SEC Limits its Practice of Confidential Review for Foreign Issuer Registration

On December 8, 2011, the SEC’s Division of Corporation Finance announced a change in its policies for reviewing registration statements of foreign issuers. When an issuer registers securities with the SEC for the first time, to conduct an initial public offering or to list its securities on a U.S. exchange, the Division invariably reviews the registration statement and provides comments before permitting it to become effective. For many years, foreign issuers have been permitted to submit these initial registration statements for review on a confidential basis, so the comment process can be substantially completed before the first public filing. This avoids conflicts with any parallel process in the home country, permits inconsistencies between U.S. and home-country practices to be addressed confidentially, and allows the issuer to withdraw or postpone the registration process without publicly disclosing its plans.

The December 8 announcement limits the practice of “non-public” review of these initial registration statements to circumstances where the registrant is: (1) a foreign government registering its debt securities; (2) a foreign private issuer that is listed or is concurrently listing its securities on a non-U.S. securities exchange; (3) a foreign private issuer that is being privatized by a foreign government; or (4) a foreign private issuer that can demonstrate that the public filing of an initial registration statement would conflict with the law of an applicable foreign jurisdiction.

The most important change concerns initial public offerings of non-U.S. equity or debt that will be listed or offered only in the United States, without any listing in the issuer’s home jurisdiction (or elsewhere outside the United States). Until now, such an IPO was eligible for non-public review, but from now on in most cases the initial filing and each amendment must be public, just as for a U.S. issuer.

Even where non-public submissions are permitted, circumstances might lead the Division to require a public filing. The December 8 announcement mentions, as examples of those circumstances, competing bids in an acquisition transaction and publicity about a proposed offering or listing.

The policy is effective immediately, even for a registrant that is already in the review process. If the registrant is no longer eligible for non-public review, its next submission must be publicly filed even if it has been proceeding on a non-public basis until now.

The change in policy was unexpected, and the announcement did not provide background on the reasons for the change except to refer to the greater frequency of foreign issuers listing only in the United States.

For the full text of the announcement, click here.

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