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Securities Act Release No. 7025 Exchange Act Release No. 33134 International Series Release No. 604 November 3, 1993
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 Table of Contents
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I. AMENDMENTS TO THE MJDS
The multijurisdictional disclosure system for Canadian issuers, adopted on June 21, 1991, permits Canadian issuers meeting specified eligibility criteria to satisfy certain securities registration and reporting requirements of the Commission by providing disclosure documents prepared in accordance with the requirements of Canadian securities regulators. 1 Concurrently with the Commissions action, the Canadian Securities Administrators (the "CSA") adopted a parallel multijurisdictional disclosure system for U.S. issuers in Canada. 2 On April 28, 1993, the Commission proposed for comment the amendments to the MJDS discussed herein. 3 The Commission received six comment letters on these proposed amendments. These amendments are being adopted today substantially as proposed. 4
The Commission proposed to amend the eligibility requirements under Forms F-9, F-10 and 40-F 5 to eliminate the market capitalization threshold, to establish the public float threshold at U.S. $75 million and to shorten the reporting history requirements to as short as twelve months. Commenters expressing a view on these proposals were supportive of the elimination of the market capitalization threshold and the reduction of the reporting history requirement but were opposed to changing the public float threshold from Cn $75 million to U.S. $75 million. A U.S. $75 million threshold has been established for U.S. issuers desiring to use the Commissions short form registration form and shelf registration system for primary offerings. 6 The Commission believes it is appropriate for this same dollar threshold to apply to the MJDS inasmuch as Canadian issuers using the MJDS for offerings in the United States may make use of Canadian short form registration and shelf registration procedures. The Commission is eliminating the market capitalization requirement and establishing the public float requirement as proposed. The CSA has proposed and has indicated that it will adopt amendments to shorten the reporting history requirement for use of the POP System from 36 to 12 months. 7 In light of the CSAs actions and the support expressed by commenters on the Commissions proposal, the Commission is adopting amendments to Forms F-9, F-10 and 40-F to shorten the reporting history requirement to 12 months.
The Commission also proposed to amend Form F-9 to recognize investment grade ratings by securities rating organizations recognized by Canadian securities regulators. Commenters expressing a view on this proposal were uniformly supportive. The CSA has proposed and has indicated that it will adopt parallel amendments to National Policy Statement No. 45 to recognize investment grade ratings by securities rating organizations which are deemed to be nationally recognized statistical rating organizations ("NRSROs") under the Commissions rules. 8 In light of the above, the Commission is adopting the amendments as proposed; these amendments will, however, become effective after the Canadian securities regulators adopt parallel amendments to the Canadian MJDS, as described under "Effective Date" below.
The Commission is also adopting the proposed amendments to Item 10 of Regulation S-K 9 and Rules 134 and 436 under the Securities Act of 1933 10 to include appropriate cross-references to the ratings now recognized under Form F-9. The proposed amendments to Form F-9 to provide that the required rating must be obtained at the time of sale to the public, rather than at the time of effectiveness, and to add an instruction regarding the registrants reasonable belief of obtaining the required rating are also being adopted, as well as an amendment to Form F-7 11 relating to specifying an agent for service.
The Commission had solicited comments relating to amending the MJDS to accommodate the unallocated shelf registration of securities. The CSA has not proposed an unallocated shelf registration system and so the Commission is not taking action relating to unallocated shelf registration under the MJDS.
II. REGULATORY FLEXIBILITY ACT CERTIFICATION
Pursuant to Section 605(b) of the Regulatory Flexibility Act [5 U.S.C. 605], at the time the Commission issued its release proposing the amendments being adopted hereby, the Chairman of the Commission certified that such amendments will not have a significant impact on a substantial number of small entities. That certification, including the reasons therefor, was attached as an Appendix to such release and was published in the Federal Register.
III. COST-BENEFIT ANALYSIS
No specific data were provided in response to the Commissions request regarding the costs and benefits of the amendments being adopted today. Some commenters indicated that amendments relating to recognition of investment grade ratings by securities rating organizations recognized by Canadian securities regulators would save Canadian issuers the expense of obtaining a securities rating from those rating organizations currently specified under Form F-9. Some commenters also noted that shortening the reporting history requirement under Forms F-9 and F-10 would permit newly public companies to more quickly achieve MJDS eligibility and thus a less expensive mechanism to access the U.S. capital markets.
IV. EFFECTIVE DATE
Except for the Instruction to §239.39(a)(2) and the Instruction to General Instruction I.A. to Form F-9 as described in the next paragraph, the amendments adopted hereby shall be effective on the date specified under "Effective Date" above. In addition, except as described in the next paragraph, filings made prior to such date may proceed as if the amendments adopted hereby were effective on the date of publication of this release in the Federal Register.
The CSA has proposed amendments to National Policy Statement No. 45 which would expand the eligibility requirements under the Canadian MJDS for U.S. issuers. 12 These amendments proposed by the CSA would reduce the reporting history requirement, eliminate the market capitalization requirement, change the public float requirement and recognize ratings by NRSROs for purposes of the Canadian MJDS in a manner similar to the amendments being adopted today. The amendments to Form F-9 relating to recognition of ratings by rating organizations recognized by Canadian securities regulators (the Instruction to §239.39(a)(2) and the Instruction to General Instruction I.A. to Form F-9) shall be effective on the date of publication by the Commission in the Federal Register of a notice of effectiveness after the CSA and the provincial securities regulators have adopted substantially as proposed such amendments relating to the eligibility requirements for U.S. issuers using the MJDS in Canada. Such amendments to Form F-9 shall be effective immediately upon publication of such notice of effectiveness in the Federal Register in accordance with the Administrative Procedure Act, which allows effectiveness in less than 30 days after publication for "a substantive rule which grants or recognizes an exemption or relieves a restriction." 5 U.S.C. §553(d)(1).
V. STATUTORY BASES
The amendments to the Commissions rules and forms are being proposed pursuant to Sections 6, 7, 8, 10 and 19(a) of the Securities Act of 1933, and Sections 3(b), 4A, 12, 13, 14, 15, 16 and 23 of the Securities Exchange Act of 1934.
List of Subjects
17 CFR Parts 229, 230, 239 and 249
Reporting and recordkeeping requirements; Securities.
TEXT OF AMENDMENTS
In accordance with the foregoing, Title 17, chapter II of the Code of Federal Regulations is amended as follows:
PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND CONSERVATION ACT OF 1975--REGULATION S-K
1. The authority citation for Part 229 continues to read in part as follows:
AUTHORITY: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 77nnn, 77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o, 78w, 78ll (d), 79e, 79n, 79t, 80a-8, 80a-29, 80a-30, 80a-37, 80b-11, unless otherwise noted.
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2. By amending §229.10 by adding a new sentence to the end of paragraph (c)(1)(i) to read as follows:
§229.10 General.
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(c) * * *
(1) * * *
(i) * * *
When the registrant has filed a registration statement on Form F-9 (§239.39 of this chapter), see Rule 436(g) (§230.436(g) of this chapter) under the Securities Act with respect to the written consent of any rating organization specified in the Instruction to paragraph (a)(2) of General Instruction I of Form F-9.
PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933
3. The authority citation for Part 230 continues to read in part as follows:
AUTHORITY: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 775, 77sss, 78c, 78l, 78m, 78n, 780, 78w, 78ll (d), 79t, 80a-8, 80a-29, 80a-30, and 80a-37, unless otherwise noted.
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4. By amending §230.134 by revising paragraph (a)(14)(i) to read as follows:
§230.134 Communications Not Deemed a Prospectus.
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(a) * * *
(14)(i) With respect to any class of debt securities, any class of convertible debt securities or any class of preferred stock, the security rating or ratings assigned to the class of securities by any nationally recognized statistical rating organization and the name or names of the nationally recognized statistical rating organization(s) which assigned such rating(s), and with respect to any class of debt securities, any class of convertible debt securities or any class of preferred stock registered on Form F-9 (§239.39 of this chapter), the security rating or ratings assigned to the class of securities by any other rating organization specified in the Instruction to paragraph (a)(2) of General Instruction I of Form F-9 and the name or names of the rating organization or organizations which assigned such rating(s).
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5. By amending §230.436 by revising paragraph (g)(1) to read as follows:
§230.436 Consents Required in Special Cases.
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(g)(1) Notwithstanding the provisions of paragraphs (a) and (b) of this section, the security rating assigned to a class of debt securities, a class of convertible debt securities, or a class of preferred stock by a nationally recognized statistical rating organization, or with respect to registration statements on Form F-9 (§239.39 of this chapter) by any other rating organization specified in the Instruction to paragraph (a)(2) of General Instruction I of Form F-9, shall not be considered a part of the registration statement prepared or certified by a person within the meaning of sections 7 and 11 of the Act.
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PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933
6. The authority citation for Part 239 continues to read in part as follows:
AUTHORITY: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77sss, 78c, 78l, 78m, 78n, 78o (d), 78w(a), 78ll (d), 79e, 79f, 79g, 79j 79l, 79m, 79n, 79q, 79t, 80a-8, 80a-29, 80a-30 and 80a-37, unless otherwise noted.
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7. By amending Form F-7 (§239.37) by adding a new paragraph J to General Instruction II to read as follows:
NOTE: Form F-7 does not appear in the Code of Federal Regulations.
Form F-7
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GENERAL INSTRUCTIONS
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II. Application of General Rules and Regulations
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J. Registrants are required to name an agent for service in the United States as required by the cover page of the registration statement even though not required to file a Form F-X.
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8. By amending §239.39 by revising the Instruction following paragraph (a)(2), by revising paragraph (b)(3), by removing paragraph (b)(4), redesignating paragraph (b)(5) as paragraph (b)(4), by revising newly redesignated paragraph (b)(4) and by revising paragraph (e), to read as follows, and in paragraph (f) introductory text and paragraph (f)(1) [in two places] by removing the references to "36" and adding in their place "12"
§239.39 Form F-91 for registration under the Securities Act of 1933 of certain investment grade debt or investment grade preferred securities of certain Canadian issuers.
(a) * * *
(2) * * *
Instruction
Securities shall be "investment grade" if, at the time of sale, at least one nationally recognized statistical rating organization (as that term is used in relation to Rule 15c3-1(c)(2)(vi)(F) under the Securities Exchange Act of 1934 (the "Exchange Act") (§240.15c3-1(c)(2)(vi)(F) of this chapter)) or at least one Approved Rating Organization (as defined in National Policy Statement No. 45 of the Canadian Securities Administrators, as the same may be amended from time to time) has rated the security in one of its generic rating categories that signifies investment grade; typically the four highest rating categories (within which there may be subcategories or gradations indicating relative standing) signify investment grade.
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(b) * * *
(3) Has been subject to the continuous disclosure requirements of any securities commission or equivalent regulatory authority in Canada for a period of at least 12 calendar months immediately preceding the filing of this Form, and is currently in compliance with such obligations; and
(4) Has an aggregate market value of the public float of its outstanding equity shares of $75 million or more; provided, however, that the requirement set forth in this paragraph (b)(4) shall not apply if the securities being registered on this Form are not convertible into another security.
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(e) If the registrant is a majority-owned subsidiary offering debt securities or preferred securities, it shall be deemed to meet the requirements of paragraphs (b)(3) and (b)(4) of this section if the parent of the registrant-subsidiary meets the requirements of paragraph (b) of this section, as applicable, and fully and unconditionally guarantees the securities being registered as to principal and interest (if debt securities) or as to liquidation preference, redemption price and dividends (if preferred securities); provided, however, that the securities of the subsidiary are only convertible or exchangeable, if at all, for the securities of the parent.
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9. By amending Form F-9 (§239.39) by revising the Instruction following paragraph A. of General Instruction I, by revising paragraph B. (3) of General Instruction I, by removing paragraph B. (4) of General Instruction I, by redesignating paragraph B. (5) of General Instruction I as paragraph B. (4), by revising newly redesignated paragraph B. (4) of General Instruction I, by revising paragraph E. of General Instruction I and by revising Instruction D. to the Signatures, to read as follows, and in paragraph F. of General Instruction I by removing in three places the references to "36" and adding in their place "12":
NOTE: Form F-9 does not appear in the Code of Federal Regulations.
Form F-9
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GENERAL INSTRUCTIONS
I. Eligibility Requirements for Use of Form F-9
A. * * *
Instruction Securities shall be "investment grade" if, at the time of sale, at least one nationally recognized statistical rating organization (as that term is used in relation to Rule 15c3-1(c)(2)(vi)(F) under the Securities Exchange Act of 1934 (the "Exchange Act") or at least one Approved Rating Organization (as defined in National Policy Statement No. 45 of the Canadian Securities Administrators, as the same may be amended from time to time) has rated the security in one of its generic rating categories that signifies investment grade; typically the four highest rating categories (within which there may be subcategories or gradations indicating relative standing) signify investment grade.
B. * * *
(3) has been subject to the continuous disclosure requirements of any securities commission or equivalent regulatory authority in Canada for a period of at least 12 calendar months immediately preceding the filing of this Form, and is currently in compliance with such obligations; and
(4) has an aggregate market value of the public float of its outstanding equity shares of $75 million or more; provided, however, that the requirements set forth in this B. (4) shall not apply if the securities being registered on this Form are not convertible into another security.
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E. If the Registrant is a majority-owned subsidiary offering debt securities or preferred securities, it shall be deemed to meet the requirements of I.B. (3) and (4) above if the parent of the Registrant-subsidiary meets the requirements of I.B. above, as applicable, and fully and unconditionally guarantees the securities being registered as to principal and interest (if debt securities) or as to liquidation preference, redemption price and dividends (if preferred securities); provided, however, that the securities of the subsidiary are only convertible or exchangeable, if at all, for the securities of the parent.
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SIGNATURES
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Instructions
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D. Where eligibility for use of this Form is based on the assignment of a security rating, the Registrant may sign the registration statement notwithstanding the fact that such security rating has not been assigned by the filing date, provided that the Registrant reasonably believes, and so states, that the security rating requirement will be met by the time of sale.
10. By amending §239.40 by in paragraph (c)(3) [in two places] removing the references to "36" and adding in their place "12" and adding the word "and" after the semi-colon at the end of paragraph (c)(3), by removing paragraph (c)(4), by redesignating paragraph (c)(5) as paragraph (c)(4), by revising newly redesignated paragraph (c)(4) as set forth below, and in paragraph (h) introductory text by removing the reference "paragraphs (c)(3), (c)(4) and (c)(5)" and adding in its place "paragraphs (c)(3) and (c)(4)" and in paragraph (i) introductory text and paragraph (i)(1) [in two places] by removing references to "36" and adding in their place "12":
§239.40 Form F-10, for registration under the Securities Act of 1933 of securities of certain Canadian issuers.
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(c) * * *
(4) Has an aggregate market value of the public float of its outstanding equity shares of $75 million or more; provided, however, that in the case of a business combination, the aggregate market value of the public float of the outstanding equity shares of each participating company other than the successor registrant is $75 million or more, except that any such participating company shall not be required to meet such public float requirement if other participating companies whose assets and gross revenues, respectively, would contribute at least 80 percent of the total assets and gross revenues from continuing operations of the successor registrant, as measured based on pro forma combination of the participating companies most recently completed fiscal years, each meet such public float requirement; and provided, further, that in the case of a business combination, such public float requirement shall be deemed satisfied in the case of a participating company whose equity shares were the subject of an exchange offer that was registered or would have been eligible for registration on Form F-8, Form F-9, Form F-10 or Form F-80 (§§239.38, 239.39, 239.40 or 239.41) or a tender offer in connection with which Schedule 13E-4F or 14D-1F (§§240.13e-102 or 240.14d-102 of this chapter) was filed or could have been filed, that terminated within the last twelve months, if the participating company would have satisfied such public float requirement immediately prior to commencement of such exchange or tender offer.
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11. By amending Form F-10 (§239.40) by in paragraph C. (3) of General Instruction I removing in two places references to "36" and adding in their place "12" and adding the word "and" after the semi-colon at the end of paragraph C.(3) of General Instruction I, by removing paragraph C.(4) of General Instruction I, by redesignating paragraph C.(5) of General Instruction I as paragraph C.(4), by revising newly redesignated paragraph C.(4) of General Instruction I and by revising paragraph H. of General Instruction I, to read as follows, and in paragraph I. of General Instruction I by removing in three places references to "36" and adding in their place "12":
NOTE: Form F-10 does not appear in the Code of Federal Regulations.
Form F-10
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GENERAL INSTRUCTIONS
I. General Eligibility Requirements for Use of Form F-10
C. * * *
(4) has an aggregate market value of the public float of its outstanding equity shares of $75 million or more; provided, however, that in the case of a business combination, the aggregate market value of the public float of the outstanding equity shares of each participating company other than the successor Registrant is $75 million or more, except that any such participating company shall not be required to meet such public float requirement if other participating companies whose assets and gross revenues, respectively, would contribute at least 80 percent of the total assets and gross revenues from continuing operations of the successor Registrant, as measured based on pro forma combination of the participating companies most recently completed fiscal years, each meet such public float requirement; and provided, further, that in the case of a business combination, such public float requirement shall be deemed satisfied in the case of a participating company whose equity shares were the subject of an exchange offer that was registered or would have been eligible for registration on Form F-8, Form F-9, Form F-10 or Form F-80, or a tender offer in connection with which Schedule 13E-4F or 14D-1F was filed or could have been filed, that terminated within the last twelve months, if the participating company would have satisfied such public float requirement immediately prior to commencement of such exchange or tender offer.
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H. With respect to registration of debt securities or preferred securities on this Form, if the Registrant is a majority-owned subsidiary, it shall be deemed to meet the requirements of I.C.(3) and (4) above if the parent of the Registrant-subsidiary meets the requirements of I.C. above and fully and unconditionally guarantees the securities being registered as to principal and interest (if debt securities) or as to liquidation preference, redemption price and dividends (if preferred securities); provided, however, that the securities of the subsidiary are only convertible or exchangeable, if at all, for the securities of the parent.
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PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934
12. The authority citation for Part 249 continues to read in part as follows:
Authority: 15 U.S.C. 78a, et seq., unless otherwise noted.
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13. By amending §249.240f by revising paragraph (b)(3), by removing paragraph (b)(4), redesignating paragraph (b)(5) as paragraph (b)(4) and by revising newly redesignated paragraph (b)(4), to read as follows, and in paragraph (c) introductory text and paragraph (c)(1) [in two places] by removing references to "36" and adding in their place "12":
§249.240f Form 40-F, for registration of securities of certain Canadian issuers pursuant to section 12(b) or (g) and for reports pursuant to section 15(d) and Rule 15d-4 (§240.15d-4 of this chapter).
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(b) * * *
(3) The registrant has been subject to the periodic reporting requirements of any securities commission or equivalent regulatory authority in Canada for a period of at least 12 calendar months immediately preceding the filing of this Form and is currently in compliance with such obligations; and
(4) The aggregate market value of the public float of the registrants outstanding equity shares is $75 million or more; provided, however, no market value threshold need be satisfied in connection with non-convertible securities eligible for registration on Form F-9 (§239.39 of this chapter).
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14. By amending Form 40-F (§249.240f) by revising clause (iii) of paragraph (2) of General Instruction A., by removing clause (iv) of paragraph (2) of General Instruction A., by redesignating clause (v) of paragraph (2) of General Instruction A. as clause (iv) and by revising newly redesignated clause (iv) of paragraph (2) of General Instruction A., to read as follows, and in paragraph (3) of General Instruction A in three places by removing the references "36" and adding in their place "12":
NOTE: Form 40-F does not appear in the Code of Federal Regulations.
Form 40-F
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GENERAL INSTRUCTIONS
A. Rules As To Use of Form 40-F
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(2) * * *
(iii) the Registrant has been subject to the periodic reporting requirements of any securities commission or equivalent regulatory authority in Canada for a period of at least 12 calendar months immediately preceding the filing of this Form and is currently in compliance with such obligations; and
(iv) the aggregate market value of the public float of the Registrants outstanding equity shares is $75 million or more; provided, however, that no market value threshold need be satisfied in connection with non-convertible securities eligible for registration on Form F-9.
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By the Commission.
1 Securities Act Release No. 6902 (June 21, 1991) [56 FR 30036].
2 National Policy Statement No. 45 of the CSA, "Multijurisdictional Disclosure System" (referred to herein as "National Policy Statement No. 45").
3 Securities Act Release No 6997 (April 28, 1993) 58 FR 26442.
4 The Commission also proposed amending Forms F-10 and 40-F to retain the financial statement reconciliation requirement under such forms. These amendments were adopted in June 1993. Securities Act Release No. 7004 (June 28, 1993) [58 FR 35367].
5 17 CFR 239.39, 239.40 and 249.40f.
6 See Securities Act Release 6964 (Oct. 22, 1992) [57 FR 48970].
7 The Prompt Offering Qualification system, which is known as the "POP System", has been established by Canadian securities regulators to allow substantial issuers quick access to the public securities markets. See National Policy Statement 47 of the CSA, "Prompt Offering Qualification System". Amendments to shorten the reporting history requirement under the POP System from 36 to 12 months were proposed in June 1993. See "Draft Amendments to National Policy Statement No. 47 and National Policy Statement No. 45" 16 OSC Bulletin 2889 (June 11, 1993).
8 Market participants currently look to a no-action process administered by the staff of the Division of Market Regulation to determine which rating organizations will be treated as NRSROs for net capital purposes under Rule 15c3-1(c)(2)(vi)(F). Six rating organizations are currently treated as NRSROs for net capital purposes as a result of this process. Four of these NRSROs are not currently recognized under National Policy Statement No. 45. Under amendments to National Policy Statement No. 45, the ratings of these four rating organizations will be usable for purposes of determining whether a U.S. issuer is eligible to use the MJDS in Canada. Likewise, National Policy Statement No. 45 currently recognizes four rating organizations, two of which are not among the six rating organizations treated by the Commission staff as NRSROs for net capital purposes. Under the amendment to Form F-9 being adopted today, the ratings of these two rating organizations will be usable for purposes of determining whether a Canadian issuer is eligible to use Form F-9 or 40-F.
9 17 CFR 229.10.
10 17 CFR 230.134 and 230.436.
11 17 CFR 239.37.
12 See fn 7, supra.
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