Release No. 33-7053

Release No. 34-33918

International Series No. 653

Fed. Reg. April 26, 1994

Simplification of Registration and Reporting Requirements for Foreign Companies; Safe Harbors for Public Announcements of Unregistered Offerings and Broker-Dealer Research Reports

ACTION: Final rule.

SUMMARY: The Commission is announcing the adoption of a rule and amendments to rules and forms to streamline registration and reporting requirements for foreign companies by expanding the universe of foreign issuers eligible to use short-form and shelf registration under the Securities Act of 1933 (the ''Securities Act''); streamlining financial statement reconciliation and financial schedule requirements; and expanding safe harbor protection for analyst reports with respect to sizeable foreign companies publicly traded offshore. In addition, the Commission is providing a new safe harbor for certain company announcements regarding exempt offerings or unregistered offshore offerings.

EFFECTIVE DATE: April 26, 1994.

FOR FURTHER INFORMATION CONTACT: Sandra Folsom Kinsey or Annemarie Tierney, (202) 272-3246, Office of International Corporate Finance, Division of Corporation Finance, or, with respect to accounting matters, Wayne E. Carnall, (202) 272-2553, Office of the Chief Accountant, Division of Corporation Finance, U.S. Securities and Exchange Commission, Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The Commission is adopting amendments to the following rules and forms under the Securities Act of 1933:¹ Form F-1,² Form F-2,³ Form F-3,⁴ Form F-4,⁵ Rule 135,⁶ Rule 139,⁷ Rule 457,⁸ Rule 462,⁹ Rule 475a,¹⁰ Rule 477,¹¹ Rule 902 of Regulation S,¹² Rule 502(c) of Regulation D¹³ and Item 512 of Regulation S-K.¹⁴ In addition, the Commission is adopting new Rule 135c¹⁵ under the Securities Act and amendments to Form 20-F¹⁶ under the Securities Exchange Act of 1934 (the ''Exchange Act'').¹⁷

I. Introduction

The Commission today is adopting a number of initiatives designed to streamline the registration and reporting process for foreign companies accessing the U.S. public securities markets. In companion releases, the Commission is proposing additional initiatives to further this goal.¹⁸ The rule and amendments adopted today were proposed by the Commission on November 3, 1993.¹⁹ In most respects, the rule and amendments are being adopted substantially as proposed.

Most of the comment letters received regarding the proposals were generally supportive of the Commission's efforts to reduce the registration and reporting burdens on foreign companies.²⁰ A number of commenters suggested modifications to the proposals, a number of which have been incorporated into the provisions being adopted.

These provisions are part of the ongoing efforts of the Commission to ease the transition of foreign companies into the U.S. disclosure system, enhance the efficiencies of the registration and reporting processes and lower costs of compliance, where consistent with investor protection.

The new provisions further streamline the foreign issuer integrated disclosure system. This system already provides a number of accommodations to foreign practices and policies. These accommodations include:

Interim reporting on the basis of home country regulatory and stock exchange practices; quarterly reports are not required from foreign issuers;

Exemption from the proxy rules and Section 16 insider stock reports and short-swing profit recovery;

Executive compensation disclosure requirements that allow disclosure of compensation for executives on an aggregate basis, if so reported in the issuer's home country; and

Offering document financial statements that are required to be updated principally on a semi-annual, rather than quarterly, basis.

Additionally, to facilitate cross border offerings and stock market listings, the Commission staff has implemented procedures to review foreign issuers' disclosure documents in draft form on a non-public basis, if requested by the issuer. Recognizing the particular difficulties of co-ordinating time schedules for cross border offerings, the review process has been tailored to accommodate the special scheduling demands for such offerings. As reflected in the companion releases, the Commission's efforts to address the special needs of foreign companies entering the U.S. public markets are ongoing and will continue, as consistent with investor protection.

II. Expanded Availability of Short-Form and Shelf Registration

The Commission is adopting revisions to its registration forms to extend to foreign issuers the benefits of short-form and shelf registration to the same extent available to domestic companies.

A. Short-Form Registration Statements

Under the amendments adopted today, the public float threshold for use of Form F-3 and full shelf registration is reduced from $300 million to $75 million and the reporting history requirement is reduced from 36 months to 12 months.²¹ These are the same as the eligibility criteria applicable to domestic companies using Form S-3.

As proposed, Form F-3 would not have required that an annual or interim report have been filed or submitted to the Commission prior to first use of the Form. Despite the proposal's requirement that a foreign issuer have been subject to the Exchange Act reporting requirements for 12 months to be eligible to use Form F-3, it would have been possible for an eligible issuer to have filed no reports during that period.²² As explained in the Proposing Release, foreign issuers, unlike domestic companies, are required to submit to the Commission under Form 6-K only those interim reports and other materials that the issuer prepares in accordance with home country or home market requirements or delivers to its securityholders. Moreover, unlike domestic companies using Form S-3, foreign companies registering on Form F-3 are not required to incorporate by reference all their reports on Form 6-K, but may chose which reports are incorporated. In light of these differences, as suggested by several commenters, the revisions to Form F-3 as adopted require that the company have filed at least one annual report prior to first use of the Form in order to ensure that information regarding the issuer is available to the market.²³

B. Shelf Registration

The expanded eligibility for short-form registration on Form F-3 in turn will allow more foreign companies the full benefits of shelf registration.²⁴ Issuers eligible to register securities for primary offerings using short-form registration are able to offer those securities on a delayed or continuous basis under the Commission shelf registration procedures.²⁵ Through expanded Form F-3 eligibility, foreign issuers will b

¹ 15 U.S.C. 77a et seq.

² 17 CFR 239.31.

³ 17 CFR 239.32.

⁴ 17 CFR 239.33.

⁵ 17 CFR 239.34.

⁶ 17 CFR 230.135.

⁷ 17 CFR 230.139.

⁸ 17 CFR 230.457.

⁹ 17 CFR 230.462.

¹⁰ 17 CFR 230.475a.

¹¹ 17 CFR 230.477.

¹² 17 CFR 230.902.

¹³ 17 CFR 230.502(c).

¹⁴ 17 CFR 229.512.

¹⁵ See 17 CFR 230.135c, being adopted today.

¹⁶ 17 CFR 249.220f.

¹⁷ 15 U.S.C. 78a et seq.

¹⁸ See Securities Act Release Nos. 7054, 7055 and 7056 (April 19, 1994).

¹⁹ Securities Act Release No. 7029 (Nov. 3, 1993) [58 FR 60307] (the ''Proposing Release'').

²⁰ Thirty-one comment letters on the proposal were received. Those letters and a summary of the comments are available for public inspection and copying in File No. S7-30-93 at the Commission's Public Reference Room in Washington, DC.

²¹ The amendments adopted today also reduce the public float test specified in form F-2 to $75 million, as proposed.

²² Domestic issuers are permitted to use Form S-3 after being subject to reporting requirements for 12 months, regardless of whether they have filed an annual report. Unlike foreign issuers, however, domestic issuers are required to file quarterly reports and such reports would be incorporated by reference into the Form S-3 registration statement.

²³ This requirement has been added to the issuer eligibility criteria because of its applicability to all offerings registered on Form F-3.