date of filing its shall not have terminated any sponsored proposed benchmark should measure
Form 15F, its U.S. ADTV for the recent ADR facility within the 12-month U.S. trading volume as a percentage of
12 month period subsequent to its period before filing the Form 15F. worldwide trading volume, should we
delisting did not exceed 5% of the reduce the threshold, for example, to
Comment Solicited 3% or 1%, to take account that some
ADTV in the issuer’s primary trading
market.63 We solicit comment on the proposed issuers may be listed or traded in
ii. One Year Ineligibility Period After trading volume benchmark and on the several markets?
Termination of ADR Facility proposed conditions restricting its use: • Are there difficulties associated
Many foreign issuers have their • Is the proposed trading volume with determining trading volume in the
securities trade in the United States in benchmark an appropriate measure of United States or foreign markets for
the form of American Depositary the relative U.S. market interest in a purposes of reproposed Rule 12h–6?
Receipts (‘‘ADRs’’). It appears that the foreign private issuer’s securities? How should the rule deal with any such
current rules relating to termination of • We assume that U.S. trading difficulties?
Exchange Act reporting by foreign volume numbers reflect U.S. investor • Should the U.S. ADTV component
private issuers may, as an unintended interest and U.S. resident trading of the proposed trading volume
activity in a security. We request data benchmark include all U.S. trading in
on the accuracy of these assumptions. the subject class of securities, whether
63 Proposed Note 1 to paragraph (a)(4) of
reproposed Rule 12h–6. An issuer that failed to • Would the proposed trading volume listed or over-the-counter, as proposed?
meet the trading volume standard at the date of benchmark provide adequate U.S. • Should the proposed trading
delisting would have to meet the trading volume
standard one year later when filing its Form 15F. volume benchmark require an issuer to
If, notwithstanding its delisting, an active U.S. over- 64 One ADR depositary bank commented that it
the-counter market in the company’s securities has recently been involved in at least a dozen ADR 65 We encourage commenters to provide
continued, the company would not be eligible to facility terminations for this purpose, which have appropriate economic support for any suggested
use proposed Rule 12h–6 and file a Form 15F in eliminated thousands of U.S. retail holders. See the change in the reproposed trading volume
reliance on the trading volume benchmark. letter from the Bank of New York. benchmark.
obtain trading volume data from Should it be shorter than one year, for While numerous commenters
particular sources? Should the example, six or nine months? supported having an alternative record
reproposed rule instead provide safe • Should we apply the proposed one- holder condition, most requested that
harbor procedures regarding sources year ineligibility period relating to the Commission significantly raise the
that an issuer may use, but would not delisting to issuers that delisted before 300 holder threshold.68 Many supported
be required to use, to obtain trading the effective date of Rule 12h–6? If not, an increase to 3,000 while others
volume data? If so, what are those what type of relief should be provided requested an increase to 500 or 1,000.
procedures or sources? to those issuers? Some commenters also requested that
• Should the proposed trading • Is it appropriate to require an issuer the Commission raise the record holder
volume benchmark require an issuer to to wait one year before being eligible to ‘‘entrance’’ threshold in Rule 12g3–2(a)
account for differences in calculating use proposed Rule 12h–6 after to conform to any record holder increase
trading volume between different types terminating its ADR facility? in the new exit rule.
of markets? If so, how should such • If so, should we adopt a one year We are not proposing to increase the
differences be taken into account? ineligibility period, as proposed? 300 holder threshold for foreign private
• Should one trading volume Should the period be more than one issuers either in the exit or entrance
standard apply to all issuers, regardless year, for example, 15, 18 or 24 months? rules at this time. We understand that,
of size, as proposed? Should we instead Should it be shorter than one year, for due to the increased internationalization
adopt different trading volume example, six or nine months? of the U.S. securities markets in recent
standards depending, for example, on • Should the one year ineligibility decades, the 300 holder standard may
the size of the issuer’s U.S. public float? condition apply only when, at the date not reflect current market conditions
• Would it be more appropriate to of termination of its ADR facility, the and, therefore, may require updating.
adopt an absolute trading volume ADTV of the issuer’s U.S. market However, the principal purpose for
measure that would require an issuer’s exceeded 5% of the ADTV in its retaining the 300 holder provision is to
U.S. trading volume not to have primary trading market for the preclude disadvantaging those
exceeded a specified amount for a 12- preceding 12 months? companies that could terminate their
month period? If so, what should be the • Should we adopt a condition Exchange Act reporting obligations
specified amount? What factors should requiring an issuer to maintain a under the current exit rules but not
determine that amount? sponsored ADR facility for a certain under the proposed trading volume
• Would the proposed trading volume period of time following its condition. In addition, since domestic
benchmark create any unanticipated deregistration under Rule 12h–6? If so, registrants are subject to a substantially
incentives in foreign private issuers that should the period be six months, more similar record holder standard, we
are undesirable? For example, is there a than six months, for example, three believe any change would be more
potential for manipulation in the months, or longer than six months, for appropriately considered as part of a
calculation of average trading volume example, a year following comprehensive evaluation of the record
under reproposed Rule 12h–6? If so, deregistration? holder provisions in both the Exchange
how should we address it? • Should we apply the proposed Act entrance and exit rules for both
• What are the approximate costs that condition relating to the termination of domestic and foreign registrants.69
an issuer is expected to incur when an ADR facility to issuers that
determining whether it meets the terminated their ADR facilities before Comment Solicited
proposed trading volume threshold? Are the effective date of Rule 12h-6? If not, We solicit comment on the
these costs lower or higher than the what type of relief should be provided reproposed alternative 300 holder
costs that an issuer would incur under to those issuers? condition:
the originally proposed benchmarks? b. Alternative 300 Holder Condition • Would it be appropriate to adopt a
• Should we adopt the originally As an alternative to the proposed 300 holder standard as an alternative to
proposed benchmarks instead? trading volume benchmark provision, the proposed trading volume standard,
• Should we instead adopt a reproposed Rule 12h–6 would permit a as reproposed?
benchmark or benchmarks that use foreign private issuer to terminate its • Should we require an issuer to wait
public float criteria, with or without a Exchange Act reporting obligations one year after terminating its ADR
trading volume component, but that are regarding a class of equity securities if facility or after delisting before being
set at a higher level than the originally it has less than 300 record holders on a eligible to rely on the 300 holder
proposed public float benchmarks? For worldwide basis or who are U.S. condition, as we have proposed for the
example, should we adopt a standard residents as long as the issuer meets the trading volume standard?
that permits deregistration if an issuer’s rule’s other conditions.66 The purpose • Does the adoption of the proposed
U.S. public float is no greater than 15%, of this alternative 300 holder condition trading volume benchmark obviate the
20%, or 25% of its worldwide public is to enable an issuer to terminate its need to increase the 300 holder standard
float? Should the issuer’s status as a Exchange Act reporting obligations if it under reproposed Rule 12h–6?
WKSI be a factor? cannot satisfy the new trading volume
• Is it appropriate to require an issuer benchmark but does meet the current exceeded $10 million for its most recent three fiscal
to wait one year before being eligible to 300 holder standard. Otherwise, an years. Based on current experience, we believe
rely on Rule 12h–6’s trading volume issuer could find itself worse off under foreign private issuers seldom use the current
standard after delisting its securities standard.
Rule 12h–6 than under the current exit 68 See, for example, the letters from Cleary
from a U.S. stock market when, at the rules.67 Gottlieb and Linklaters.
time of the delisting, the issuer did not 69 In this regard, we note that the Advisory
satisfy the trading volume condition, as 66 Proposed Rule 12h–6(a)(4)(ii). Committee on Smaller Public Companies has made
proposed? 67 The reproposed alternative record holder recommendations relating to Exchange Act
• If so, should we adopt a one-year condition is substantially the same as the proposed registration and termination of registration. See the
condition. We did not originally propose, and we Final Report of the Advisory Committee on Smaller
ineligibility period, as proposed? are not now proposing, a similar 500 record holder Public Companies, dated April 23, 2006, which is
Should the period be more than one condition, although one exists in the current rules available at http://www.sec.gov/ info/ smallbus/
year, for example, 15, 18 or 24 months? for a small issuer with total assets that have not acspc/acspc-finalreport.pdf.
2. Prior Exchange Act Reporting 6–K report during the period because it Comment Solicited
Condition was unsure of the underlying home We solicit comment on the
We are reproposing a prior Exchange country document’s materiality.74 reproposed prior Exchange Act
Act reporting condition that a foreign In order to prevent the rule from
reporting condition:
imposing a significantly greater burden
private issuer must meet before it can • Is it appropriate to require, as a
terminate its section 12(g) registration or on a foreign private issuer than the
condition of deregistration under Rule
its section 15(d) reporting obligations current exit regime, we propose to
12h–6, that an issuer have been an
reduce the required prior reporting
regarding a class of equity securities Exchange Act reporting company for at
period to at least 12 months and require
under Rule 12h–6.70 This condition least the 12 months prior to the filing of
only one Exchange Act annual report.
would require an issuer of equity its Form 15F, and to have filed or
However, the reproposed rule would
securities to have had reporting submitted all Exchange Act reports,
also require a foreign private issuer to
obligations under section 13(a) or including one annual report, for that
have submitted all Form 6–Ks required
section 15(d) of the Exchange Act for at period, as reproposed?
during the 12 months preceding the
least the 12 months preceding the filing • Should this time period be longer in
filing of its Form 15F in order to be
of Form 15F, to have filed or furnished order to provide U.S. investors with a
eligible to terminate its reporting
all reports required for this period, and history of Exchange Act reports,
obligations regarding a class of equity
to have filed at least one annual report including financial reports?
securities. This requirement would help
pursuant to section 13(a) of the • If a foreign private issuer seeking to
ensure that a U.S. investor is able to
Exchange Act. The purpose of this prior deregister has not timely filed its
access through EDGAR 75 and in English
Exchange Act reporting condition is to reports, should any adopted rule require
all material interim information about a
provide investors in U.S. securities a period of time to elapse within which
foreign private issuer as required by its
markets with a minimum period of time the issuer would have to be both current
home country. We believe this investor
to make investment decisions regarding and timely before it could file its Form
protection concern outweighs any
a foreign private issuer’s securities 15F to cease its Exchange Act reporting
difficulty that a foreign private issuer
based on the information provided in an obligations? If so, should the required
may experience when determining
Exchange Act annual report and the period be one month or a period longer
whether a particular home country
interim home country materials or shorter than one month?
document is material, particularly since
furnished in English under cover of
a foreign private issuer must routinely 3. The One Year Dormancy Condition
Form 6–K.71
Originally proposed Rule 12h–6 make materiality judgments under As reproposed, a foreign private
would have required a foreign private existing Exchange Act reporting issuer would also have to comply with
issuer to have had Exchange Act requirements. a one year dormancy condition before it
From a practical point of view, the could terminate its Exchange Act
reporting obligations for the two years
proposed 12-month prior reporting registration and reporting obligations
preceding the filing of its Form 15F and
requirement should not be problematic regarding a class of equity securities
to have filed at least two Exchange Act
since, based on current experience, most under Rule 12h–6.78 As reproposed,
annual reports before it could terminate
foreign companies that register Rule 12h–6 would prohibit sales of a
its Exchange Act reporting obligations
securities with the Commission, foreign private issuer’s securities in the
regarding a class of equity securities.
including solely under Exchange Act United States in a registered offering
Several commenters objected to this two
section 12(g), stay in the U.S. market for under the Securities Act during the 12
year reporting condition on the grounds
at least a year and file at least one months preceding the filing of its Form
that it would impose a stricter reporting
Exchange Act annual report.76 15F other than securities issued:
requirement than is the case under the
Moreover, the prior reporting condition • To the issuer’s employees;
current exit rules.72 Some noted that
would require that a foreign private • By selling security holders in non-
section 15(d) and Rule 12h–3 only
issuer must be current in its reporting underwritten offerings;
require at a minimum the filing of one
obligations, not that it must have timely • Upon the exercise of outstanding
Exchange Act annual report. Others
filed all reports required during the 12 rights granted by the issuer if the rights
stated that there is no mandatory
month period. In the event that an are granted pro rata to all existing
minimum reporting requirement under
issuer determines that it should have security holders of the class of the
section 12(g) and Rule 12g–4.73
Still other commenters opposed a filed a Form 6–K during this period, it issuer’s securities to which the rights
prior reporting condition that required can do so before it files its Form 15F.77 attach;
an issuer to have furnished all Form 6– 74 See
• Pursuant to a dividend or interest
the letter from Cleary Gottlieb.
K reports required during the applicable 75 EDGAR
reinvestment plan; or
is the Commission’s Electronic Data
period. Those commenters stated that Gathering, Analysis and Retrieval System. • Upon the conversion of outstanding
this requirement would make the rule 76 See the letter from PricewaterhouseCoopers, convertible securities or upon the
unavailable if a foreign private issuer which, when maintaining that a two-year reporting exercise of outstanding transferable
did not submit a single required Form period was unnecessary, stated its belief that warrants issued by the issuer.
‘‘companies would not generally incur the cost to
become an SEC registrant if they intended to The primary purpose of the dormancy
70 Reproposed Rule 12h–6(a)(1). deregister within a two-year period.’’ See also condition’s prohibition of registered
71 Under cover of a Form 6–K (17 CFR 249.306), Commission staff’s annual review of foreign private offerings is to preclude a foreign private
a foreign private issuer is required to furnish in issuers that are Exchange Act reporting companies
English a copy of any document that it publishes at the end of each calendar year (‘‘International
issuer from exiting the Exchange Act
or is required to publish under the laws of its home Registered and Reporting Companies’’ Reports), reporting system shortly after it has
country or the requirements of its local exchange or which are available at the Commission’s Internet engaged in U.S. capital raising.
that it has distributed to shareholders, and which Web site at http://www.sec.gov/ divisions/corpfin/ As originally proposed, Rule 12h–6
is material to an investment decision. internatl/companies.shtml.
72 See the letters from Simpson Thacher & Bartlett 77 See Part II.D.1. of this release for a discussion
would have excepted from the
and the New York State Bar Association. of the application of reproposed Rule 12h–6, dormancy condition’s prohibition of
73 See the letter from Skadden, Arps, Slate, including its prior reporting condition, to successor
Meagher & Flom. issuers. 78 Reproposed Rule 12h–6(a)(2).
sales of an issuer’s registered securities investors relatively recently from exiting many private placement financings and
in the United States only securities sold the Exchange Act reporting regime other unregistered offerings by foreign
to an issuer’s employees and those sold under Rule 12h–6 on the grounds that companies offshore, to the detriment of
by selling security holders in non- the U.S. securities markets no longer U.S. investors and U.S. broker–dealers,
underwritten offerings. The reproposed represent as viable an option for capital since many companies might prefer to
rule retains these exceptions because, as raising. In addition, we believed that finance outside the United States under
we noted in the Original Proposing proscribing only registered offerings Regulation S than inside the United
Release, these sales are not undertaken could act as a disincentive to a foreign States, for example, under section 4(2)
primarily for capital-raising purposes or private issuer to conduct a registered and Rule 144A, in order to avoid
for the benefit of the issuer. The offering in the United States. triggering the dormancy condition.
reproposed rule continues to prohibit Numerous commenters urged the Therefore, we are reproposing a
sales of an issuer’s securities by its Commission to exclude unregistered dormancy condition that is significantly
selling security holders in an offerings from the one year dormancy less restrictive in scope than the
underwritten registered offering, despite condition on the grounds that an issuer proposed condition. The reproposed
some commenters who opposed this that has engaged in exempted offerings, rule would permit the unregistered sale
prohibition,79 because there is a greater such as Rule 144A or section 4(2) of securities that are exempted under
likelihood of issuer involvement in a private placements, has not taken the Securities Act. The permitted
U.S. underwritten offering than in a advantage of its status as a reporting category of securities would include
non-underwritten offering of selling company since both reporting and non– sales pursuant to section 4(2),
security holders. reporting companies may engage in Regulation D, Rule 144A, Rules 801 and
At the suggestion of some those exempted offerings, and since, 802, and exempt securities under
commenters, we propose to add three without a contractual undertaking, section 3, including section 3(a)(10) of
additional exceptions to the dormancy purchasers in those offerings are not the Securities Act.
condition’s prohibition of sales of an entitled to the full protections of the At the request of several commenters,
issuer’s registered securities: 80 The U.S. federal securities laws.83 Many the reproposed rule would include the
issuance of registered securities commenters also warned that, unless definition of ‘‘employee’’ under Form
pursuant to pro rata rights offerings, the Commission excluded from the S–8 88 for the purpose of applying the
dividend or interest reinvestment plans, dormancy requirement exempted dormancy condition under Rule 12h–
and the conversion of outstanding unregistered offerings, such as rights 6.89 That definition includes any
convertible securities. These offerings exempt under Securities Act employee, director, general partner,
transactions may occur for reasons Rule 801 or exchange offers exempt certain trustees, certain insurance
unrelated to capital raising or for the under Securities Act Rule 802, foreign agents, and former employees as well as
benefit of the issuer, for example, to private issuers would systematically executors, administrators or
benefit current security holders or for exclude U.S. investors from these beneficiaries of the estates of deceased
the convenience of investors. However, offerings,84 thereby running counter to employees, and a family member of an
the reproposed rule also provides that the Commission’s stated goal of employee who has received shares
these exceptions do not apply to encouraging foreign companies to through a gift or domestic relations
securities issued pursuant to a standby include U.S. holders in these offerings order.90 Otherwise, a narrow
underwritten offering or other similar on an equal basis with foreign security interpretation of the term ‘‘employee’’
arrangement in the United States. This holders when it adopted the cross– could result in an issuer being
limitation is consistent with the border transaction safe harbors of disqualified from terminating its
Commission’s previous treatment of Securities Act Rules 801 and 802 and Exchange Act registration and reporting
these three types of registered the Tier 1 tender offer rules.85 obligations under Rule 12h–6 because it
offerings.81 Several commenters specifically
engaged in a sale of securities during the
As originally proposed, Rule 12h–6 opposed including schemes of
dormancy period to an employee’s
would also have precluded a foreign arrangement exempted under Securities
family member or other relationship
private issuer from engaging in Act section 3(a)(10) within the scope of
permitted under Form S–8 but not
unregistered offerings in the United the dormancy condition. Those
explicitly allowed under the new rule.
States during the dormancy period, commenters noted that many schemes
other than those involving securities of arrangement are undertaken for non– Comment Solicited
sold to its employees, securities exempt capital raising purposes, for example, to We solicit comment on the
from registration under section 3 of the effect a redomicile or reorganization for reproposed dormancy condition:
Securities Act 82 (except section tax purposes.86 Others believed that • Would it be appropriate to adopt
3(a)(10)) and obligations having a prohibiting only registered offerings the dormancy condition, as reproposed?
maturity at the time of issuance of less under the dormancy condition would • Is the reproposed amount of time
than nine months and exempted under only marginally encourage issuers to required for the dormancy condition too
section 4(2) of the Securities Act. We engage in unregistered offerings instead long or too short?
proposed to prohibit unregistered of registered ones, if at all.87 • Are the reproposed exceptions to
These comments have persuaded us the dormancy condition appropriate?
offerings, such as private placements,
that adoption of the originally proposed • Are certain transactions we initially
under the dormancy condition in order
dormancy condition could well drive proposed to exempt from the dormancy
to prevent a foreign company that has
actively engaged in U.S. capital raising 83 See, for example, the letters from Cravath, the 88 17 CFR 239.16b. Form S–8 is the form used by
efforts and sold securities to U.S. New York State Bar, and Skadden Arps. an Exchange Act reporting company to register
84 See, for example, the letter from Linklaters.
securities for issuance to its employees or those of
79 See the letter from Cravath. 85 See Release No. 33–7759 (October 26, 1999), 64 its subsidiaries or parent under an employee benefit
80 See the letter from ABA (Business). FR 61382 (November 10, 1999). plan.
81 Instruction 2 to Item 8 of Form 20–F imposes 86 See, for example, the letter from Cleary 89 See, for example, the letter from ABA
a similar limitation. Gottlieb. (Business).

82 15 U.S.C. 77c. 87 See the letter from Linklaters. 90 See General Instruction A.1 to Form S–8.
condition, when a public float standard the Commission would have a greater market is in the United Kingdom, and
was proposed, no longer appropriate for regulatory interest in continuing to not in their jurisdiction of incorporation
exemption? For example, is there a risk subject the foreign company to the or principal listing.
that foreign private issuers would issue Exchange Act reporting regime. In response to commenters’ concerns,
securities to U.S. investors or employees As originally proposed, Rule 12h–6
we are shortening the reproposed
who would then sell them in registered would have required a foreign private
foreign listing period to one year from
secondary offerings before issuer of equity securities to have
maintained a listing of the subject class the originally proposed two years. This
deregistration?
of securities for the preceding two years change is consistent with our similar
4. Foreign Listing Condition on an exchange in its home country. As revision of the proposed prior reporting
As reproposed, Rule 12h–6 would originally proposed, ‘‘home country’’ condition. We also propose to permit an
require that, with respect to equity would have had the same meaning as issuer to aggregate its trading over two
securities, for at least the 12 months under Form 20–F, which defines ‘‘home non-U.S. markets for the purpose of
preceding the filing of its Form 15F, a country’’ as the jurisdiction in which meeting the foreign listing condition in
foreign private issuer must have the issuer is legally organized, order to address the concerns of issuers
maintained a listing of the subject class incorporated or established and, if that have substantial trading markets in
of securities on an exchange in a foreign different, the jurisdiction where it has more than one country. Finally, we are
jurisdiction, which, either singly or its principal listing. Originally proposed proposing a ‘‘foreign listing’’ condition
together with one other foreign Rule 12h–6 would further have required rather than a ‘‘home country’’ listing
jurisdiction, constitutes the primary that a foreign private issuer’s home condition in order to accommodate
trading market for the issuer’s subject country constitute its primary trading issuers that have their primary trading
class of securities.91 The reproposed market. We proposed to define the term market in jurisdictions other than their
rule defines ‘‘primary trading market’’ to ‘‘primary trading market’’ to mean that place of incorporation or principal
mean that at least 55 percent of the at least 55 percent of the trading in the listing. These proposed revisions should
trading in the foreign private issuer’s foreign private issuer’s securities took increase the flexibility of the new rule
subject class of securities took place in, place in, on or through the facilities of for many foreign private issuers.
on or through the facilities of a a securities market in a single foreign At the same time, the reproposed
securities market or markets in no more country during a recent 12 month foreign listing condition should serve to
than two foreign jurisdictions during a period. protect the interests of U.S. investors by
recent 12-month period.92 That We received a variety of comments on requiring that at least 55 percent of the
definition further provides that if an this home country listing condition. ADTV of the company’s subject class of
issuer aggregates the trading of its Although most commenters agreed in securities must have occurred through
securities in two foreign jurisdictions principle with a prior non-U.S. listing
the facilities of no more than two
for the purpose of Rule 12h–6, the condition, several commenters
foreign jurisdictions, and that, if an
trading market for the issuer’s securities expressed concern that many foreign
issuer does aggregate the ADTV of its
in at least one of the two foreign private issuers would not be able to
subject class of securities over two non-
jurisdictions must be larger than the meet the ‘‘55 percent trading in a single
U.S. jurisdictions, at least one of the two
U.S. trading market for the issuer’s non-U.S. market’’ threshold of the
primary trading market definition.94 foreign markets must be larger than the
securities.93 U.S. market for the subject class of
The purpose of this foreign listing Those commenters urged the
Commission to adopt a prior listing securities.97 These proposed
condition is to help assure that there is requirements should increase the
a non-U.S. jurisdiction that principally condition that would permit an issuer to
meet the 55 percent or greater trading likelihood that the principal pricing
regulates and oversees the issuance and determinants for a foreign private
trading of the issuer’s securities and the threshold by aggregating its trading in
more than one non-U.S. market. issuer’s securities are located outside
issuer’s disclosure obligations to
Some commenters expressed concern the United States and that the issuer is
investors. This listing condition makes
that the proposed prior non-U.S. listing subject to an overseas regulator with
more likely the availability of a set of
period was too long.95 Other principal authority for regulating the
non-U.S. securities disclosure
commenters noted that some foreign issuance and trading of the issuer’
documents to which a U.S. investor may
private issuers have their principal securities and the issuer’s disclosure to
turn for material information when
trading market in a jurisdiction that is investors.98 Consequently, for an issuer
making investment decisions about the
different than its place of incorporation meeting these requirements, there
issuer’s securities following the
or principal listing.96 For example, should be less interruption in the flow
termination of its disclosure obligations
under Rule 12h–6. If the United States some companies are incorporated in of material information about the issuer
was the sole or principal market for the Switzerland and listed on the Swiss
foreign private issuer’s securities, then Exchange (SWX), but are primarily 97 For the purpose of the reproposed primary
traded on virt-x, a cross-border trading market determination, an issuer would first

electronic trading platform based in measure the ADTV of its listed securities aggregated
91 Reproposed Rule 12h–6(a)(3) (17 CFR 240.12h–
over one or two foreign jurisdictions. It would then
6(a)(3)). London that is regulated by the United divide this amount by its worldwide ADTV. This
92 Reproposed Rule 12h–6 defines ‘‘recent 12- Kingdom’s Financial Services denominator would include the ADTV only for
month period’’ to mean a 12-calendar month period Authority. Those companies would not those foreign jurisdictions in which the issuer has
that ended no more than 60 days before the filing listed the subject class of securities as well as its
meet the proposed home country listing

date of the Form 15F. Rule 12h–6(e)(7). U.S. ADTV. Its U.S. ADTV would include all
93 Rule 12h–6(e)(6). As proposed and as adopted,
condition because their primary trading securities of the subject class, whether listed or
measurement under this condition is by reference unlisted.
94 See, for example, the letter from Cravath.
to average daily trading volume (ADTV) as reported 98 This ‘‘primary trading market’’ requirement
by the relevant market. Although the proposing However, commenters did not provide data or other would also help ensure that an issuer’s foreign
release noted that there are differences concerning specific information in this area. listing represents a significant trading market for its
95 See the letter from Ziegler, Ziegler &
how various markets measure and report trading equity securities rather than a listing on a non-
volume (for example, dealer markets versus auction Associates. trading market such as the Luxembourg Stock
markets), no commenter addressed this point. 96 See the letter from the Swiss Exchange. Exchange.
once it exits the Exchange Act reporting calculation include all foreign markets did not originally propose, and we are
system, to the benefit of U.S. investors. in which an issuer’s securities are not here proposing, a provision
As reproposed, Rule 12h–6 would traded, including unlisted or over-the- comparable to Rule 12h–3’s 500 record
require issuers to determine that the counter trading, rather than only for holder threshold for debt securities
primary trading market for their equity foreign listed markets, as reproposed? issuers because we believe most foreign
securities is outside the United States • Should the denominator of the private issuers that are debt securities
and, if it is, that the trading volume of primary trading market calculation registrants would likely exceed the $10
their securities in the United States does include only the foreign jurisdictions in million asset threshold that
not exceed the threshold under the rule. the numerator plus U.S. ADTV? accompanies the 500 record holder
In addition, as noted above, the • Should the U.S. ADTV component standard.101
condition relating to primary trading in the denominator of the primary A few commenters requested that the
market would help assure that a foreign trading market calculation include only Commission increase the debt securities
private issuer would be subject to the listed securities rather than all U.S. record holder threshold to as much as
disclosure and other requirements of a traded securities, whether listed or 1,000. We have decided against
foreign regulatory authority. The unlisted, as reproposed? proposing to increase the debt securities
evolution of market structures could • Will issuers have difficulty threshold at this time for the same
raise a number of issues in this area. obtaining ADTV information for trading reasons that we also are not proposing
Non-U.S., private non-exchange trading in the United States, in their primary to increase the record holder threshold
markets may develop in the future trading market, or elsewhere? for equity securities issuers as part of
whose listed or traded issuers may not • In the United States, issuers should this rulemaking.
be subject to the same regulatory be able to obtain information through
treatment by foreign securities the U.S. transaction reporting plan. Do Comment Solicited
regulators as listed companies today. other markets or jurisdictions have We solicit comment on the
Also, securities markets, which similar trade reporting arrangements? Is reproposed debt securities record holder
historically have been organized and additional guidance from the condition:
regulated along national lines, and their Commission necessary in this area, or • Would it be appropriate to adopt
listed companies, which also have been will issuers be able to make reasonable the debt securities record holder
largely regulated by national securities judgments? condition, as reproposed?
regulatory authorities, may in the future • Should the proposed rule provide
additional flexibility for the C. Revised Counting Method
become more transnational. The
schemes of regulation for these markets development of trans-national trading As originally proposed, Rule 12h–6
and companies may change in response markets? If so, what types of provisions would have permitted an issuer to use
to these continued developments. would be appropriate to address these a modified version of the ‘‘look
types of markets? through’’ counting method under Rule
Comment Solicited 12g3–2(a) when determining the
B. Debt Securities Provision
We solicit comment on the percentage of a foreign private issuer’s
reproposed foreign listing condition: As reproposed, Rule 12h–6 would
outstanding equity shares held by its
• Would it be appropriate to adopt enable a foreign private issuer to
non-affiliates on a worldwide basis that
the foreign listing condition, as terminate its Exchange Act reporting
are held by U.S. residents or the number
reproposed? obligations regarding a class of debt
of U.S. residents holding a foreign
• Should the foreign listing condition securities as long as the issuer has filed
private issuer’s equity or debt securities.
be longer or shorter than the reproposed or furnished all reports required under
Instead of having to look through the
condition? Exchange Act section 13(a) or section
accounts of brokers, banks and other
• Is the reproposed definition of 15(d), including at least one Exchange
nominees on a worldwide basis to
primary trading market appropriate? Act annual report, and has its class of
determine the number of its U.S.
Should we instead require an issuer’s debt securities held of record by less
resident holders, as is required under
primary trading market to consist of one than 300 holders either on a worldwide
the current rules, an issuer could limit
single foreign country, as initially basis or who are U.S. residents.99 This
its inquiry to brokers, banks and other
proposed, rather than two foreign provision reflects the minimum
nominees located in the United States,
countries, as reproposed? Should we reporting requirement and current 300
the issuer’s jurisdiction of
instead permit an issuer to aggregate the holder standard under section 15(d) and
incorporation, legal organization or
trading in its securities over three or Rule 12h–3.
The reproposed debt securities establishment and, if different, the
more foreign jurisdictions as long as the jurisidiction of its primary trading
trading volume in one of those provision is substantially similar to the
originally proposed provision.100 We market.102 This revised counting
jurisdictions is greater than its U.S. method is substantially similar to the
trading volume? counting method that the Commission
• Should the reproposed definition
99 Reproposed Rule 12h–6(b).
100 We have made one technical revision to the adopted under the exemptive rules for
require that more than or less than 55% originally proposed debt securities provision. An cross-border rights offerings, exchange
of an issuer’s trading occur in the issuer that has listed a class of debt securities on offers and business combinations, as
primary trading market? an exchange and registered the class under section
• For purposes of the reproposed 12(b), without also registering those securities
under the Securities Act, would have reporting must have terminated its listing and section 12(b)
primary trading market determination, registration pursuant to Rule 12d–2 before it could
obligations under section 13(a), not section 15(d) of
will issuers have difficulty making the the Exchange Act. Yet the originally proposed debt effect its termination of reporting under Rule 12h–
necessary calculations? If so, what are securities provision only referred to section 15(d) 6.
101 None of the commenters requested that we
these difficulties and how might they be obligations. In order to permit the termination of
registration and reporting under Rule 12h–6 by incorporate the 500 record holder and $10 million
addressed in the rule? asset standard into proposed Rule 12h–6’s debt
listed debt issuers, we have revised the reporting
• Should the worldwide foreign condition to state that an issuer must have filed or securities provision or into the alternative record
trading component in the denominator furnished all reports required under Exchange Act holder condition for equity securities.
of the primary trading market section 13(a) or section 15(d). A listed debt issuer 102 Reproposed Rule 12h–6(d).
well as under the definition of foreign rulemaking. Based on our experience that an issuer that has succeeded to the
private issuer. with that definitional rule, we are not Exchange Act reporting obligations of an
The reproposed counting method is persuaded that issuers are unable acquired company may terminate those
substantially the same as originally without undue burden to apply the reporting obligations under Rule 12h–6
proposed, except for two revisions. current standard using the adopted as long as it satisfies specified
Since reproposed Rule 12h–6 would presumption. conditions. Second, we propose to
eliminate the public float benchmark, Some foreign jurisdictions have laws extend the application of Rule 12h–6 to
the reproposed counting method would that provide an established and a foreign private issuer that previously
apply only to an issuer of equity enforceable means for a public company filed a Form 15 and effected its
securities proceeding under the to obtain information about its termination of registration or
alternative 300 holder provision, or to a shareholders. We solicited comment suspension of reporting under the
debt securities issuer that must meet the regarding whether we should permit an current exit rules before the effective
300 holder standard. In addition, as issuer to rely on information obtained date of Rule 12h–6, subject to
reproposed, Rule 12h–6 would provide through these foreign statutory or code conditions.
that an issuer that aggregates the trading provisions when calculating the
volume of its securities in two foreign 1. Application of Rule 12h–6 to
percentage of its worldwide public float Successor Issuers
jurisdictions for the purpose of meeting held by U.S. residents or the number of
the rule’s listing condition will have to its U.S. resident equity or debt holders. In the Original Proposing Release, we
look through nominee accounts in both We received only two comment letters requested comment on the prior
foreign jurisdictions, which comprise its regarding this issue.105 Exchange Act reporting condition.
primary trading market, and in the Reproposed Rule 12h–6 does not Several commenters expressed their
United States as well as in its provide that a foreign private issuer may concern that, as proposed, an issuer that
jurisdiction of incorporation, if different rely solely on specified foreign statutory has succeeded to the Exchange Act
from the two jurisdictions that comprise or code provisions. However, as part of reporting obligations of an acquired
its primary trading market. its inquiry regarding whether it meets company pursuant to Rule 12g–3 or
As part of the counting method any of the quantitative benchmarks 15d–5 106 may not be able to terminate
provision, we are reproposing a under Rule 12h–6, an issuer may refer its reporting obligations under Rule
presumption that we previously to shareholder information obtained 12h–6 because of the proposed rule’s
adopted under the cross-border rules pursuant to those foreign statutory or reporting condition, although the
and definition of foreign private code provisions to the extent that this successor issuer satisfies the rule’s other
issuer.103 This presumption is that, if, shareholder information is reasonably requirements. In order to address this
after reasonable inquiry, an issuer is reliable and accurate and furthers the concern, reproposed Rule 12h–6
unable without unreasonable effort to purpose of the inquiry. specifically provides that, following a
obtain information about the amount of merger, consolidation, exchange of
securities held by nominees for the Comment Solicited securities, acquisition of assets or
accounts of customers resident in the We solicit comment on the otherwise, a foreign private issuer that
United States, it may assume that the reproposed counting method provison: has succeeded to the reporting
customers are the residents of the • Would it be appropriate to adopt obligations under Exchange Act section
jurisdiction in which the nominee has the counting method provision, as 13(a) of another issuer pursuant to Rule
its principal place of business. reproposed? 12g–3, or to the reporting obligations of
Some commenters stated that, while • How should issuers’ experiences another issuer under Exchange Act
this presumption is useful when with applying the counting method section 15(d) pursuant to Rule 15d–5,
determining the percentage of an under the cross-border rules and may file a Form 15F to terminate those
issuer’s worldwide public float that is definition of foreign private issuer reporting obligations if, regarding a class
held by U.S. residents, it is not much inform our decision whether to adopt of equity securities, the successor issuer
help when an issuer must calculate the the reproposed counting method? meets Rule 12h–6’s prior reporting,
actual number of its U.S. resident • The reproposed counting method foreign listing, and quantitative
holders for the purpose of either the would limit the current required benchmark conditions.107 Regarding a
alternative record holder condition for class of debt securities, the successor
worldwide search for nominees of U.S.
equity issuers or the debt securities issuer must meet the conditions under
holders to the U.S., the jurisdiction of
provision. Those commenters urged the Rule 12h–6(b), including the revised
incorporation or organization, and
Commission to adopt a presumption reporting condition. Reproposed Rule
possibly the primary trading market.
that would enable an issuer to count 12h–6 then provides that, when
Are these limits appropriate? If not,
each nominee as one shareholder determining whether it meets the prior
should the search be further limited or
located in the nominee’s principal place reporting condition under either the
expanded?
of business when the issuer is unable equity or debt securities provision of the
without unreasonable effort to obtain D. Expanded Scope of Rule 12h–6 final rule, a successor issuer may take
information about the nominee’s In response to comments on the into account the reporting history of the
customer accounts. appropriate scope of Rule 12h–6, we issuer whose reporting obligations it has
We did not adopt the suggested assumed pursuant to Rule 12g–3 or
propose to expand the rule in two
presumption when we adopted the 15d–5.108
respects. First, we propose to provide
counting method for the rule defining
This successor issuer provision would

the term ‘‘foreign private issuer,’’ 104 and 105 Both commenters stated that they had enable a non-Exchange Act reporting
we decline to propose it as part of this successfully relied on section 212 of the United foreign private issuer that acquires a
Kingdom Companies Act to obtain information reporting foreign private issuer in a
103 See Securities Act Rule 800(h)(4) (17 CFR about an issuer’s shareholders. One of the
230.800(h)(4)) and Instruction B to Exchange Act commenters also cited Article L. 228–2 of the
106 17CFR 240.12g–3 and 240.15d–5.
Rule 3b–4(c)(1) (17 CFR 240.3b–4(c)(1)). French Commercial Code as an established and
107 Reproposed Rule 12h–6(c)(1).
104 See Release No. 34–41936 (September 28, reliable means for a company to obtain shareholder
1999), 64 FR 53900 (October 5, 1999). information. 108 Reproposed Rule 12h–6(c)(2).
transaction exempt under the Securities 2. Application of Rule 12h–6 to Prior • The issuer must currently not be
Act, for example, under Rule 802 or Form 15 Filers required to register a class of securities
section 3(a)(10), to qualify immediately As originally proposed, Rule 12h–6 under section 12(g) or be required to file
for termination of its Exchange Act would have applied only to reporting reports under section 15(d);
reporting obligations under Rule 12h–6, foreign private issuers that have not yet • the issuer must file a Form 15F; and
without having to file an Exchange Act filed a Form 15 to cease their Exchange • if its Form 15 applied to a class of
annual report, as long as the successor Act reporting obligations. In response to equity securities, for at least the 12
issuer meets the rule’s listing and our request for comments concerning months before the filing of its Form 15F,
quantitative benchmark conditions, and the scope of proposed Rule 12h–6 and the issuer must have maintained a
the acquired company’s reporting on the current exemptive scheme for listing of the subject class of equity
history fulfills Rule 12h–6’s prior foreign private issuers,109 numerous securities on an exchange in a foreign
reporting condition. Since the successor commenters urged the Commission to jurisdiction, which, either singly or
issuer would have assumed the acquired expand the scope of Rule 12h–6 by together with another foreign
company’s Exchange Act reporting extending it to foreign private issuers jurisdiction, constitutes the primary
obligations, we believe that it is that have previously filed a Form 15 and trading market for the issuer’s class of
appropriate that the issuer succeed to thereby already terminated or subject securities.
the acquired company’s reporting suspended their Exchange Act reporting
history for the purpose of Rule 12h–6. obligations under the current exit As with any other foreign private
rules.110 issuer of equity securities that elects to
However, if a previously non- terminate its reporting obligations under
We agree with those commenters who
Exchange Act reporting foreign private Rule 12h–6, the purpose of the proposed
stated that foreign private issuers should
issuer acquires an Exchange Act listing condition is to help ensure that
not be denied the benefits of the new
reporting company by consummating an the prior Form 15 filer is subject to a
exit regime simply because they met the
exchange offer, merger or other business foreign regulator and a non-U.S. body of
requirements for ceasing their Exchange
combination registered under the Act reporting obligations under the regulation governing the trading of the
Securities Act, most likely on a Form F– current rules and followed the only exit issuer’s securities and its disclosure
4 registration statement, the acquiror procedure available to them.111 We see obligations to its shareholders. This
would have to fulfill Rule 12h–6’s prior no meaningful distinction between an listing condition makes more likely the
reporting condition without reference to issuer that would qualify for availability of a set of home country
the acquired company’s reporting termination of Exchange Act reporting securities documents to which a U.S.
history. Since the acquiror would have under the alternative record holder investor may turn for material
triggered its own section 15(d) reporting provision of Rule 12h–6 and a Form 15 information when making investment
obligations upon the effectiveness of its filer that has already met the record decisions about the issuer’s securities
Securities Act registration statement, it holder requirements under Rule 12g–4 following the termination of its
would have to meet Rule 12h–6’s full or Rule 12h–3 but, under the proposed disclosure obligations under Rule 12h–
reporting condition like any other rule amendments, would continue to 6.
section 15(d) reporting company before have to count its U.S. shareholders The purpose of the proposed Form
it could terminate its reporting annually in order to determine whether 15F filing requirement is to notify
obligations under the new rule. it has renewed or assumed anew investors and alert the Commission that
Comment Solicited Exchange Act reporting obligations. the prior Form 15 filer is claiming the
Accordingly, as reproposed, Rule benefits of Rule 12h–6, to have the
We solicit comment on the proposed 12h–6 would extend termination of issuer certify that it meets the
expanded scope of Rule 12h–6 with Exchange Act reporting to a foreign conditions of the new rule, and to
respect to successor issuers: private issuer that, before the effective provide the issuer’s Internet Web site
date of Rule 12h–6, has already effected address.112
• Should an issuer be permitted to the suspension or termination of its
terminate its Exchange Act reporting Exchange Act reporting obligations after Comment Solicited
obligations under Rule 12h–6 if, filing a Form 15. Since these filers have
following a merger, acquisition or other We solicit comment on the proposed
already met a quantitative standard
similar transaction in which it has expanded scope of Rule 12h–6 with
under the current exit rules, they would
succeeded to Exchange Act reporting respect to prior Form 15 filers:
not have to meet any other quantitative
obligations pursuant to Rule 12g–3, it benchmark under Rule 12h–6. They also • Is it appropriate to permit an issuer
meets Rule 12h–6’s foreign listing and would not have to satisfy the prior that, before the effective date of Rule
quantitative benchmark requirements, reporting or dormancy provisions since 12h–6, has terminated or suspended its
and the acquired company’s reporting they would already be non-reporting Exchange Act reporting obligations by
history fulfills Rule 12h–6’s prior entities. filing a Form 15, to obtain the benefits
reporting condition, as proposed? However, a prior Form 15 filer would of termination under Rule 12h–6, as
• Should we require that the have to meet the following conditions in proposed?
Exchange Act reporting target company order to obtain the benefits of Rule 12h– • Are the proposed requirements that
have satisfied the trading volume or 300 6: a prior Form 15 filer must meet in order
record holder benchmark just prior to to be eligible to proceed under Rule
completing one of the above 109 See Release No. 34–53020 at pp. 20 and 69– 12h–6 appropriate? Are there any other
70. eligibility requirements that we should
transactions before a successor issuer 110 See the letters from the European Commission,
may proceed under Rule 12h–6? Cleary Gottlieb and Makinson Cowell.
add?
• Should there be limitations placed 111 These benefits include termination of
Exchange Act reporting regarding a subject class of 112 A prior Form 15 filer would have to furnish
on a successor issuer’s eligibility to use securities and the immediate availability of the Rule its home country documents, required under Rule
Rule 12h–6? If so, what are those 12g3–2(b) exemption upon the termination of 12g3–2(b), on the Internet the same as any other
limitations? reporting. Form 15F filer. See Part II.H., below.
E. Public Notice Requirement F. Form 15F As with Form 15, and as originally
Like our current exit rules, proposed, filing of the reproposed Form
We are reproposing a public notice
reproposed Rule 12h–6 would require a 15F would immediately suspend an
requirement as a condition to
foreign private issuer to file issuer’s Exchange Act reporting
termination of reporting under Rule
electronically on EDGAR a form obligations regarding the subject class of
12h–6, except for prior Form 15
certifying that it meets the requirements securities and commence a 90-day
filers.113 Pursuant to this requirement,
for ceasing its Exchange Act reporting waiting period. If, at the end of this 90-
an issuer of equity or debt securities or
obligations. By signing and filing new day period, the Commission has not
a successor issuer would have to
Form 15F, a foreign private issuer objected to the filing, the suspension
publish, either before or on the date that
would be certifying that: would automatically become a
it files its Form 15F, a notice in the
• It meets all of the conditions for termination of registration and
United States that discloses its intent to
termination of Exchange Act reporting reporting. If the Commission denies the
terminate its section 13(a) or 15(d)
specified in Rule 12h–6; and Form 15F or the issuer withdraws it,
reporting obligations. The issuer would
have to publish the notice, such as a • There are no classes of securities within 60 days of the date of the denial
other than those that are the subject of or withdrawal, the issuer would be
press release, through a means
the Form 15F regarding which the issuer required to file or submit all reports that
reasonably designed to provide broad
has Exchange Act reporting obligations. would have been required had it not
dissemination of the information to the
Unlike current Form 15, reproposed filed the Form 15F.114
public in the United States. The issuer
Form 15F would require a foreign Some commenters requested that we
also would be required to submit a copy
private issuer to provide disclosure shorten the 90 day period to 60 days or
of the notice, either under cover of a
regarding several items in order to lengthen the time in which an issuer
Form 6–K before or at the time of filing
provide investors with information must file or submit Exchange Act
of the Form 15F, or as an exhibit to the
regarding an issuer’s decision to reports upon withdrawal of its Form
Form 15F. The primary purpose of this
terminate its Exchange Act reporting 15F. We are not proposing to do so
reproposed notice provision is to alert
obligations. The information would also because the reproposed time periods are
U.S. investors who have purchased the
assist Commission staff in monitoring based on those established under Form
issuer’s securities about the issuer’s
the use of Rule 12h–6. 15 and the current exit rules, which we
intended exit from the Exchange Act
Most commenters that addressed the believe have proven adequate.
registration and reporting system.
originally proposed Form 15F generally After filing the reproposed Form 15F,
The reproposed notice provision is agreed with its form and content.
substantially similar to the originally an issuer would have no continuing
Accordingly, the reproposed Form 15F obligation to make inquiries or perform
proposed notice requirement, except is substantially similar to the earlier
that, under the earlier proposed other work concerning the information
proposed Form 15F. Like the originally contained in the Form 15F, including its
provision, the issuer would have had to proposed form, the reproposed Form
publish the notice at least 15 business assessment of trading volume or
15F would solicit information regarding: ownership of its securities. However,
days before it files its Form 15F. At the • An issuer’s Exchange Act reporting
suggestion of commenters, we have the reproposed Form 15F would require
history;
an issuer to undertake to withdraw its
revised the notice provision simply to • When it last sold registered
require an issuer to publish the notice Form 15F before the date of
securities in the United States other
before or on the date of filing of its Form effectiveness if it has actual knowledge
than those excluded from consideration
15F. We agree that a fixed, prior Form of information that causes it reasonably
under Rule 12h–6;
15F notice requirement would be of • The primary trading market for an to believe that, at the date of filing the
little benefit to investors and would issuer’s equity securities that is the Form 15F:
only serve to prolong the termination subject of its Form 15F; • The average daily trading volume of
process. • Trading volume data for an issuer’s its subject class of securities in the
The reproposed notice requirement equity securities in the United States United States during a recent 12-month
would not apply to a prior Form 15 filer and in its primary trading market, if period exceeded 5 percent of the
that files a Form 15F to terminate its applicable; average daily trading volume of that
registration and reporting obligations • The number of an issuer’s equity or class of securities in the issuer’s primary
under Rule 12h–6(h). Since a prior Form debt securities record holders, if trading market during the same period,
15 filer would already have ceased its applicable; and if proceeding under Rule 12h–6(a)(4)(i);
Exchange Act reporting obligations, • The classes of equity and debt • Its subject class of securities was
investors would gain little from the securities, if any, that are the subject of held of record by 300 or more United
publishing of such a notice. the Form 15F. States residents or 300 or more persons
In addition, we have revised the worldwide, if proceeding under Rule
Comment Solicited proposed form to conform to the 12h–6(a)(4)(ii) or Rule 12h–6(b); or
We solicit comment on the changes to the originally proposed Rule • It otherwise no longer qualified for
reproposed notice requirement: 12h–6, as reproposed today. These termination of its Exchange Act
revisions include adding items to
• Would it be appropriate to adopt reporting obligations under Rule 12h–6.
acquire material information concerning
the notice requirement, as reproposed? While this reproposed undertaking is
a Form 15F filer:
• Should we require an issuer to mail substantially similar to the originally
• That is a successor issuer;

a copy of the notice to each of its U.S. • That is a prior Form 15 filer; proposed undertaking, in response to
investors in addition to, or in lieu of, • That has a primary trading market commenters, we have added the phrase
publishing the notice through a press composed of two foreign jurisdictions; ‘‘at the date of filing’’ to clarify that an
release or other publicly disseminated and issuer would not be required to
means? • That may have delisted or withdraw a Form 15F due to changes in
terminated an ADR facility prior to
113 Reproposed Rule 12h–6(g). filing the Form 15F. 114 Reproposed Rule 12h–6(f).
its trading volume or share ownership section 12(g) or suspend the duty to file would be able to maintain a sponsored
occurring after the date of filing.115 reports under section 15(d) if the class ADR facility with respect to its
of securities is held by less than 300 securities.121 This condition also would
Comment Solicited
U.S. residents or by 500 U.S. residents facilitate resales of that issuer’s
We solicit comment on the and the issuer has had total assets not securities to qualified institutional
reproposed Form 15F filing exceeding $10 million on the last day of buyers under Rule 144A.122 Moreover,
requirement: each of its most recent three fiscal having a foreign private issuer’s key
• Would it be appropriate to adopt years.116 Accordingly, we are home country documents posted in
the Form 15F filing requirement, as reproposing the amendments to English on its web site would assist U.S.
reproposed? eliminate these provisions in Rules 12g– investors who are interested in trading
• Are there any items that should be 4 and 12h–3, as originally proposed. the issuer’s securities in its primary
added to the Form 15F? Are there any securities market.123
reproposed items that should be Comment Solicited The reproposed extension of Rule
removed? We solicit comment on the 12g3–2(b) would apply both to a class
G. Amended Rules 12g–4 and 12h–3 reproposed amendments to Rules 12g–4 of equity securities formerly registered
and 12h–3: under section 12(g) and one that
Although similar to the current 300
• Would it be appropriate to adopt formerly gave rise to section 15(d)
record holder standard, reproposed Rule reporting obligations, as originally
the amendment to the current exit rules,
12h–6’s alternative threshold record proposed. The Rule 12g3–2(b)
as reproposed?
holder condition and its debt securities exemption received under reproposed
provision would offer advantages H. Amendment Regarding the Rule Rule 12g3–2(e) would remain in effect
compared to the current exit rules. As 12g3–2(b) Exemption for as long as the foreign private issuer
reproposed, Rule 12h–6’s revised We are reproposing, substantially as satisfies the rule’s electronic publication
counting method would limit the originally proposed, an amendment to conditions or until the issuer registers a
jurisdictions in which a foreign private Exchange Act Rule 12g3–2 117 that new class of securities under section 12
issuer must search for records of its U.S. would apply the exemption under or incurs section 15(d) reporting
resident holders. Moreover, reproposed Exchange Act Rule 12g3–2(b) obligations by filing a new Securities
Rule 12h–6 would enable a foreign immediately to an issuer of equity Act registration statement, which has
private issuer to terminate, rather than securities upon the effectiveness of its become effective.124
merely suspend, its section 15(d) termination of reporting under Rule Some commenters have suggested that
reporting obligations regarding a class of 12h–6.118 As a condition to the we make the application of the Rule
equity or debt securities. In addition, immediate application of the Rule 12g3– 12g3–2(b) exemption optional rather
under reproposed Rule 12h–6, a foreign 2(b) exemption upon its termination of than automatic upon the termination of
private issuer would be able to claim the reporting under Rule 12h–6, an issuer reporting under Rule 12h–6. We decline
benefits of the Rule 12g3–2(b) would have to publish subsequently in to do so as part of the reproposed rule
exemption immediately upon the English material home country amendments because we do not believe
effectiveness of its termination of documents required under Rule 12g3– that such an amendment would be in
reporting regarding a class of equity 2(b)(1)(iii) on its web site or through an the best interests of U.S. investors.
securities under section 12(g) or 15(d). electronic information delivery system Enabling an issuer to claim the
In each instance, once its termination of generally available to the public in its exemption immediately upon
reporting becomes effective under Rule primary trading market.119 termination of reporting under Rule
12h–6, an issuer would no longer have The purpose of this condition is to 12h–6, rather than upon application or
to concern itself with whether the provide U.S. investors with access to notice to the Commission at some later
number of its U.S. resident or material information about an issuer of date, should foster the prompt
worldwide holders of the class of equity securities following its publishing of that issuer’s material
subject securities has risen above the termination of reporting pursuant to home country documents on its Internet
statutory or regulatory threshold. Rule 12h–6.120 In addition, an issuer Web site, to the benefit of investors.125
Given these advantages, we believe
that, following the adoption of 116 See Exchange Act Rules 12g–4(a)(2) and 12h– through the electronic over-the-counter bulletin
reproposed Rule 12h–6, few, if any, 3(b)(2). board administered by Nasdaq. See, for example,
foreign private issuers would elect to 117 Reproposed Rule 12g3–2(e). NASD Notice to Members (January 1998).
121 In order to establish an ADR facility, an issuer
proceed under the provisions of Rule 118 Currently, foreign private issuers that
registered a class of securities under section 12 must register the ADRs on Form F–6 (17 CFR
12g–4 or Rule 12h–3 that allow a foreign 239.36) under the Securities Act. The eligibility
must wait at least 18 months following their
private issuer to terminate its termination of reporting before they would be criteria for the use of Form F–6 include the
registration of a class of securities under eligible to apply for the Rule 12g3–2(b) exemption. requirement that the issuer have a reporting
In addition, foreign private issuers with an active obligation under Exchange Act section 13(a) or have
115 We also are reproposing amendments to the or suspended reporting obligation under section established the exemption under Rule 12g3–2(b).
122 See Securities Act Rule 144A(d)(4) (17 CFR
rules governing the Commission’s delegated 15(d) have thus far not been eligible to claim the
authority to permit staff of the Division of Rule 12g3–2(b) exemption. See Rule 12g3–2(d)(1) 230.144A(d)(4)).
Corporation Finance to accelerate the effectiveness (17 CFR 240.12g3–2(d)(1)), which currently excepts 123 Brokers currently are exempt from complying
of an issuer’s termination of registration and from the 18 month requirement issuers that have with certain information obligations under
reporting under Rule 12h–6 before the 90th day at filed Securities Act registration statements using the Exchange Act Rule 15c2–11 (17 CFR 240.15c2–11)
the issuer’s request. The issuer must make this Multijurisdictional Disclosure Act (MJDS) forms. when a foreign company has established and
request in writing and file it on EDGAR. 119 Reproposed Rule 12g3–2(e)(2). maintains the Rule 12g3–2(b) exemption. See
Nevertheless, Division of Corporation Finance staff 120 Any post-termination trading of a foreign Release No. 34–41110 (February 25,1999), 64 FR
may submit requests to accelerate the effectiveness private issuer’s securities in the United States 11124 (March 8, 1999).
124 See Reproposed Rule 12g3–2(e)(3).
of an issuer’s termination of registration and would have to occur through over-the-counter
reporting pursuant to Rule 12h–6 to the markets such as that maintained by the Pink Sheets, 125 An issuer that does not want to claim the Rule
Commission for consideration, as appropriate. As LLC since, as of April, 1998, the NASD and the 12g3–2(b) exemption immediately following its
we noted in the Original Proposing Release, there Commission have required a foreign private issuer deregistration under Rule 12h–6 could abstain from
is currently a similar delegation relating to Form 15, to register a class of securities under Exchange Act posting its home country documents on its Web site
which is rarely used. section 12 before its securities could be traded at that time.
1. Extension of the Rule 12g3–2(b) securities.126 Since we are reproposing are more difficult to access, we are
Exemption Under Reproposed Rule to abolish the 18 month ‘‘waiting reproposing Rule 12g3–2(e), which
12g3–2(e) period’’ for equity securities issuers that relies on electronic access to a foreign
As reproposed, because Rule 12g3– have terminated their Exchange Act company’s home country securities
2(e) applies to any issuer that has reporting obligations pursuant to Rule documents, although not through the
terminated its reporting under Rule 12h–6, it would serve no useful purpose Commission’s electronic database.
12h–6, the rule amendment would to impose this waiting period on a debt As part of the condition requiring an
effectively extend the Rule 12g3–2(b) securities issuer that has terminated its issuer to publish its home country
exemption to: reporting obligations regarding a class of documents required under Rule 12g3–
• A foreign private issuer of equity debt securities under Rule 12h–6 and, 2(b)(1)(iii) on its Internet Web site or
securities immediately upon its sometime thereafter, determines that it through an electronic information
termination of reporting pursuant to will need the Rule 12g3–2(b) exemption delivery system generally available to
Rule 12h–6(a); for a class of equity securities. the public in its primary trading market,
• A successor issuer immediately However, contrary to the suggestions reproposed Rule 12g3–2(e) would
upon its termination of reporting of some commenters, we are not require an issuer to publish English
pursuant to Rule 12h–6(c); and proposing to permit a debt securities translations of the following documents
• A prior Form 15 filer immediately issuer to claim the Rule 12g3–2(b) on its web site:
upon its termination of reporting exemption immediately upon the • Its annual report, including or
pursuant to Rule 12h–6(h). effectiveness of termination of its debt accompanied by annual financial
Currently Rule 12g3–2(d)(2) precludes securities under Rule 12h–6 on the statements;
extending the Rule 12g3–2(b) exemption possibility that, at some future date, it • Interim reports that include
to a foreign private issuer, other than a may require the exemption for a class of financial statements;
Canadian issuer using the MJDS forms, equity securities. When that date • Press releases; and
that has issued securities in a merger or arrives, the issuer may submit an • All other communications and
other similar transaction to acquire a application for the Rule 12g3–2(b) documents distributed directly to
company that has registered a class of exemption, which will provide the security holders of each class of
securities under section 12 or has a Commission with current information securities to which the exemption
reporting obligation under section 15(d). about the outstanding class of equity relates.128
As reproposed, we would amend Rule securities, including U.S. ownership Reproposed Rule 12g3–2(e) would
12g3–2(d)(2) effectively to extend the information. further require a foreign private issuer of
Rule 12g3–2(b) exemption to a successor equity securities to disclose in the Form
Comment Solicited 15F the address of its Internet Web site
issuer that has terminated its Exchange
Act reporting obligations under Rule We solicit comment on the or that of the electronic information
12h–6(c). Since we have proposed to reproposed amendments to Rule 12g3– delivery system in its primary trading
permit a successor issuer to rely on its 2: market on which it will publish the
predecessor’s reporting history for the • Would it be appropriate to extend information required under Rule 12g3–
purpose of Rule 12h–6, we believe the the Rule 12g3–2(b) amendment to an 2(b)(1)(iii).129 The purpose of this
issuer should also benefit from claiming issuer immediately upon the requirement is to alert investors and the
the Rule 12g3–2(b) exemption effectiveness of its termination of Commission regarding where investors
immediately upon the effectiveness of Exchange Act reporting obligations and others may find the company’s
its Form 15F. under Rule 12h–6, as reproposed? home country documents should a
We also propose to extend the Rule • Would it be appropriate to extend problem arise concerning the Internet
12g3–2(b) amendment immediately the Rule 12g3–2(b) amendment to location of those documents.
upon the termination of reporting successor issuers and prior Form 15 Currently non-reporting issuers that
pursuant to Rule 12h–6(h) to a foreign filers that are eligible to file a Form 15F seek the Rule 12g3–2(b) exemption must
private issuer that, before the effective under Rule 12h–6, as reproposed? submit their letter application for the
date of Rule 12h–6, terminated its • What are the estimated annual costs exemption and their home country
registration or suspended its reporting of electronically publishing the material documents to the Commission in paper.
obligations regarding a class of equity home country documents required by We agree with the commenters who
securities after filing a Form 15. This is Rule 12g3–2(b), as proposed? stated that the same primary reason for
consistent with our proposed expansion requiring an issuer to publish its home
2. Electronic Publishing of Home country documents on its Internet Web
of the scope of Rule 12h–6 to encompass Country Documents
prior Form 15 filers. Without this site after it terminates its reporting
change, a prior Form 15 filer would find Currently foreign companies claim the obligations under Rule 12h–6 applies
itself subject to the 18 month waiting Rule 12g3–2(b) exemption by submitting equally to current Rule 12g3–2(b)
period that currently exists under Rule to the Commission on an ongoing basis
the material required by the rule. This paper documents, materials received in paper are
12g3–2(d), although the issuer qualified not accessible through the EDGAR system.
for termination of reporting under Rule material may only be submitted in paper 128 Reproposed Note 1 to Rule 12g3–2(e). Rule
12h–6(h). format.127 Because paper submissions 12g3–2(b) requires an exempt issuer to submit
We further propose to permit a foreign substantially the same categories of home country
126 Reproposed Rule 12g3–2(e)(4). documents as a reporting issuer must furnish to the
private issuer that filed a Form 15F 127 A non-Exchange Act reporting issuer that has Commission under cover of Form 6–K. Moreover,
solely to terminate its reporting successfully filed an application for the Rule 12g3– both Rule 12g3–2(b) and Form 6–K state that only
obligations regarding a class of debt 2(b) exemption must currently furnish its home material information need be furnished under the
securities to apply for the Rule 12g3– country documents in paper because the rule and form. See Rule 12g3–2(b)(3) (17 CFR
2(b) exemption for a class of equity application is analogous to one submitted for an 240.12g3–2(b)(3)) and General Instruction B to Form
exemption under Exchange Act section 12(h). See 6–K.
securities any time after the Regulation S–T Rule 101(c)(16) (17 CFR 129 Note 3 to reproposed Rule 12g3–2(e). An
effectiveness of its termination of 232.101(c)(16)). Although the Commission’s EDGAR issuer would not have to update the Form 15F to
reporting regarding the class of debt database contains an entry signifying the receipt of reflect a change in that address.
exempt companies and the non- document. At a minimum, we suggest rules, so we encourage you to submit
reporting companies that eventually companies provide Web site access to your comments promptly.
will apply for the exemption. In each their home country reports for at least
III. Paperwork Reduction Act Analysis
case, the electronic posting of an a 12 month period.
issuer’s home country documents would We solicit comment on the The reproposed rule amendments
increase an investor’s ability to access reproposed electronic publishing contain ‘‘collection of information’’
those documents. requirement: requirements within the meaning of the
Therefore, we propose to amend Rule • Is it appropriate to require an Paperwork Reduction Act of 1995
12g3–2 to permit a foreign private issuer issuer, which has claimed the Rule (‘‘PRA’’).133 The titles of the affected
that, upon application to the 12g3–2(b) exemption immediately upon collection of informations are Form 20–
Commission and not after filing Form the effectiveness of its termination of F (OMB Control No. 3235–0288), Form
15F, has obtained or will obtain the Exchange Act reporting obligations 40–F (OMB Control No. 3235–0381),
Rule 12g3–2(b) exemption to publish its under Rule 12h–6, to publish in English Form 6–K (OMB Control No. 3235–
home country documents that it is 0116), new Form 15F, and submissions
its material home country documents
required to furnish on a continuous under Exchange Act Rule 12g3–2 (OMB
required by Rule 12g3–2(b) on its
basis under Rule 12g3–2(b)(1)(iii) on its Control No. 3235–0119).134 An agency
Internet web site or through an
Internet Web site or through an may not conduct or sponsor, and a
electronic information delivery system
electronic information delivery system person is not required to respond to, a
generally available to the public in its
generally available to the public in its collection of information such as Form
primary trading market, as reproposed?
primary trading market.130 As a 20–F or new Form 15F unless it
• Is it appropriate to permit an issuer displays a currently valid OMB control
condition to this electronic posting, an
that has obtained the Rule 12g3–2(b) number. Compliance with the
issuer that wishes to use this procedure
exemption upon application to the disclosure requirements of new Form
would have to comply with the English
Commission, and not under reproposed 15F and new Rule 12h–6, which will
translation requirements of reproposed
Rule 12h–6, to publish in English its affect the above collections of
Rule 12g3–2(e). It also would have to
material home country documents information, is mandatory.
provide the Commission with the
address of its Internet Web site or that required by Rule 12g3–2(b) on its Form 20–F sets forth the disclosure
of the electronic information delivery Internet web site or through an requirements for a foreign private
system in its primary trading market in electronic information delivery system issuer’s annual report and registration
its application for the Rule 12g3–2(b) generally available to the public in its statement under the Exchange Act as
exemption or in an amendment to that primary trading market, as reproposed? well as many of the disclosure
application. General Request for Comments requirements for a foreign private
Because currently the Commission issuer’s registration statements under
does not have an established means for We solicit comment on reproposed the Securities Act. We adopted Form
a non-reporting company to submit Rule 12h–6, reproposed Form 15F, 20–F pursuant to the Exchange Act and
electronically to the Commission its reproposed amendments to Rules 12g–4, the Securities Act in order to provide
initial documents under Rule 12g3– 12h–3, and 12g3–2, as well as to all investors with information about foreign
2(b)(1)(i) and (ii),131 an applicant would other aspects of the reproposed rule private issuers that have registered
have to continue to submit its letter amendments. Here and throughout the securities with the Commission.
application and the home country release, when we solicit comment, we Form 40–F sets forth the disclosure
documents submitted in support of its are interested in hearing from all requirements regarding the annual
initial application to the Commission in interested parties, including members report and registration statement under
paper.132 Commenters provided several and representatives of the investing the Exchange Act for a Canadian issuer
suggestions in response to our request public, representatives of foreign that is qualified to use the
for comments relating to the operation companies and foreign industry groups, Multijurisdictional Disclosure System
of Rule 12g3–2(b) in general. We will representatives of broker-dealers, (‘‘MJDS’’). We adopted Form 40–F
consider these suggestions in future domestic issuers, and other participants pursuant to the Exchange Act in order
rulemaking, as appropriate. in U.S. securities markets. We are to permit qualified Canadian issuers to
Some commenters suggested that the further interested in learning from all prepare their Exchange Act annual
Commission impose a specific time parties what aspects of the rule reports and registration statements
limit, for example 3 years, governing reproposal they deem essential, what based primarily in accordance with
how long an issuer must keep its home aspects they believe are preferred but Canadian requirements.
country documents on its Internet Web not essential, and what aspects they Form 6–K is used by a foreign private
site. We decline to propose a specific believe should be modified. We also issuer to report material information
time limit primarily because different would like to know whether there are that it:
types of home country documents may any facts or considerations not
require different periods of electronic discussed in the comment letters 133 44 U.S.C. 3501 et seq.
134 134 A limited number of foreign private
posting. While an issuer would be submitted in response to the Original
issuers file annual reports on Form 10–K (17 CFR
required to post electronically a home Proposing Release that, in your opinion, 249.310) and a limited number of foreign private
country document for a reasonable make adoption of reproposed Rule 12h– issuers file annual reports on Form 10–KSB (17 CFR
period of time, what constitutes a 6 and the accompanying reproposed 249.310b). In voluntarily electing to file periodic
reports using domestic issuer forms, these issuers
reasonable period would depend on the rule amendments inappropriate? We are

seem to have closely aligned themselves with the
nature and purpose of the home country still interested in commenters’ views on U.S. market. Accordingly, for the purpose of the
the questions posed in the Original Paperwork Reduction Act Analysis, these issuers do
130 Reproposed Rule 12g3–2(f). Proposing Release, as we are still not appear likely to terminate their Exchange Act
131 17 CFR 240.12g3–2(b)(1)(i) and (ii). registration under new Rule 12h–6, and we have
considering those questions in light of
132 As under current practice, the applicant assumed that none of these companies will seek to
should send these initial materials to the
the reproposal. Due to the advanced use Rule 12h–6. Foreign private issuers that file
Commission’s Office of International Corporate stage of this rulemaking, we intend to periodic reports using domestic issuer forms will be
Finance in the Division of Corporation Finance. act expeditiously on the reproposed eligible, nonetheless, to use Rule 12h–6.
• Makes or is required to make public Exchange Act reporting obligations, Form 15F during the first year of use.
under the laws of the jurisdiction of its including the obligation to file an We expect that most of these estimated
incorporation, domicile or organization annual report on Form 20–F or 40–F effects would occur on a one-time,
(its ‘‘home country’’); and the obligation to submit interim rather than a recurring, basis. While we
• Files or is required to file with its Form 6–K reports, after filing a Form expect that some issuers would
home country stock exchange that is 15F. Reproposed Rule 12h–6 and the terminate their Exchange Act reporting
made public by that exchange; or accompanying rule amendments would under Rule 12h–6 and file Form 15F in
• Distributes or is required to also enable a foreign private issuer to subsequent years, we do not expect the
distribute to its security holders. claim the Rule 12g3–2(b) exemption resulting burdens and costs to be of the
A foreign private issuer may attach immediately upon the effectiveness of same magnitude as the burdens and
annual reports to security holders, its termination of reporting pursuant to costs currently expected during the first
statutory reports, press releases and the reproposed, new exit rule, and to year. Moreover, we expect that, over
other documents as exhibits or publish copies of its home country time the number of foreign private
attachments to the Form 6–K. We documents required by Rule 12g3–2(b) issuers that are encouraged to enter the
adopted Form 6–K under the Exchange on its Internet Web site instead of Exchange Act reporting system as a
Act in order to keep investors informed submitting them in paper to the result of the reproposed rule
on an ongoing basis about foreign Commission. We have based the annual amendments would increase so that, on
private issuers that have registered burden and cost estimates of the an annual basis, the number of foreign
securities with the Commission. adopted rule amendments on Forms 20– companies entering the Exchange Act
As reproposed, new Form 15F is the F, 40–F, 6–K and 15F, and on the home reporting regime would exceed the
form that a foreign private issuer would country submissions required under number exiting that regime.
have to file when terminating its Rule 12g3–2(b), on the following We published a notice requesting
Exchange Act reporting obligations estimates and assumptions: comment on the collection of
• A foreign private issuer incurs or information requirements in the
under new Exchange Act Rule 12h–6.
will incur 25% of the annual burden Original Proposing Release and
Form 15F would require a filer to
required to produce each Form 20–F or submitted these requirements to the
disclose information that would help
40–F report or Form 15F; Office of Management and Budget
investors understand the foreign private • Outside firms, including legal
issuer’s decision to terminate its (‘‘OMB’’) for review in accordance with
counsel, accountants and other advisors, the PRA.136 OMB subsequently
Exchange Act reporting obligations and incur or will incur 75% of the burden
assist Commission staff in assessing approved the proposed requirements
required to produce each Form 20–F or without change. As discussed in Part II
whether the Form 15F filer is eligible to 40–F report or Form 15F at an average
terminate its Exchange Act reporting above, we received several comment
cost of $400 per hour; letters regarding the proposed rule
obligations pursuant to Rule 12h–6. • A foreign private issuer incurs or
Exchange Act Rule 12g3–2 is an amendments, although none addressed
will incur 75% of the annual burden
exemptive rule that, under paragraph (b) their estimated effects on the collection
required to produce each Form 6–K
of that rule, provides an exemption from of information requirements. We have
report and Rule 12g3–2(b) submission,
Exchange Act section 12(g) registration revised proposed Rule 12h–6 and the
not including English translation work,
for a foreign private issuer that, in accompanying proposed rule
and 25% of the annual burden required
addition to satisfying other amendments in response to these
to perform the English translation work
requirements, submits copies of its comments. Because of these changes, we
for Form 6–K reports and Rule 12g3–
material home country documents to the have revised the estimated reporting
2(b) submissions; and
Commission on an ongoing basis. We • Outside firms, including legal and cost burdens of the reproposed rule
adopted paragraph (b) of Rule 12g3–2 in counsel, accountants and other advisors, amendments, as discussed below.
order to provide information for U.S. incur or will incur 25% of the burden A. Form 20–F
investors concerning foreign private required to produce each Form 6–K
issuers with limited securities trading in During the first year of effectiveness
report and Rule 12g3–2(b) submission,
U.S. capital markets. of reproposed Rule 12h–6, we estimate
not including English translation work,
The hours and costs associated with that as many as 25% of Form 20–F filers
at an average cost of $400 per hour, and
preparing, filing and sending Forms 20– could terminate their Exchange Act
75% of the annual burden resulting
F, 40–F, 6–K and 15F, and making reporting obligations under the new
from the English translation work for
submissions under Exchange Act Rule rule, compared to the 15% previously
Form 6–K reports and Rule 12g3–2(b)
12g3–2(b) constitute reporting and cost submissions, at an average cost of $125 estimated under the earlier, proposed
burdens imposed by those collections of per hour.135 rule amendments.137 However, we
information. We based our estimates of As was the case with the originally continue to believe that Rule 12h–6
the effects that the reproposed rule proposed rule amendments, the would encourage some foreign
amendments would have on those estimated effects of the reproposed rule companies to enter the Exchange Act
collections of information primarily on amendments reflect the initial phase-in 136 44 U.S.C. 3507(d) and 5 CFR 1320.11.
our review of the most recently period of the Exchange Act termination 137 This estimate has increased due to a number
completed PRA submissions for Forms process under new Rule 12h–6 and of revisions to the proposed rule, which should
20–F, 40–F, and 6–K, and for enable more foreign private issuers to qualify for
termination of Exchange Act reporting under
135 We relied on most of these estimates and

submissions under Rule 12g3–2(b), on
assumptions for the proposed rulemaking. reproposed Rule 12h–6 than under the proposed
the particular requirements for those However, at the original proposing stage, we used rule. A review by the Commission’s Office of
forms and submissions, and on relevant an estimated hourly rate of $300 for work Economic Analysis of trading volume data on a
information, for example, concerning performed by an outside firm, not including English sample of foreign Exchange Act reporting
comparative trading volume for translation work. We recently increased the companies that filed Form 20–F during 2004
estimated outside firm rate to $400/hour after suggests that approximately 30% of filers would
numerous filers of those forms. consulting with several private law firms. We have meet the U.S. trading volume threshold of the
Reproposed Rule 12h–6 would permit used the $400/hour rate for outside firms in this reproposed rule. That percentage may vary by
a foreign private issuer to terminate its reproposing rulemaking. region.
registration and reporting regime for the amendments.144 However, the C. Form 6–K
first time. Consequently, during the first reproposed rule could encourage some During the first year of effectiveness
effective year of Rule 12h–6, the number foreign companies to enter the Exchange of reproposed Rule 12h–6, we estimate
of Form 20–F annual reports filed could Act registration and reporting regime for that as many as 23% of foreign private
increase by 5%, leading to a net the first time, including some that issuers that furnish Form 6–K reports
decrease of 20% for Form 20–Fs filed would be eligible to use the MJDS could terminate their Exchange Act
over this same period. This net decrease forms, including the Form 40–F annual reporting obligations under the new
would cause: report. Consequently, over this same rule,152 compared to the 14% previously
• The number of Form 20–Fs filed to period, the number of Form 40–F estimated under the originally proposed
decrease to 880, which is 110 less than annual reports filed could increase by rule amendments. However, the
the 990 estimated under the originally approximately 3%, resulting in a net reproposed rule could encourage some
proposed rule; 138 decrease of 7% for Form 40–Fs filed foreign companies to enter the Exchange
• The total number of burden hours over this same period.145 This net Act registration and reporting regime for
required to produce Form 20–F 139 to decrease would cause: the first time, including those that
decrease to 2,314,400 total hours, which • The number of Form 40–Fs filed to would furnish Form 6–K reports.
is 289,300 hours less than the decrease total 125; 146 Consequently, over this same period,
to 2,603,700 total hours estimated under • The number of burden hours the number of Form 6–K reports
the originally proposed rule; 140 required to produce Form 40–F 147 to furnished could increase by as much as
total 53,375 total hours; 148 5%,153 resulting in a net decrease of
• The total number of burden hours
• The number of burden hours 18% for Form 6–Ks furnished over this
required by foreign private issuers to
required by foreign private issuers to same period. This net decrease would
produce Form 20–F to decrease to
produce Form 40–F to total 13,344 cause:
578,600 total hours, which is 72,325
hours; 149 and • The number of Form 6–K reports
hours less than the decrease to 650,925
• The cost incurred by outside firms furnished to decrease to 12,022, which
total hours estimated under the
to produce Form 40–F to total is 1,320 less than the 13,342 estimated
orginally proposed rule; 141 and
$16,012,500, which is $4,003,125 150 under the originally proposed rule;154
• The cost incurred by outside firms more than the $12,009,375 estimated • The total number of burden hours
to produce Form 20–F to total under the originally proposed rule.151 required to produce the Form 6–Ks 155
$694,320,000,142 which is $108,487,500 to decrease to 104,591 total hours,156
more than the $585,832,500 estimated 144 We do not expect the expanded scope of
which is 12,054 hours less than the
under the originally proposed rule.143 reproposed Rule 12h–6 to have as great an effect on decrease to 116,645 total hours
MJDS filers as other foreign reporting companies
B. Form 40–F since, typically, the percentage of an MJDS filer’s estimated under the originally proposed
shares held by U.S. residents and the U.S. trading rule;
During the first year of effectiveness volume relating to those shares is significant. • The total number of burden hours
of reproposed Rule 12h–6, we estimate Moreover, because of their close proximity to U.S. required by foreign private issuers to
that as many as 10% of Form 40–F filers capital markets, we believe MJDS filers are less
likely to seek to terminate their Exchange Act
produce Form 6–K 157 to decrease to
could terminate their Exchange Act reporting obligations than other foreign private 65,369 hours,158 which is 17,572 hours
reporting obligations under the new issuers. Accordingly, based on current experience,
rule, which is the same percentage we expect no more than 10% of Form 40–F filers 152 This estimate is based on the estimated
previously estimated under the would terminate their Exchange Act reporting number of Form 20–F and Form 40–F filers that are
obligations under reproposed Rule 12h–6. expected to terminate their Exchange Act reporting
originally proposed rule 145 This is the same percentage previously obligations under reproposed Rule 12h–6. 1,100
estimated under the originally proposed rule Form 20–Fs × .25 = 275; 134 Form 40–Fs × .10 =
138 1,100 Form 20–Fs filed annually (prior to this amendments. 13; 288 = .23 × 1,234.
rulemaking) × .20 = 220; 1,100—220 = 880 Form 146 134 Form 40–Fs filed annually (prior to this 153 This estimate is based on the estimated
20–Fs filed annually. rulemaking) × .07 = 9; 134¥9 = 125 Form 40–Fs number of foreign private issuers that are expected
139 As in the Original Proposing Release, we filed annually. to enter the Exchange Act reporting regime and file
estimate that a foreign private issuer requires on 147 As in the Original Proposing Release, we Form 20–Fs or Form 40–Fs as a result of this
average 2,630 hours to produce each Form 20–F. estimate that it takes 427 hours on average to reproposed rulemaking during the first year of
140 880 Form 20–Fs filed annually × 2,630 hours produce a Form 40–F report. effectiveness. 1,100 Form 20–Fs × .05 = 55; 134
per Form 20–F = 2,314,400 hours. 148 125 Form 40–Fs filed annually × 427 hours per Form 40–Fs × .03 = 4; 59 = .05 × 1,234.
141 880 Form 20–Fs × 2,630 hours per Form 20– 154 14,661 Form 6–K reports × .18 = 2,639;
Form 40–F = 53,375 hours.
F × .25 = 578,600 hours. Thus, we estimate that, 149 125 Form 40–Fs filed annually × 427 hours per 14,661–2,639 = 12,022 Form 6–K reports.
during the first year of effectiveness of Rule 12h– Form 40–F × .25 = 13,344 hours. Thus, we estimate 155 In the Original Proposing Release, we
6, foreign private issuers could incur a reduction of that, during the first year of effectiveness of estimated that, prior to this rulemaking, it took a
144,650 hours in the number of burden hours reproposed Rule 12h–6, foreign private issuers total of 127,197 annual burden hours to produce the
required to produce Form 20–F. 220 Form 20–Fs × could incur a reduction of 961 hours in the number 14,661 Form 6–Ks, or approximately 8.7 hours per
2,630 hrs × .25 = 144,650 hours. Using an estimated of burden hours required to produce Form 40–F. 9 Form 6–K (for work performed by foreign private
hourly rate of $175 for in-house work, foreign Form 40–Fs × 427 hrs. × .25 × = 961 hrs. This could issuers and outside firms). We continue to use this
private issuers could incur Form 20–F cost savings result in estimated Form 40–F cost savings for 8.7 hour estimate for the reproposed rule
of $25,313,750 during Rule 12h–6’s first year of foreign private issuers of $168,175. 961 hrs. × $175/ amendments.
effectiveness. 144,650 hrs. × $175/hr. = hr. = $168,175. 156 12,022 Form 6–K reports × 8.7 hours = 104,591
$25,313,750. 150 The $4,003,125 increase results from an hours.

142 880 Form 20–Fs × 2,630 hours × .75 × $400/ increase in the estimated outside firm hourly rate 157 In the Original Proposing Release, we
hour = $694,320,000. The $108,487,500 increase from $300 to $400. estimated that the amount of time required to
reflects the increase in the estimated outside firm 151 125 Form 40–Fs filed annually × 427 hours per translate foreign language materials into English
hourly rate from $300 to $400. Form 40–F x .75 × $400/hour = $16,012,500. This constitutes approximately 8% of the total hours
143 We further estimate cost savings of estimate corresponds to estimated cost savings of required to produce Form 6–K. We have revised
$173,580,000 regarding outside firms’ production of $1,152,900 in connection with outside firms’ this estimate to 25% based on updated information
Form 20–Fs during Rule 12h–6’s first year of production of Form 40–F during reproposed Rule provided by financial printer representatives.
effectiveness. 220 Form 20–Fs × 2,630 hrs. × .75 × 12h–6’s first year of effectiveness. 9 × 427 hrs. × .75 158 104,591 hours × .25 = 26,148 hours for English
$400/hr. = $173,580,000. Thus, during the first year × $400/hr. = $1,152,900. Thus, during the first year translation work; 104,591 hours¥26,148 hours =
of its effectiveness, Rule 12h–6 could result in total of its effectiveness, Rule 12h–6 could result in 78,443 hours for non-English translation work;
estimated Form 20–F cost savings of $198,893,750. estimated total Form 40–F cost savings of $168,175 78,443 hours × .75 = 58,832 hours for non-English
$25,313,750 + $173,580,000 = $198,893,750. + $1,152,900 = $1,321,075. translation work performed by foreign private
less than the decrease to 82,941 total • The number of burden hours During the first year of effectiveness
hours estimated under the originally required to produce Form 15F 163 to of reproposed Rule 12h–6, we estimate
proposed rule;159 and total 10,530 hours,164 which is 5,190 that as many as 351 foreign private
• The cost incurred by outside firms hours more than the 5,340 hours issuers could claim the Rule 12g3–2(b)
to produce Form 6–K to total estimated under the originally proposed exemption immediately upon the
$10,295,775,160 which is $2,078,475 rule amendments; effectiveness of their termination of
• Foreign private issuers to incur a reporting under reproposed Rule 12h–
more than the $8,217,300 estimated total of 2,633 hours to produce Form
under the originally proposed rule.161 6.170 This increase in the number of
15F,165 which is 1,298 hours more than Rule 12g3–2(b) exempt issuers would
D. Form 15F the 1,335 hours estimated under the cause:
originally proposed rule amendments; • The number of issuers claiming the
During the first year of effectiveness and Rule 12g3–2(b) exemption to total 1,036;
of reproposed Rule 12h–6, we estimate • Outside firms to incur a total cost • The number of Rule 12g3–2(b)
that as many as 351 foreign private of $3,159,200 to produce Form 15F,166 submissions made annually to total
issuers 162 could file a Form 15F to which is $1,174,700 more than the 12,432;
terminate their Exchange Act reporting $1,984,500 estimated under the • The number of annual burden hours
obligations compared to the 178 originally proposed rule required to produce these Rule 12g3–
previously estimated under the amendments.167 2(b) submissions to total 49,728 hours;
originally proposed rule amendments. E. Rule 12g3–2(b) Submissions • Foreign private issuers to incur a
This increase in the estimated number total of 31,080 annual burden hours to
of Form 15F filers could cause: We estimate that 685 foreign private
produce these Rule 12g3–2(b)
issuers currently have obtained the Rule
submissions, or 2.5 annual burden
12g3–2(b) exemption.168 In addition, we
issuers; 26,148 hours × .25 = 6,537 hours of English hours per submission;171 and
estimate that each Rule 12g3–2(b)
translation work performed by foreign private • Outside firms to incur a total cost
issuers; 58,832 hours + 6,537 hours = 65,369 total exempt issuer currently makes 12 Rule
hours for Form 6–K work performed by foreign 12g3–2(b) submissions per year for a of $4,909,275 172 to produce the Rule
private issuers, or 5.4 hours for foreign private total of 8,220 Rule 12g3–2(b) 12g3–2(b) submissions.173
issuer work per Form 6–K.
159 We further estimate that, during the first year
submissions. We further estimate that it 170 This amount includes the estimated 288 Form
of effectiveness of reproposed Rule 12h–6, foreign takes a total of 32,880 annual burden 20–F and 40–F filers expected to terminate their
private issuers could incur a reduction of 14,349 hours, or 4 annual burden hours per Exchange Act reporting obligations under
hours in the number of burden hours required to submission (for work performed by reproposed Rule 12h–6 as well as the estimated 63
produce Form 6–K. 2,639 Form 6–Ks × 8.7 hours foreign private issuers and outside prior Form 15 filers expected to file a Form 15F to
= 22,959 hours; 22,959 hours × .25 = 5,740 hours make their prior termination or suspension of
of English translation work; 5,740 hours × .25 = firms), to produce the 8,220 Rule 12g3– reporting under Rule 12h–6.
1,435 hours of English translation work for foreign 2(b) submissions.169 171 Because the home country document
private issuers; 22,959 × .75 = 17,219 hours of non- submission requirement under Rule 12g3–2(b) is
English translation work; 17,219 × .75 = 12,914 163 In the Original Proposing Release, we similar to the home country document submission
hours of non-English translation work for foreign estimated that the production of each Form 15F requirement under Form 6–K, we have used the
private issuers; 1,435 + 12,914 = 14,349 hours. This would require 30 hours. Although we have revised same assumptions regarding the English and non-
could result in estimated Form 6–K cost savings of some aspects of the originally proposed Form 15F, English translation work required under Rule 12g3–
$2,511,075 for foreign private issuers during the we do not believe these changes are significant 2(b) that we adopted for Form 6–K submissions.
first year of reproposed Rule 12h–6’s effectiveness. enough to affect materially this 30 hour estimate. Accordingly: 49,728 hours × .25 = 12,432 total
14,349 hrs. × $175/hr. = $2,511,075. Therefore, we continue to use this estimate for the annual burden hours for English translation work;
160 78,443 hours × .25 = 19,611 hours × $400/hour reproposed rule amendments. 49,728¥12,432 = 37,296 total annual burden hours
= $7,844,400 for non-translation work; 26,148 hours 164 351 Form 15Fs × 30 = 10,530 hours. required for non-English translation work; 37,296
× .75 = 19,611 hours × $125/hour = $2,451,375 for 165 10,530 hours × .25 = 2,633 hours. This could hours × .75 = 27,972 total annual burden hours
English translation work; $7,844,400 + $2,451,375 result in estimated Form 15F costs for foreign incurred by foreign private issuers for non-English
= $10,295,775 for total work performed by outside private issuers of $460,775 during reproposed Rule translation work; 12,432 hours × .25 = 3,108 total
firms. The $2,078,475 increase reflects the increase 12h–6’s first year of effectiveness. 2,633 hrs. × $175 annual hours incurred by foreign private issuers for
in the estimated outside firm hourly rate from $300 = $460,775. English translation work; 27,972 + 3,108 = 31,080
to $400.and the increase in the estimated outside 166 10,530 hours × .75 = 7,898 hours; 7,898 hours total annual burden hours incurred by foreign
firm rate for English translation work from $75 to × $400/hour = $3,159,200. The $3,159,200 increase private issuers for Rule 12g3–2(b) submissions, or
$125/hour based on current information provided reflects the increase in the number of estimated 2.5 annual burden hours per submission. Of the
by financial printer representatives. Form 15F filers and the increase in the estimated 31,080 hours, 10,530 hours would result from
161 This estimate corresponds to estimated cost outside firm hourly rate from $300 to $400. adoption of the reproposed rules and 20,550 hours
savings of $2,260,025 in connection with outside 167 Thus, reproposed Rule 12h–6 could result in represents an adjustment from the previous PRA
firms’ production of Form 6–K during Rule 12h–6’s total estimated Form 15F costs of $3,619,975 during estimates for Rule 12g3–2 submissions.
first year of effectiveness. 5,740 hrs. × .75 × $125/ its first year of effectiveness. $460,775 + $3,159,200 172 49,728 hours × .25 = 12,432 hours for English
hour = $538,125 for English translation work; = $3,619,975. translation work; 12,432 hours × .75 = 9,324 hours;
17,219 × .25 × $400/hour = $1,721,900 for non- 168 This estimate is based on Commission staff’s 9,324 hours × $125 = $1,165,500 for English
English translation work. $538,125 + $1,721,900 = most recent annual review of the number of current translation work; 49,728 hours ¥12,432 hours =
$2,260,025 in Form 6–K cost savings for outside Rule 12g3–2(b) exempt companies, which will be 37,296 hours for non-English translation work;
firms. Thus, Rule 12h–6 could result in total available soon on our Internet Web site at http:// 37,296 hours × .25 = 9,324 hours; 9,324 hours ×
estimated Form 6–K cost savings of $4,771,100. www.sec.gov/divisions/corpfin.shtml. $400 = $3,729,600 for non-English translation work;
$2,511,075 + $2,260,025 = $4,771,100. 169 These estimates represent an adjustment of $1,165,500 + $3,729,600 = $4,895,100 for total work
162 We derived this estimate from the number of
31,080 hours from the 1,800 total hours previously performed by outside firms. Of that total amount,
Form 20–F filers (275) and Form 40–F filers (13) reported for Rule 12g3–2(b) submissions. As part of $1,658,475 would result from adoption of the
estimated to elect to terminate their Exchange Act this rulemaking, we have re-evaluated the number reproposed rules and $3,236,625 constitutes an
reporting obligations under reproposed Rule 12h– adjustment from the previous PRA estimates for
of foreign private issuers that currently claim the

6 during the first year of the rule’s effectiveness. We Rule 12g3–2(b) exemption, the number of Rule Rule 12g3–2 submissions.
then added to this sum (288) the number of prior 12g3–2(b) submissions made by them, and the 173 We further estimate that reproposed Rule 12h–
Form 15 filers (63) estimated to file a Form 15F number of burden hours required for their 6 and the accompanying rule amendments could
during the first year of reproposed Rule 12h–6’s production, in addition to assessing the effects on result in total estimated Rule 12g3–2(b) costs of
effectiveness in order to make their Form 15 Rule 12g3–2(b) submissions expected to result from $3,501,225 during the first year of their
termination or suspension of reporting obligations. adoption of the final rule amendments. We believe effectiveness. 351 issuers × 12 submissions/issuer ×
The latter number is based on the approximate these estimates more accurately reflect the current 2.5 hrs./submission = 10,530 hours; 10,530 hours ×
number of foreign private issuers that filed a Form burden hours required for the collections of $175/hr. = $1,842,750 in Rule 12g3–2(b) submission
15 from 2003 through the present. information submitted under Rule 12g3–2(b). Continued
Comment Solicited and costs. Persons who desire to submit To remove a disincentive for foreign
We solicit comment on the expected comments on the collections of companies to enter U.S. public capital
effects of reproposed Rule 12h–6 and information requirements should direct markets, the reproposed rule
the accompanying reproposed rule their comments to the OMB, Attention: amendments would benefit U.S.
amendments on Form 20–F, Form 40–F, Desk Officer for the Securities and investors by enabling a foreign
Form 6–K and Rule 12g3–2(b) Exchange Commission, Office of Exchange Act reporting company to
submissions and on the expected effects Information and Regulatory Affairs, lower its costs of compliance in
of reproposed Form 15F under the PRA. Washington, DC 20503, and send a copy connection with Exchange Act
In particular, we solicit comment on: of the comments to Nancy M. Morris, deregistration. This reduction in the
• The extent to which foreign private Secretary, Securities and Exchange cost of compliance would directly
issuers would respond to reproposed Commission, 100 F Street, NE., benefit both foreign companies and their
Rule 12h–6 by electing to file Form 15F Washington, DC 20549–9303, with investors, including those resident in
to terminate their registration and reference to File No. S7–12–05. the United States.
reporting in the U.S.; Requests for materials submitted to the The reproposed rule amendments
• How many foreign private issuers OMB by us with regard to these would result in foreign private issuers
would join the Exchange Act collections of information should be in incurring lower costs of Exchange Act
registration and reporting regime for the writing, refer to File No. S7–12–05, and compliance in four possible ways. First,
first time as a result of the reproposed be submitted to the Securities and rather than require a foreign private
rule; Exchange Commission, Records issuer to determine the number of its
• How accurate are our burden hour Management, Office of Filings and U.S. holders, as is the case under the
and cost estimates for Forms 20–F, 40– Information Services, 100 F Street, NE., current exit rules, reproposed Rule 12h–
F, and 6–K, and Rule 12g3–2(b) Washington, DC 20549. Because the 6 would enable a foreign private issuer
submissions expected to result from the OMB is required to make a decision to rely solely on trading volume data
reproposed rule amendments; concerning the collections of regarding its securities in the United
• How accurate are our burden hour information between 30 and 60 days States and its primary trading market
and cost estimates for reproposed Form after publication, your comments are when determining whether it may
15F; and best assured of having their full effect if terminate its Exchange Act reporting
• Whether most of the effects of the OMB receives them within 30 days obligations. Because trading volume
reproposed Rule 12h–6 would occur of publication. data is more easily obtainable than
during the first year, as expected, or information regarding its U.S.
over a longer period, for example, IV. Cost-Benefit Analysis
shareholders, the reproposed rule
during the first two or three years. A. Expected Benefits should lower the costs of Exchange Act
We further solicit comment in order termination for foreign private issuers.
to: Reproposed Rule 12h–6 and the Second, reproposed Rule 12h–6
• Evaluate whether the reproposed accompanying rule amendments would would allow a foreign firm to terminate
collections of information are necessary benefit U.S. investors to the extent that its Exchange Act reporting obligations
for the proper performance of the they remove a possible disincentive for regarding a class of equity securities and
functions of the Commission, including foreign companies that are not currently immediately obtain the Rule 12g3–2(b)
whether the information will have Exchange Act reporting companies to exemption. Accordingly, such a
practical utility; register their equity and debt securities terminating foreign private issuer would
• Determine whether there are ways with the Commission. In response to be able to avoid the costs associated
to enhance the quality, utility, and foreign companies’ concerns about with continued annual verification that
clarity of the information to be Exchange Act reporting and other its number of holders of record remains
collected; obligations, these rules would fine-tune below 300.
• Evaluate whether there are ways to the criteria by which a foreign company
minimize the burden of the collections Third, the reproposed rule would
may terminate those obligations. In so permit an issuer to rely on the
of information on those who respond, doing, the reproposed rule amendments
including through the use of automated assistance of an independent
should over time remove an information services provider when
collection techniques or other forms of impediment to foreign company access
information technology; and determining whether it falls below the
and participation in U.S. public capital 300 U.S. holder standard. The option to
• Evaluate whether the reproposed markets while still providing U.S.
rule amendments will have any effects hire an independent information
investors with the protections afforded services provider may be a more
on any other collections of information by our Exchange Act reporting regime.
not previously identified in this section. efficient and cost-effective mechanism
Any member of the public may direct The reproposed rule amendments to make that determination. Moreover, a
to us any comments concerning these should remove a disincentive for foreign foreign company may save costs when
burden and cost estimates and any firms to enter our Exchange Act assessing its eligibility to terminate its
suggestions for reducing the burdens reporting regime by lowering the cost of registration and reporting under the 300
exiting from that regime. Investors are record holder provision of reproposed
costs for foreign private issuers. For outside firm expected to benefit from the Rule 12h–6, since the rule would limit
costs: 351 issuers × 12 submissions/issuer × 4 hrs./ amendments by being able to purchase the number of jurisdictions in which a
submission = 16,848 hours; 16,848 × .25 = 4,212
shares in foreign firms that have been foreign private issuer must search for
hours of English translation work; 4,212 × .75 ×
$125 = $394,875 of English translation costs for
registered with the Commission and the amount of securities represented by
outside firms. 16,848 hours × .75 = 12,636 hours of that, therefore, provide a high level of accounts of customers resident in the
non-English translation work; 12,636 × .25 × $400 investor protection. In addition, U.S. United States held by brokers, dealers,
= $1,263,600 of non-English translation costs for investors may incur lower transaction banks and other nominees. The current
outside firms. $394,875 + $1,263,600 = $1,658,475
in total Rule 12g3–2(b) submission costs for outside
costs when trading a foreign company’s rules require a foreign private issuer to
firms. $1,842,750 + $1,658,475 = $3,501,225 in total shares on a U.S. exchange relative to a conduct a worldwide search for such
estimated Rule 12g3–2(b) costs. foreign exchange. U.S. customer accounts.
Fourth, once having terminated its its termination of reporting under incur costs associated with hiring an
reporting obligations under reproposed reproposed Rule 12h–6.178 attorney or investment adviser, to the
Rule 12h–6, a foreign company would We expect that reproposed Rule 12h– extent that they have not already done
no longer be required to incur costs 6 would enable some foreign registrants so, to explain the material differences, if
associated with producing an Exchange to avoid other recent U.S. regulation, any, between a foreign company’s home
Act annual report or interim Form 6–K such as the Sarbanes-Oxley Act.179 country reporting requirements, as
reports.174 Based on estimates and Investors would lose the benefits reflected in its home country annual
assumptions used for the purpose of the afforded by the Sarbanes-Oxley Act to report posted on its Internet Web site,
Paperwork Reduction Act, these the extent a current foreign registrant is and Exchange Act reporting
estimated cost savings could total not fully subject to that Act. requirements.
approximately $200,000,000 for the first Some U.S. investors might seek to
trade in the equity securities of a foreign Comment Solicited
year of reproposed Rule 12h–6’s
effectiveness.175 company following its termination of We solicit comment on the costs and
Exchange Act reporting under benefits to U.S. and other investors,
B. Expected Costs reproposed Rule 12h–6. U.S. investors foreign private issuers, and others who
seeking to trade the former reporting may be affected by reproposed Rule12h–
Investors could incur costs from the company’s securities in the U.S. may be 6, reproposed Form 15F and the
reproposed rule amendments to the forced to trade in over-the-counter associated reproposed rule
extent that currently registered foreign markets such as the one administered by amendments. We request your views on
companies respond to the rule changes Pink Sheets, LLC, which could result in the costs and benefits described above
by terminating their Exchange Act higher transaction costs than if the as well as on any other costs and
registration and reporting obligations foreign company had continued to have benefits that could result from adoption
with respect to their equity and debt a class of securities registered with the of the reproposed rules. We also request
securities. If Exchange Act disclosure Commission. data to quantify the costs and value of
requirements provide more information U.S. investors seeking to trade the the benefits identified. In particular, we
or protection to U.S. or other investors former reporting company’s securities in solicit comment on:
than is provided in an issuer’s primary its primary trading market also could • The number of current foreign
trading market, then all investors, both incur additional costs. For example, private issuers that are expected to
U.S. and foreign, may suffer the costs of U.S. investors who held the securities in terminate their Exchange Act
losing that information and protection the form of ADRs could incur costs registration and reporting as a result of
upon Exchange Act termination.176 If associated with the depositary’s reproposed Rule 12h–6 and the
this is the case, the announcement that conversion of the ADRs into ordinary accompanying reproposed rule
a foreign firm is terminating its shares.180 Moreover, some U.S. amendments and the timing of such
Exchange Act reporting may result in a investors could incur costs associated termination;
loss of share value and the incurrence with finding and contracting with a new • The number of prospective foreign
by investors of higher costs from trading broker-dealer who is able to trade in the companies that are expected to join the
in the firm’s equity and debt securities. foreign reporting company’s primary Exchange Act reporting regime as a
trading market. U.S. investors may face result of the reproposed rules and the
There are costs associated with the additional costs due to the cost of timing of such intial registration and
filing of reproposed Form 15F, which is currency conversion and higher reporting; and
a requirement for a foreign private transaction costs trading the securities
issuer that terminates its Exchange Act • How investors would be affected
in a foreign market. both directly and indirectly from the
registration and reporting under Rule Some investors who wish to make rule proposals, as discussed in this
12h–6.177 A foreign private issuer will investment decisions regarding former section.
also incur costs in connection with Exchange Act reporting foreign
having to post on its Internet Web site companies also may incur costs to the V. Consideration of Impact on the
in English its material home country extent that the information provided by Economy, Burden on Competition and
documents required to maintain the such companies pursuant to any home Promotion of Efficiency, Competition
Rule 12g3–2(b) exemption that it will country regulations is different from and Capital Formation Analysis
have received upon the effectiveness of that which currently is required under When adopting rules under the
the Exchange Act. Such investors could Exchange Act, Section 23(a)(2) of the
174 We recognize that, as a result of terminating
Exchange Act 181 requires us to consider
their Exchange Act reporting obligations under 178 As discussed in Part III of this release, based
reproposed Rule 12h–6, foreign firms may accrue on estimates and assumptions adopted for the
the impact that any new rule would
other cost savings that are not specifically Paperwork Reduction Act, these resulting Rule have on competition. Section 23(a)(2)
quantified in this section. One such example is an 12g3–2(b) costs could amount to $3,501,225. also prohibits us from adopting any rule
investment in an internal control system in order 179 15 U.S.C. 7201 et seq.
that would impose a burden on
to comply with the Sarbanes-Oxley Act. 180 A foreign company may terminate its ADR
175 As discussed in Part III of this release, for the competition not necessary or
facility whether or not it is an Exchange Act
first year of reproposed Rule 12h–6’s effectiveness, registrant, and reproposed Rule 12h–6 does not
appropriate in furtherance of the
estimated cost savings in connection with Forms require the termination of ADR facilities. In fact, by purposes of the Exchange Act.
20–F, 40–F and 6–K could amount to, respectively, granting foreign private issuers the Rule 12g3–2(b) Furthermore, when engaging in
$198,893,750, $1,321,075, and $4,771,100, for a exemption immediately upon their termination of
total of $204,985,925.
rulemaking that requires us to consider
reporting with regard to a class of equity securities,
176 Conversely, in countries that have similar
Rule 12h–6 would enable foreign private issuers to
or determine whether an action is
regulatory regimes and levels of investor protection, retain their ADR facilities as unlisted facilities necessary or appropriate in the public
the impact of U.S. deregistration may be mitigated. following their termination of reporting under Rule interest, Section 3(f) of the Exchange
177 As discussed in Part III of this release, based 12h–6. As reproposed, Rule 12h–6 would require an Act 182 requires the Commission to
on estimates and assumptions adopted for the issuer that has terminated a sponsored ADR facility
purpose of the Paperwork Reduction Act, these to wait a year before it may file a Form 15F in
181 15 U.S.C. 78w(a)(2).
costs could total $3,619,975 during the first year of reliance on the trading volume provision of
the reproposed form’s use. reproposed Rule 12h–6. 182 15 U.S.C. 78c(f).
consider whether the action will to register their equity and debt 1 of its Delegation of Authority rules
promote efficiency, competition and securities with the Commission by and Rule 101 of Regulation S–T, if
capital formation. reassuring foreign private issuers that, adopted, would not have a significant
In the Original Proposing Release, we should interest in the U.S. market for economic impact on a substantial
considered proposed Rule 12h–6 and their securities decline sufficiently, they number of small entities for purposes of
the accompanying proposed rule may exit the Exchange Act reporting the Regulatory Flexibility Act. The
amendments in light of the standards set system with little difficulty. reason for this certification is as follows.
forth in the above statutory sections. We By providing increased flexibility for Reproposed Rule 12h–6, reproposed
solicited comment on whether, if foreign private issuers regarding our Form 15F and the accompanying
adopted, proposed Rule 12h–6 and the Exchange Act reporting system, the reproposed rule amendments would
other proposed rule amendments would reproposed rule amendments should permit the termination of Exchange Act
result in any anti-competitive effects or encourage foreign companies to reporting by a foreign private issuer
promote efficiency, competition and participate in U.S. capital markets as regarding a class of equity securities
capital formation. We further Exchange Act reporting companies to under either Exchange Act section 12(g)
encouraged commenters to provide the benefit of investors. In so doing, the or section 15(d) for which U.S. markets
empirical data or other facts to support reproposed rule amendments should show relatively little interest. The
their views on any anti-competitive foster increased competition between reproposed rules would further permit a
effects or any burdens on efficiency, domestic and foreign firms for investors foreign private issuer that seeks
competition or capital formation that in U.S. capital markets. termination of reporting regarding a
might result from adoption of proposed Moreover, by requiring a foreign class of equity or debt securities to also
Rule 12h–6 and the other proposed rule private issuer that has terminated its terminate its section 15(d) reporting
amendments. Exchange Act reporting under obligations regarding a class of debt
Although most commenters did not reproposed Rule 12h–6 to publish its securities as long as it meets conditions
submit any empirical data to support home country documents required similar to those currently required for
their views, many commenters under Exchange Act Rule 12g3–2(b) in suspending reporting obligations under
maintained that proposed Rule 12h–6 English on its Internet Web site or section 15(d). The reproposed rule
would not achieve its intended through an electronic information amendments would also automatically
purpose—to facilitate the exit from the delivery system that is generally extend the Exchange Act Rule 12g3–2(b)
Exchange Act reporting system of a available to the public in its primary exemption to a foreign private issuer
foreign private issuer in which there is trading market, the reproposed rules that has terminated its Exchange Act
relatively little U.S. market interest and would help ensure that U.S. investors reporting obligations with regard to a
thereby remove a disincentive for other continue to have ready access to class of equity securities pursuant to
foreign companies to join that system. material information in English about reproposed Rule 12h–6 on the condition
According to these commenters, because the foreign private issuer.183 Thus, that it publish material information
a significant number of foreign reporting reproposed Rule 12h–6 and the required by its home country in English
companies would not benefit from the accompanying rule amendments should on its Internet Web site or through an
proposed new rules, other foreign foster increased efficiency in the trading electronic information delivery system
companies would avoid registering their of the issuer’s securities for U.S. that is generally available to the public
securities with the Commission out of investors following the issuer’s in its primary trading market. The
concern that once an issuer became an termination of Exchange Act reporting. reproposed rule amendments would
Exchange Act reporting company, it similarly extend an electronic
Comment Solicited
would remain one indefinitely. publishing option to a foreign private
Consequently, according to these We solicit comment on whether the issuer that has obtained the Rule12g3–
commenters, contrary to the reproposed rules would impose a 2(b) exemption upon application and
Commission’s intention, the rule burden on competition or whether they not under Rule 12h–6.
proposals would not promote would promote efficiency, competition Because reproposed Rule 12h–6 and
competition and capital formation by and capital formation. Commenters are the accompanying reproposed rule
foreign private issuers in the U.S. requested to provide empirical data and amendments would only apply to
securities markets. other factual support for their views if foreign private issuers, they would
In response to these concerns, we possible. directly affect only foreign companies
have revised the rule proposals in VI. Regulatory Flexibility Act and not domestic companies. Similarly,
several respects, including proposing a Certification reproposed Form 15F would only affect
provision that would enable a foreign foreign companies since only foreign
registrant to terminate its Exchange Act The Securities and Exchange private issuers would be permitted to
reporting obligations based solely on Commission hereby certifies, pursuant use this form.
trading volume data, which should be to 5 U.S.C. 605(b), that reproposed Rule Based on an analysis of the language
more easily obtainable than information 12h–6 and reproposed Form 15F under and legislative history of the Regulatory
regarding the number of a foreign the Exchange Act, the reproposed Flexibility Act, Congress did not intend
registrant’s U.S. holders or the amendments to Rules 12g3–2, 12g–4 that the Act apply to foreign issuers.
percentage of shares held by such and 12h–3 under the Exchange Act, and Accordingly, the entities directly
holders. We believe the reproposed rule the reproposed amendments to Rule 30– affected by the reproposed rule and
amendments will provide a foreign form amendments will fall outside the
183 Similarly, by expanding the scope of proposed
reporting company with a more efficient scope of the Act. For this reason,
Rule 12h–6 to permit prior Form 15 filers to
option of exiting the Exchange Act terminate their Exchange Act reporting obligations reproposed Exchange Act Rule 12h–6,
reporting system when U.S. investor under the reproposed, new exit rule and claim the reproposed Form 15F, and the
interest has become relatively scarce. In Rule 12g3–2(b) exemption immediately upon such accompanying reproposed rule
termination, the reproposed rules would help
so doing, reproposed Rule 12h–6 and promote the availability of material home country
amendments should not have a
the other reproposed rule amendments information in English about those issuers for U.S. significant economic impact on a
should encourage foreign private issuers investors. substantial number of small entities.
We encourage written comments PART 232—REGULATION S–T— (suspended or active) under section
regarding this certification. We request GENERAL RULES AND REGULATIONS 15(d) of the Act, except as provided by
in particular that commenters describe FOR ELECTRONIC FILINGS paragraph (e) of this section; and
the nature of any impact on small * * * * *
entities and provide empirical data to 3. The general authority citation for
(e)(1) A foreign private issuer that has
support the extent of the impact. part 232 is revised to read as follows:
filed a Form 15F (§ 249.324 of this
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, chapter) pursuant to § 240.12h-6 shall
VII. Statutory Basis and Text of 77s(a), 77sss(a), 78c(b), 78l, 78m, 78n, 78o(d),
Proposed Rule Amendments receive the exemption provided by
78w(a), 78ll(d), 80a–8, 80a–29, 80a–30, 80a– paragraph (b) of this section for a class
37, and 7201 et seq.; and 18 U.S.C. 1350.
We are reproposing the amendments of equity securities immediately upon
to Rule 30–1 of Part 200, Rule 101 of * * * * * the effectiveness of the termination of
Regulation S–T, and Exchange Act 4. Amend § 232.101 by: registration of that class of securities
Rules 12g3–2, 12g–4 and 12h–3, new a. Removing the word ‘‘and’’ at the under section 12(g) of the Act (15 U.S.C.
Exchange Act Rule 12h–6 and new end of paragraph (a)(1)(x); 78l(g)) or the termination of the duty to
Exchange Act Form 15F under the b. Removing the period and adding ‘‘; file reports regarding that class of
authority in sections 6, 7, 10 and 19 of and’’ at the end of paragraph (a)(1)(xi); securities under section 15(d) of the Act
the Securities Act184 and sections 3(b), and (15 U.S.C. 78o(d)), or both.
12, 13, 23 and 36 of the Exchange c. Adding paragraph (a)(1)(xii). (2) Notwithstanding any provision of
Act.185 The addition reads as follows: § 240.12g3–2(b), in order to satisfy the
§ 232.101 Mandated electronic conditions of the § 240.12g3–2(b)
List of Subjects
submissions and exceptions. exemption received under this
17 CFR Part 200 (a) * * * paragraph, the issuer shall publish in
(1) * * * English the information required under
Administrative practice and
(xii) Forms 15 and 15F (§ 249.323 and paragraph (b)(1)(iii) of this section on its
procedure, Authority delegations
§ 249.324 of this chapter). Internet Web site or through an
(Government agencies).
* * * * * electronic information delivery system
17 CFR Parts 232, 240 and 249 generally available to the public in its
PART 240—GENERAL RULES AND primary trading market, rather than
Reporting and recordkeeping furnish that information to the
requirements, Securities. REGULATIONS, SECURITIES
EXCHANGE ACT OF 1934 Commission.
Text of Proposed Rule Amendments (3) The § 240.12g3–2(b) exemption
5. The general authority citation for received under this paragraph will
For the reasons set out in the part 240 is revised to read as follows: remain in effect for as long as the
preamble, we propose to amend Title Authority: 15 U.S.C. 77c, 77d, 77g, 77j, foreign private issuer satisfies the
17, Chapter II of the Code of Federal 77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, electronic publication condition of
Regulations as follows. 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j, paragraph (e)(2) of this section or until
78j–1, 78k, 78k–1, 78l, 78m, 78n, 78o, 78p, the issuer registers a class of securities
PART 200—ORGANIZATION; 78q, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 80a– under section 12 of the Act or incurs
CONDUCT AND ETHICS; AND 20, 80a–23, 80a–29, 80a–37, 80b–3, 80b–4,
reporting obligations under section
INFORMATION AND REQUESTS 80b–11, and 7201 et seq.; and 18 U.S.C. 1350,
unless otherwise noted. 15(d) of the Act.
1. The general authority citation for (4) Notwithstanding the time period
* * * * * specified in § 240.12g3–2(d)(1), a foreign
part 200 is revised to read as follows: 6. Amend § 240.12g3–2 by revising private issuer that filed a Form 15F
Authority: 15 U.S.C. 77s, 77o, 77sss, 78d, paragraphs (d)(1) and (d)(2) and adding solely with respect to a class of debt
78d–1, 78d–2, 78w, 78ll(d), 78mm, 80a–37, paragraphs (e) and (f) to read as follows: securities under section 15(d) of the Act
80b–11, and 7202, unless otherwise noted.
§ 240.12g3–2 Exemptions for American (15 U.S.C. 78o(d)) may apply for the
* * * * * depositary receipts and certain foreign exemption provided by paragraph (b) of
2. Amend § 200.30–1 by adding securities. this section for a class of equity
paragraph (e)(17) to read as follows: * * * * * securities at any time following the
§ 200.30–1 Delegation of authority to (d) * * * effectiveness of its termination of
Director of Division of Corporation Finance. (1) Securities of a foreign private reporting regarding the class of debt
issuer that has or has had during the securities.
* * * * *
prior eighteen months any securities Note 1 to Paragraph (e): 1. In order to
(e) * * * registered under section 12 of the Act or maintain the § 240.12g3–2(b) exemption
(17) At the request of a foreign private a reporting obligation (suspended or obtained under this paragraph, at a
issuer, pursuant to Rule 12h–6 active) under section 15(d) of the Act minimum, a foreign private issuer shall
(§ 240.12h–6 of this chapter), to (other than arising solely by virtue of electronically publish English translations of
accelerate the termination of the the use of Form F–7, F–8, F–9, F–10 or the following documents required to be
registration of a class of securities under F–80), except as provided by paragraph furnished under paragraph (b)(1)(iii) of this
section 12(g) of the Act (15 U.S.C. 78l(g)) (e) of this section; section if in a foreign language:
or the duty to file reports under section a. Its annual report, including or
(2) Securities of a foreign private accompanied by annual financial statements;

13(a) of the Act (15 U.S.C. 78m(a)) or issuer issued in a transaction (other than b. Interim reports that include financial
section 15(d) of the Act (15 U.S.C. a transaction registered on Form F–8, F– statements;
78o(d)). 9, F–10 or F–80) to acquire by merger, c. Press releases; and
* * * * * consolidation, exchange of securities or d. All other communications and
acquisition of assets, another issuer that documents distributed directly to security
184 15 U.S.C. 77f, 77g, 77j, and 77s. had securities registered under section holders of each class of securities to which
185 15 U.S.C. 78c, 78l, 78m, 78w, and 78mm. 12 of the Act or a reporting obligation the exemption relates.
Note 2 to Paragraph (e): As used in c. Removing paragraph (b)(2), an exchange in a foreign jurisdiction
paragraph (e)(2) of this section, primary including the undesignated paragraph; that, either singly or together with the
trading market has the same meaning as d. Redesignating paragraph (b)(3) as trading of the same class of the issuer’s
under § 240.12h-6(e). (b)(2); securities in another foreign
Note 3 to Paragraph (e): A foreign private e. Revising the cite ‘‘paragraphs jurisdiction, constitutes the primary
issuer that filed a Form 15F regarding a class (b)(1)(ii) and (2)(ii)’’ to read ‘‘paragraph trading market for those securities; and
of equity securities shall disclose in the Form (b)(1)(ii)’’ in paragraph (c); and (4)(i) The average daily trading
15F the address of its Internet Web site or f. Revising the phrase ‘‘criteria (i) and
that of the electronic information delivery volume of the subject class of securities
system in its primary trading market on
(ii) in either paragraph (b)(1) or (2)’’ to in the United States during a recent 12-
which it will publish the information read ‘‘either criteria (i) or (ii) of month period has been no greater than
required under paragraph (b)(1)(iii) of this paragraph (b)(1)’’ in paragraph (d). 5 percent of the average daily trading
section. An issuer need not update the Form 9. Add § 240.12h–6 to read as follows: volume of that class of securities in the
15F to reflect a change in that address. issuer’s primary trading market during
Note 4 to Paragraph (e): A foreign private § 240.12h–6 Certification by a foreign the same period; or
issuer that filed a Form 15F solely with private issuer regarding the termination of (ii) On a date within 120 days before
respect to a class of debt securities must registration of a class of securities under the filing date of the Form 15F, a foreign
provide the Commission with the address of section 12(g) or the duty to file reports
under section 13(a) or section 15(d).
private issuer’s subject class of equity
its Internet Web site or that of the electronic securities is either held of record by:
information delivery system in its primary (a) A foreign private issuer may (A) Less than 300 persons on a
trading market when it applies for the terminate the registration of a class of
exemption under § 240.12g3–2(b) regarding a worldwide basis; or
securities under section 12(g) of the Act (B) Less than 300 persons resident in
class of equity securities. (15 U.S.C. 78l(g)) or terminate the
(f)(1) A foreign private issuer that, upon the United States.
application to the Commission and not after obligation under section 15(d) of the Act
(15 U.S.C. 78o(d)) to file or furnish Note 1 to Paragraph (a)(4): If an issuer has
filing a Form 15F, has obtained or will obtain delisted a class of equity securities from a
the exemption under § 240.12g3–2(b), may reports required by section 13(a) of the
national securities exchange or inter-dealer
publish the information required under Act (15 U.S.C. 78m(a)), or both, with quotation system in the United States, and at
paragraph (b)(1)(iii) of this section on its respect to a class of equity securities, the time of delisting, the average daily
Internet Web site or through an electronic after certifying to the Commission on trading volume of that class of securities in
information delivery system generally Form 15F (17 CFR 249.324) that: the United States exceeded 5 percent of the
available to the public in its primary trading (1) The foreign private issuer has had average daily trading volume of that class of
market, rather than furnish that information
to the Commission, as long as it complies reporting obligations under section 13(a) securities in the issuer’s primary trading
with the English translation requirements or section 15(d) of the Act for at least market threshold for the preceding 12
provided in paragraph (e) of this section. the 12 months preceding the filing of months, the issuer must wait at least 12
(2) Before a foreign private issuer may the Form 15F, has filed or furnished all months before it may file a Form 15F to
publish information electronically pursuant terminate its section 13(a) or 15(d) reporting
reports required for this period, and has
to this paragraph, it must provide the obligations in reliance on paragraph (a)(4)(i).
filed at least one annual report pursuant
Commission with the address of its Internet to section 13(a) of the Act;
Web site or that of the electronic information Note 2 to Paragraph (a)(4): An issuer that
(2) The foreign private issuer’s has terminated a sponsored American
delivery system in its primary trading market
in its application for the exemption under securities have not been sold in the Depositary Receipts facility must wait 12
§ 240.12g3–2(b) or in an amendment to that United States in a registered offering months before it may file a Form 15F to
application. under the Securities Act of 1933 (15 terminate its section 13(a) or 15(d) reporting
U.S.C. 77a et seq.) during the 12 months obligations in reliance on paragraph (a)(4)(i).
7. Amend § 240.12g–4 by: preceding the filing of the Form 15F, (b) A foreign private issuer may
a. Removing the authority citations other than securities issued: terminate its duty to file or furnish
following the section; and (i) To the issuer’s employees;
b. Revising paragraph (a) to read as reports pursuant to section 13(a) or
(ii) By selling security holders in non- section 15(d) of the Act with respect to
follows: underwritten offerings; a class of debt securities after certifying
§ 240.12g–4 Certifications of termination (iii) Upon the exercise of outstanding to the Commission on Form 15F that:
of registration under section 12(g). rights granted by the issuer if the rights (1) The foreign private issuer has filed
(a) Termination of registration of a are granted pro rata to all existing or furnished all reports required by
class of securities under section 12(g) of security holders of the class of the section 13(a) or section 15(d) of the Act,
the Act (15 U.S.C. 78l(g)) shall take issuer’s securities to which the rights including at least one annual report
effect 90 days, or such shorter period as attach; pursuant to section 13(a) of the Act; and
the Commission may determine, after (iv) Pursuant to a dividend or interest (2) On a date within 120 days before
the issuer certifies to the Commission reinvestment plan; or the filing date of the Form 15F, the class
(v) Upon the conversion of of debt securities is either held of record
on Form 15 (17 CFR 249.323) that the
outstanding convertible securities or by:
class of securities is held of record by:
(1) Less than 300 persons; or upon the exercise of outstanding (i) Less than 300 persons on a
(2) Less than 500 persons, where the transferable warrants issued by the worldwide basis; or
total assets of the issuer have not issuer; (ii) Less than 300 persons resident in
exceeded $10 million on the last day of Note to Paragraph (a)(2): The exceptions in the United States.
each of the issuer’s most recent three paragraphs (a)(2)(iii)–(v) do not apply to (c)(1) Following a merger,
fiscal years. securities issued pursuant to a standby consolidation, exchange of securities,
underwritten offering or other similar acquisition of assets or otherwise, a
* * * * * arrangement in the United States;
8. Amend § 240.12h–3 by: foreign private issuer that has succeeded
a. Removing the authority citations (3) The foreign private issuer has to the reporting obligations under
following the section; maintained a listing of the subject class section 13(a) of the Act of another issuer
b. Adding the word ‘‘and’’ at the end of securities for at least the 12 months pursuant to § 240.12g–3, or to the
of paragraph (b)(1)(ii); preceding the filing of the Form 15F on reporting obligations of another issuer
under section 15(d) of the Act pursuant may rely in good faith on the assistance (2) If the Form 15F is subsequently
to § 240.15d–5, may file a Form 15F to of an independent information services withdrawn or denied, the issuer shall,
terminate those reporting obligations if: provider that in the regular course of its within 60 days after the date of the
(i) Regarding a class of equity business assists issuers in determining withdrawal or denial, file with or
securities, the successor issuer meets the number of, and collecting other submit to the Commission all reports
the conditions under paragraphs (a)(1), information concerning, their security that would have been required had the
(a)(3) and (a)(4) of this section; or holders. issuer not filed the Form 15F.
(ii) Regarding a class of debt (e) Definitions. For the purpose of this (g) As a condition to termination of
securities, the successor issuer meets section: reporting under paragraph (a), (b) or (c)
the conditions under paragraph (b) of (1) Debt security means any security of this section, a foreign private issuer
this section. other than an equity security as defined must, either before or on the date that
(2) When determining whether it under § 240.3a11–1, including non- it files its Form 15F, publish a notice in
meets the prior reporting requirement participatory preferred stock, which is the United States that discloses its
under paragraph (a)(1) or paragraph defined as non-convertible capital stock, intent to terminate its reporting
(b)(1) of this section, a successor issuer the holders of which are entitled to a obligations under section 13(a) or
may take into account the reporting preference in payment of dividends and section 15(d) of the Act or both. The
history of the issuer whose reporting in distribution of assets on liquidation, issuer must publish the notice through
obligations it has assumed pursuant to dissolution, or winding up of the issuer, a means reasonably designed to provide
§ 240.12g–3 or § 240.15d–5. but are not entitled to participate in broad dissemination of the information
(d) Counting method. When residual earnings or assets of the issuer. to the public in the United States. The
determining under this section the (2) Employee has the same meaning as issuer must also submit a copy of the
number of United States residents the definition of employee provided in notice to the Commission, either under
holding a foreign private issuer’s equity Form S–8 (§ 239.16b). cover of a Form 6–K (17 CFR 249.306)
or debt securities: (3) Equity security has the same before or at the time of filing of the
(1)(i) Use the method for calculating meaning as under § 240.3a11–1. Form 15F, or as an exhibit to the Form
record ownership § 240.12g3–2(a), (4) Foreign private issuer has the same 15F.
except that you may limit your inquiry meaning as under § 240.3b-4. (h)(1) A foreign private issuer that,
regarding the amount of securities (5) Primary trading market means
before the effective date of this section,
represented by accounts of customers that:
terminated the registration of a class of
resident in the United States to brokers, (i) At least 55 percent of the trading
securities under section 12(g) of the Act
dealers, banks and other nominees in a foreign private issuer’s class of
or suspended its reporting obligations
located in: securities that is the subject of Form 15F
regarding a class of equity or debt
(A) The United States; took place in, on or through the
securities under section 15(d) of the Act
(B) The foreign private issuer’s facilities of a securities market in a
may file a Form 15F in order to:
jurisdiction of incorporation, legal single foreign jurisdiction or in no more
organization or establishment; and than two foreign jurisdictions during a (i) Terminate under this section the
(C) The foreign private issuer’s recent 12-month period; and registration of a class of equity securities
primary trading market, if different from (ii) If a foreign private issuer that was the subject of a Form 15
the issuer’s jurisdiction of aggregates the trading of its subject class (§ 249.323 of this chapter) filed by the
incorporation, legal organization or of securities in two foreign jurisdictions issuer pursuant to § 240.12g–4; or
establishment. for the purpose of this section, the (ii) Terminate its reporting obligations
(ii) If you aggregate the trading trading market for the issuer’s securities under section 15(d) of the Act, which
volume of the issuer’s securities in two in at least one of the two foreign had been suspended by the terms of that
foreign jurisdictions for the purpose of jurisdictions must be larger than the section or by the issuer’s filing of a
complying with paragraph (a)(3) of this United States trading market for the Form 15 pursuant to § 240.12h–3,
section, you must include both of those same class of the issuer’s securities. regarding a class of equity or debt
foreign jurisdictions when conducting (6) Recent 12-month period means a securities.
your inquiry under paragraph (d)(1)(i) of 12-calendar-month period that ended no (2) In order to be eligible to file a
this section. more than 60 days before the filing date Form 15F under this paragraph:
(2) If, after reasonable inquiry, you are of the Form 15F. (i) An issuer must currently not be
unable without unreasonable effort to (f)(1) Suspension of a foreign private required to register a class of securities
obtain information about the amount of issuer’s duty to file reports under under section 12(g) of the Act or be
securities represented by accounts of section 13(a) or section 15(d) of the Act required to file reports under section
customers resident in the United States, shall occur immediately upon filing the 15(d) of the Act; and
for purposes of this section, you may Form 15F with the Commission if filing (ii) If a foreign private issuer
assume that the customers are the pursuant to paragraph (a), (b) or (c) of terminated the registration of a class of
residents of the jurisdiction in which this section. If there are no objections securities pursuant to § 240.12g–4 or
the nominee has its principal place of from the Commission, 90 days, or such suspended its reporting obligations
business. shorter period as the Commission may pursuant to § 240.12h–3 or section 15(d)
(3) You must count securities as determine, after the issuer has filed its of the Act regarding a class of equity
owned by United States holders when Form 15F, the effectiveness of any of the securities, for at least the 12 months
publicly filed reports of beneficial following shall occur: before the filing of its Form 15F, the
ownership or information that is (i) The termination of registration of a issuer must have maintained a listing of
otherwise provided to you indicates that class of securities under section 12(g); the subject class of equity securities on
the securities are held by United States and an exchange in a foreign jurisdiction
residents. (ii) The termination of a foreign that, either singly or together with one
(4) When calculating under this private issuer’s duty to file reports other foreign jurisdiction, constitutes
section the number of your United under section 13(a) or section 15(d) of the primary trading market for the
States resident security holders, you the Act. issuer’s class of equity securities.
(3)(i) If the Commission does not Estimated average burden hours per was the subject of a Form 15 (§ 249.323 of
object, 90 days after the filing of a Form response: 30.0. this chapter) filed by the issuer pursuant to
15F under this paragraph, or such § 240.12g–4; or
United States Securities and Exchange • Terminate its reporting obligations under
shorter period as the Commission may
Commission, Washington, DC 20549 section 15(d) of the Act, which had been
determine, the effectiveness of any of suspended by the terms of that section or by
the following shall occur: Form 15F—Certification of a Foreign the issuer’s filing of a Form 15 pursuant to
(A) The termination under this Private Issuer’s Termination of § 240.12h–3, regarding a class of equity or
section of the registration of a class of Registration of a Class of Securities debt securities.
equity securities, which was the subject Under Section 12(g) of the Securities B. Certification Effected by Filing Form 15F
of a Form 15 filed pursuant to Exchange Act of 1934 or Its
By completing and signing this Form, the
§ 240.12g–4, and the duty to file reports Termination of the Duty to File Reports issuer certifies that:
required by section 13(a) of the Act Under Section 13(a) or Section 15(d) of • It meets all of the conditions for
regarding that class of securities; or the Securities Exchange Act of 1934 termination of Exchange Act reporting
(B) The termination of a foreign Commission File Numberlllll specified in Rule 12h–6 (17 CFR 240.12h–6);
private issuer’s reporting obligations lllllllllllllllllllll and
under section 15(d) of the Act, which (Exact name of registrant as specified in its • There are no classes of securities other
had previously been suspended by the charter) than those that are the subject of this Form
terms of that section or by the issuer’s lllllllllllllllllllll 15F regarding which the issuer has Exchange
(Address, including zip code, and telephone Act reporting obligations.
filing of a Form 15 pursuant to
§ 240.12h–3, regarding a class of equity number, including area code, of registrant’s C. Effective Date
principal executive offices)
or debt securities. For an issuer filing Form 15F under Rule
lllllllllllllllllllll
(ii) If the Form 15F is subsequently (Title of each class of securities covered by 12h–6(a), (b) or (c), the duty to file any
withdrawn or denied, the foreign this Form) reports required under section 13(a) of the
private issuer shall, within 60 days after Exchange Act will be suspended immediately
Place an X in the appropriate box(es) to upon filing the Form 15F. If there are no
the date of the withdrawal or denial, file indicate the provision(s) relied upon to objections from the Commission, 90 days, or
with or submit to the Commission all terminate the duty to file reports under the within a shorter period as the Commission
reports that would have been required Securities Exchange Act of 1934: may determine, after the issuer has filed its
had the issuer not filed the Form 15F. Form 15F, there shall take effect:
Rule 12h–6(a) b Rule 12h–6(c) b • The termination of registration of a class
PART 249—FORMS, SECURITIES Rule 12h–6(b) b Rule 12h–6(h) b of securities under section 12(g) of the Act;
EXCHANGE ACT OF 1934 • The termination of the issuer’s duty to
General Instructions file or submit reports under section 13(a) or
10. The authority citation for part 249 A. Who May Use Form 15F and When section 15(d) of the Act; or
continues to read in part as follows: • Both.
1. A foreign private issuer may file Form
Authority: 15 U.S.C. 78a et seq. and 7201 For an issuer that has already terminated
15F, pursuant to Rule 12h–6(a) (17 CFR
et seq.; and 18 U.S.C. 1350, unless otherwise its registration of a class of equity securities
240.12h–6(a)) under the Securities Exchange
noted. pursuant to Rule 12g–4 or suspended its
Act of 1934 (‘‘Exchange Act’’), when seeking
reporting obligations under section 15(d) or
* * * * * to terminate:
Rule 12h–3, the effectiveness of its
11. Add § 249.324 to read as follows: • The registration of a class of securities
termination of section 12(g) registration
under section 12(g) of the Exchange Act and
under Rule 12h–6 and the corresponding
§ 249.324 Form 15F, certification by a the corresponding duty to file or furnish
duty to file reports required by section 13(a)
foreign private issuer regarding the reports required by section 13(a) of the of the Act, or the termination of its
termination of registration of a class of Exchange Act; or previously suspended reporting obligations
securities under section 12(g) or the duty to • The obligation under section 15(d) of the under section 15(d) of the Act, shall also
file reports under section 13(a) or section Exchange Act to file or furnish reports occur 90 days after the issuer has filed its
15(d). required by section 13(a) of the Act regarding Form 15F under Rule 12h–6(h), or within a
This form shall be filed by a foreign a class of equity securities; or shorter period as the Commission may
• Both. determine, if there are no objections from the
private issuer to disclose and certify the 2. A foreign private issuer may file Form
information on the basis of which it Commission.
15F, pursuant to Rule 12h–6(b) (17 CFR Regardless of the particular Rule 12h–6
meets the requirements specified in 240.12h–6(b)), when seeking to terminate its provision under which it is filing the Form
Rule 12h–6 (§ 240.12h–6 of this chapter) reporting obligations under section 13(a) or 15F, an issuer that seeks an effective date
to terminate the registration of a class of section 15(d) of the Exchange Act regarding sooner than 90 days after the filing of its
securities under section 12(g) of the Act a class of debt securities. Form 15F must submit its request to the
(15 U.S.C. 78l(g)) or the duty to file 3. A foreign private issuer may file Form Commission in writing.
reports under section 13(a) of the Act 15F, pursuant to Rule 12h–6(c) (17 CFR
240.12h–6(c)), when seeking to terminate D. Other Filing Requirements
(15 U.S.C. 78m(a)) or section 15(d) of
reporting obligations under section 13(a) or You must file Form 15F and related
the Act (15 U.S.C. 78(o)(d)). In each section 15(d) of the Exchange Act to which materials, including correspondence, in
instance, unless the Commission it has succeeded pursuant to Rule 12g–3 (17 electronic format via our Electronic Data
objects, termination occurs 90 days, or CFR 240.12g–3) or Rule 15d–5 (17 CFR Gathering, Analysis, and Retrieval (EDGAR)
such shorter time as the Commission 240.15d–5). system in accordance with the EDGAR rules
may direct, after the filing of Form 15F. 4. A foreign private issuer may file Form set forth in Regulation S–T (17 CFR Part 232).
15F, pursuant to Rule 12h–6(h) (17 CFR
12. Add Form 15F (referenced in The Form 15F and related materials must be
240.12h–6(h)), if, before the effective date of in the English language as required by
§ 249.324) to read as follows: Rule 12h–6, it terminated the registration of Regulation S–T Rule 306 (17 CFR 232.306).
(Note: The text of Form 15F will not appear a class of securities under section 12(g) of the You must provide the signature required for
in the Code of Federal Regulations.) Act, or suspended its reporting obligations Form 15F in accordance with Regulation S–
OMB APPROVAL regarding a class of equity or debt securities T Rule 302 (17 CFR 232.302). If you have
under section 15(d) of the Act, in order to: technical questions about EDGAR, call the
OMB Number: 3235–0621. • Terminate under Rule 12h–6 the EDGAR Filer Support Office at (202) 551–
Expires: registration of a class of equity securities that 8900. If you have questions about the EDGAR
rules, call the Office of EDGAR and d. Pursuant to a dividend or interest date of delisting, and, as of that date, disclose
Information Analysis at (202) 551–3610. reinvestment plan; or the average daily trading volume of the
If the Form 15F is subsequently withdrawn e. Upon the conversion of outstanding subject class of securities in the United States
or denied, you must, within 60 days after the convertible securities or upon the exercise of as a percentage of the average daily trading
date of the withdrawal or denial, file with or outstanding transferable warrants issued by volume for that class of securities in your
submit to the Commission all reports that the issuer. primary trading market for the preceding 12-
would have been required had you not filed However, you must include registered month period.
the Form 15F. See Rule 12h–6(f)(2) (17 CFR offerings described in paragraphs (c) through E. Disclose whether you have terminated a
240.12h–6(f)(2)) and Rule 12h–6(h)(3)(ii) (17 (e) of this instruction if undertaken pursuant sponsored American depositary receipt
CFR 240.12h–6(h)(3)(ii)). to a standby underwritten offering or other (ADR) facility regarding the class of subject
similar arrangement in the United States. securities. If so, provide the date of the ADR
E. Rule 12g3–2(b) Exemption facility termination.
2. If you have registered equity securities
Regardless of the particular Rule 12h–6 on a shelf or other Securities Act registration Instructions to Item 4
provision under which it is proceeding, a statement under which securities remain
foreign private issuer that has filed a Form 1. ‘‘Recent 12-month period’’ means a 12-
unsold, disclose the last sale of securities
15F regarding a class of equity securities calendar-month period that ended no more
under that registration statement. If no sale
shall receive the exemption under Rule than 60 days before the filing date of this
has occurred during the preceding 12
12g3–2(b) (17 CFR 240.12g3–2(b)) for the form, as defined under Rule 12h–6(e). You
months, disclose whether you have filed a
subject class of equity securities immediately may disclose the comparative trading volume
post-effective amendment to terminate the
upon the effective date of its termination of data in response to this item in tabular format
registration of unsold securities under that
registration and reporting under Rule 12h–6. and attached as an exhibit to this Form.
registration statement.
Refer to Rule 12g3–2(e) or (f) (17 CFR 2. An issuer is ineligible to rely on
240.12g3–2(e) or (f)) for the conditions that Item 3. Primary Trading Market paragraph (a)(4)(i) of Rule 12h–6 if, as of the
a foreign private issuer must meet in order A. Identify the exchange outside the date of delisting, the average daily trading
to maintain the Rule 12g3–2(b) exemption United States, and the foreign jurisdiction in volume of the subject class of securities in
following its termination of Exchange Act which that exchange is located, on which the United States exceeded 5 percent of the
registration and reporting. you have maintained a listing of the class of average daily trading volume of that class of
securities that is the subject of this Form. securities in the issuer’s primary trading
Part I B. Provide the date of initial listing on that market, as measured over the preceding 12
The purpose of this part is to assist the foreign exchange. In addition, disclose months, and 12 months has not elapsed from
Commission in assessing whether you meet whether you have maintained a listing of the the date of delisting.
the requirements for terminating your subject class of securities on that foreign 3. An issuer is ineligible to rely on
Exchange Act reporting under Rule 12h–6. If, exchange for at least the 12 months preceding paragraph (a)(4)(i) of Rule 12h–6 if it has
pursuant to Rule 12h–6, there is an item that the filing of this Form. terminated a sponsored ADR facility and 12
does not apply to you, mark that item as C. Disclose the percentage of trading in the months has not elapsed from the date of
inapplicable. subject class of securities that occurred in the termination.
jurisdiction of your foreign listing as of a Item 5. Alternative Record Holder
Item 1. Exchange Act Reporting History recent 12-month period. Information
A. State when you first incurred the duty Instruction to Item 3
to file reports under section 13(a) or section If relying on Rule 12h–6(a)(4)(ii) (17 CFR
15(d) of the Exchange Act. When responding to this item, refer to the 240.12h–6(a)(4)(ii)):
B. State whether you have filed or definition of ‘‘primary trading market’’ in Disclose the number of record holders of
submitted all reports required under Rule 12h–6(e) (17 CFR 240.12h–6(e)). In the subject class of equity securities on a
Exchange Act section 13(a) or section 15(d) accordance with that definition, if your worldwide basis or who are United States
and corresponding Commission rules for the primary trading market consists of two residents at a date within 120 days before
12 months preceding the filing of this form, foreign jurisdictions, provide the information filing this Form. Disclose the date used for
and whether you have filed at least one required by this section for each foreign the purpose of Item 5.
annual report under section 13(a). jurisdiction. In addition, disclose whether
the trading market for your securities in at Item 6. Debt Securities
Instruction to Item 1 least one of those two foreign jurisdictions is If relying on Rule 12h–6(b) (17 CFR
If you are a successor issuer that has filed larger than the trading market for your 240.12h–6(b)):
this Form 15F pursuant to Rule 12h–6(c), and securities in the United States as of the same Disclose the number of record holders of
are relying on the reporting history of the recent 12-month period. Disclose the first your debt securities either on a worldwide
issuer to which you have succeeded under and last days of that recent 12-month period. basis or who are United States residents at a
Rule 12g–3 (17 CFR 12g–3) or Rule 15d–5 (17 date within 120 days before the date of filing
Item 4. Comparative Trading Volume Data
CFR 240.15d–5), identify that issuer and of this Form. Disclose the date used for the
provide the information required by this If relying on Rule 12h–6(a)(4)(i) (17 CFR purpose of Item 6.
section for that issuer. 240.12h–6(a)(4)(i)), provide the following
information: Instructions to Items 5 and 6
Item 2. Recent United States Market Activity A. Identify the first and last days of the 1. When determining the number of record
State when your securities were last sold recent 12-month period used to meet the holders of your equity or debt securities who
in the United States in a registered offering requirements of that rule provision. are United States residents, refer to Rule
under the Securities Act of 1933 (15 U.S.C. B. For the same recent 12-month period, 12h–6(d) (17 CFR 240.12h–6(d)) for the
77a et seq.) (‘‘Securities Act’’). disclose the average daily trading volume of appropriate counting method.
the class of securities that is the subject of 2. If you have relied upon the assistance of
Instructions to Item 2 an independent information services
this Form both in the United States and in
1. Do not include registered offerings your primary trading market. provider to determine the number of your
involving the issuance of securities: C. For the recent 12-month period, disclose United States equity or debt securities
a. To your employees, as that term is
the average daily trading volume of the holders, identify this party in your response.
defined in Form S–8 (17 CFR 239.16b); subject class of securities in the United States
b. By selling security holders in non- as a percentage of the average daily trading Item 7. Notice Requirement
underwritten offerings; volume for that class of securities in your If filing Form 15F pursuant to Rule 12h–
c. Upon the exercise of outstanding rights primary trading market. 6(a), (b) or (c):
granted by the issuer if the rights are granted D. Disclose whether you have delisted the A. Disclose the date of publication of the
pro rata to all existing security holders of the subject class of securities from a national notice, required by Rule 12h–6(g) (17 CFR
class of the issuer’s securities to which the securities exchange or inter-dealer quotation 240.12h–6(g)), disclosing your intent to
rights attach; system in the United States. If so, provide the terminate your duty to file reports under
section 13(a) or 15(d) of the Exchange Act or Part II period, if proceeding under Rule 12h–
both. 6(a)(4)(i);
B. Identify the means, such as publication Item 9. Rule 12g3–2(b) Exemption
(2) Its subject class of securities was held
in a particular newspaper, used to Disclose the address of your Internet Web of record by 300 or more United States
disseminate the notice in the United States. site or of the electronic information delivery residents or 300 or more persons worldwide,
Instruction to Item 7 system in your primary trading market on if proceeding under Rule 12h–6(a)(4)(ii) or
which you will publish the information Rule 12h–6(b); or
If you have submitted a copy of the notice required under Rule 12g3–2(b)(1)(iii) (17 CFR
under cover of a Form 6–K (17 CFR 249.306), (3) It otherwise no longer qualified for
240.12g3–2(b)(1)(iii)). termination of its Exchange Act reporting
disclose the submission date of the Form 6–
K. If not, attach a copy of the notice as an Instruction to Item 9 obligations under Rule 12h–6.
exhibit to this Form. See Rule 12h–6(g). Refer to Note 1 to Rule 12g3–2(e) for Instruction to Item 11
Item 8. Prior Form 15 Filers instructions regarding providing English After filing this Form, an issuer has no
translations of documents published
If relying on Rule 12h–6(h): continuing obligation to make inquiries or
pursuant to Rule 12g3–2(b)(1)(iii) (17 CFR
A. Disclose whether, before the effective perform other work concerning the
240.12g3–2(b)(1)(iii).
date of Rule 12h–6, you filed a Form 15 (17 information contained in this Form,
CFR 249.323) to terminate the registration of Part III including its assessment of trading volume or
a class of equity securities pursuant to Rule ownership of its securities in the United
Item 10. Exhibits
12g–4 (17 CFR 240.12g–4) or to suspend your States.
reporting obligations under section 15(d) of List the exhibits attached to this Form.
the Act regarding a class of equity or debt Signature
Instruction to Item 10
securities pursuant to Rule 12h–3 (17 CFR Pursuant to the requirements of the
240.12h–3). If so, disclose the date that you In addition to exhibits specifically
Securities Exchange Act of 1934, [name of
filed the Form 15. If you suspended your mentioned on this Form, you may attach as
registrant as specified in charter] has duly
reporting obligations by the terms of section an exhibit any document providing
authorized the undersigned person to sign on
15(d), disclose the effective date of that information that is material to your eligibility
its behalf this certification on Form 15F. In
suspension as well as the date that you filed to terminate your reporting obligations under
so doing, [name of registrant as specified in
a Form 15 to notify the Commission of that Exchange Act Rule 12h–6. You should refer
to any relevant exhibit when responding to charter] certifies that, as represented on this
suspension pursuant to Rule 15d–6 (17 CFR Form, it has complied with all of the
240.15d–6). the items on this Form.
conditions set forth in Rule 12h–6 for
B. Disclose whether, since the effectiveness Item 11. Undertakings terminating its registration under section
of your termination of registration pursuant
Furnish the following undertaking: 12(g) of the Exchange Act, or its duty to file
to Rule 12g–4, or of your suspension of
The undersigned issuer hereby undertakes reports under section 13(a) or section 15(d)
reporting pursuant to Rule 12h–3 or section
15(d) of the Exchange Act, your reporting to withdraw this Form 15F if, at any time of the Exchange Act, or both.
obligations under section 13(a) or section before the effectiveness of its termination of By: lllllllllllllllllll
15(d) of the Exchange Act have remained reporting under Rule 12h–6, it has actual Title: llllllllllllllllll
terminated or suspended. knowledge of information that causes it Date: llllllllllllllllll
C. If you terminated the registration of a reasonably to believe that, at the time of
filing the Form 15F: By the Commission.
class of equity securities pursuant to Rule
12g–4 or suspended your reporting (1) The average daily trading volume of its Dated: December 22, 2006.
obligations regarding a class of equity subject class of securities in the United States Florence E. Harmon,
securities pursuant to Rule 12h–3 or section during a recent 12-month period exceeded 5 Deputy Secretary.
15(d) of the Exchange Act, provide the percent of the average daily trading volume
disclosure required by Item 3 of this Form, of that class of securities in the issuer’s [FR Doc. E6–22405 Filed 1–10–07; 8:45 am]
‘‘Primary Trading Market.’’ primary trading market during the same BILLING CODE 8011–01–P

Proposed Rule: Investment Companies: Investment Company Governance Practices Foreign Private Issuer's Termination of Registration

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Proposed Rule: Investment Companies: Investment Company Governance Practices Foreign Private Issuer's Termination of Registration

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Thursday,

January 11, 2007

SECURITIES AND EXCHANGE on an ongoing basis to material SUPPLEMENTARY INFORMATION: We are

proposed Rule 12h–6, and because of FOR FURTHER INFORMATION CONTACT:

York Stock Exchange (NYSE) Listed Company

calculating its U.S. ADTV, an issuer would have to

(‘‘Cravath’’). markets, to the detriment of U.S. investors. In

similar approach. Regulation M at 17 CFR 242.100. Cleary Gottlieb.

63 Proposed Note 1 to paragraph (a)(4) of

a similar limitation. Gottlieb. (Business).

traded on virt-x, a cross-border trading market determination, an issuer would first

meet the proposed home country listing

This successor issuer provision would

• That is a successor issuer;

reasonable period would depend on the rule amendments inappropriate? We are

135 We relied on most of these estimates and

$25,313,750. 150 The $4,003,125 increase results from an hours.

of foreign private issuers that currently claim the

(2) Securities of a foreign private accompanied by annual financial statements;

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