11 January 2007

SEC proposed changes to deregistration rules for non-US companies

The SEC released a consultation on changes to deregistration rules for non-US companies. It proposes to amend the rules allowing a foreign private issuer to terminate the registration of a class of equity securities under section 12(g) of the Securities Exchange Act of 1934 (and thus stop filing reports required as a result of registration) and to cease its reporting obligations regarding a class of equity or debt securities under section 15(d) of the Exchange Act.

Under the current rules, a foreign private issuer may find it difficult to terminate its Exchange Act registration and reporting obligations despite the fact that there is relatively little interest in the issuer's securities among United States investors. Moreover, currently a foreign private issuer can only suspend, and cannot permanently terminate, a duty to report arising under section 15(d).

Reproposed Exchange Act Rule 12h–6 would permit the termination of Exchange Act reporting regarding a class of equity securities under either section 12(g) or section 15(d) of the Exchange Act by a foreign private issuer that meets a quantitative benchmark designed to measure relative U.S. market interest for that class of securities, which does not depend on a head count of the issuer’s U.S. security holders. The reproposed benchmark would require the comparison of the average daily trading volume of an issuer’s securities in the United States with that in its primary trading market.

Because the Commission did not fully address this approach when it originally proposed Rule 12h–6, and because of other proposed changes to Rule 12h–6 not fully discussed in the original rule proposal, we are reproposing Rule 12h– 6 and the accompanying rule amendments. These rule amendments would seek to provide U.S. investors with ready access through the Internet on an ongoing basis to material information about a foreign private issuer of equity securities that is required by its home country after it has exited the Exchange Act reporting system.

Deadline for comments is 12 February 2007.

SEC proposal

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