RELEASE NOS. 33-8900;

34-57409;

INTERNATIONAL SERIES RELEASE NO. 1308;

File No. S7-05-08

RIN 3235-AK03

AGENCY: Securities and Exchange Commission.

ACTION: Proposed amendments to forms and rules.

SUMMARY: We are proposing a number of changes to our rules relating to foreign private issuers that are intended to improve the accessibility of the U.S. public capital markets to these issuers, as well as to enhance the information that is available to investors. These amendments are part of a series of initiatives that seek to address changes in our disclosure and other requirements applicable to foreign private issuers in light of market developments, new technologies and other matters in a manner that promotes investor protection, cross-border capital flows and the elimination of unnecessary barriers to our capital markets. We are proposing amendments that would enable foreign issuers to test their qualification to use the forms and rules available to foreign private issuers once a year, rather than continuously. We are also proposing amendments to change the deadline for annual reports filed by foreign private issuers and to eliminate an option under which foreign private issuers are permitted to omit segment data from their U.S. GAAP financial statements, and an amendment to the rule pertaining to going private transactions to reflect the new termination of reporting and deregistration rules for foreign private issuers. In addition, we are soliciting comment on proposals that would revise the annual report and registration statement forms used by foreign private issuers to improve certain disclosures provided in these forms.

DATES: Comments should be received on or before May 12, 2008.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments:

• Use the Commissions Internet comment form (http://www.sec.gov/rules/proposed.shtml); or
• Send an e-mail to rule-comments@sec.gov. Please include File Number S705-08 on the subject line; or
• Use the Federal Rulemaking ePortal (http://www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments:

• Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090.

All submissions should refer to File Number S7-05-08. The file number should be included on the subject line if e-mail is used. To help us process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commissions Internet Web site (http://www.sec.gov/rules/proposed/shtml). Comments are also available for public inspection and copying in the Commissions Public Reference Room, 100 F Street, NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. All comments received will be posted without change; we do not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly.

FOR FURTHER INFORMATION CONTACT: Felicia H. Kung, Senior Special Counsel, Office of International Corporate Finance, Division of Corporation Finance, at (202) 551-3450, or Craig Olinger, Deputy Chief Accountant, Division of Corporation Finance, at (202) 551-3400, or Katrina A. Kimpel, Professional Accounting Fellow, Office of the Chief Accountant, at (202) 551-5300, U.S. Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-3628.

SUPPLEMENTARY INFORMATION: We are proposing amendments to Rule 405¹ of Regulation C,² Form F-1,³ Form F-3⁴ and Form F-4⁵ under the Securities Act of 1933 ("Securities Act"),⁶ Form 20-F⁷ under the Securities Exchange Act of 1934 ("Exchange Act"),⁸ and Exchange Act Rules 3b-4,⁹ 13a-10,¹⁰ 13e-3,¹¹ and 15d-10.¹² Our proposed amendments would: (1) Permit foreign issuers to test their qualification to use the forms and rules available to foreign private issuers on an annual basis, rather than on the continuous basis that is currently required; (2) Accelerate the filing deadline for annual reports filed on Form 20-F by foreign private issuers under the Exchange Act by shortening the filing deadline from 6 months to within 90 days after the foreign private issuers fiscal year-end in the case of large accelerated and accelerated filers, and to within 120 days after a foreign private issuers fiscal year-end for all other issuers, after a two-year transition period; (3) Eliminate an instruction to Item 17 of Form 20-F that permits certain foreign private issuers to omit segment data from their U.S. GAAP financial statements; and (4) Amend Rule 13e-3 under the Securities Exchange Act by adding cross-references to the new termination of reporting and deregistration rules for foreign private issuers.

In addition, we are soliciting comments on proposals to: (5) Require foreign private issuers that are required to provide a U.S. GAAP reconciliation to do so pursuant to Item 18 of Form 20-F; (6) Amend Form 20-F to require foreign private issuers to disclose information about changes in the issuers certifying accountant, the fees and charges paid by holders of American Depositary Receipts, the payments made by the depositary to the foreign issuer whose securities underlie the American Depositary Receipts, and, for listed issuers, the differences in the foreign private issuers corporate governance practices and those applicable to domestic companies under the relevant exchanges listing rules; and (7) Require foreign private issuers to provide certain financial information in annual reports on Form 20-F about a significant, completed acquisition that is significant at the 50% or greater level.

Table of Contents

I. Overview of the Proposed Amendments

When the Commission adopted Form 20-F in 1979,¹³ the form used by foreign private issuers¹⁴ to register a class of securities under the Exchange Act and to file annual reports,¹⁵ we indicated our basic philosophy that U.S. investors should be provided with information that is equal "as nearly as possible and practicable" to that provided by domestic issuers in our markets.¹⁶ Our objective in adopting Form 20-F was to place the disclosures required of foreign private issuers on a more equal footing to that required of domestic issuers. At the same time, we acknowledged that differences in the national laws and accounting regulations applicable to foreign private issuers should be considered when establishing disclosure requirements for foreign private issuers.¹⁷ As a result, we provided certain disclosure accommodations in Form 20-F, although we indicated that our assessment of the appropriate disclosure requirements for foreign private issuers was part of an ongoing evolutionary process.¹⁸

In the nearly thirty years since the adoption of Form 20-F, there has been a movement toward greater international agreement on the accounting and other nonfinancial statement disclosures that should be provided by issuers. Last December, we published rules to permit foreign private issuers to file financial statements with the Commission that comply with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), without reconciliation to generally accepted accounting principles (GAAP) used in the United States.¹⁹ These rules support the efforts of the IASB and the Financial Accounting Standards Board (FASB) to converge their accounting standards. In addition, through the efforts of the International Organization of Securities Commissions (IOSCO),²⁰ securities regulators around the world are increasingly requiring the same types of disclosures in prospectuses used for public offerings and listings in their securities markets. In 1998, the IOSCO Technical Committee published the International Disclosure Standards for Cross-Border Offerings and Initial Listings by Foreign Issuers²¹ ("International Equity Disclosure Standards"), which pertains to prospectuses prepared by foreign issuers for public offerings and listings of equity securities. The Commission explicitly incorporated all of the International Equity Disclosure Standards into Form 20-F, effective in 2000.²² Other members of IOSCO have also based their prospectus requirements on the International Equity Disclosure Standards.

At the same time, we remain fully committed to facilitating cross-border capital flows and eliminating inadvertent barriers to our capital markets. In March 2007, we adopted rules that made it easier for foreign private issuers to terminate their reporting obligations and deregister their securities.²³ We adopted these rules out of concern that the burdens and uncertainties associated with terminating their registration and reporting obligations under the Exchange Act could serve as a disincentive to foreign private issuers accessing the U.S. public capital markets.²⁴ As noted previously, we adopted rules last December to permit foreign private issuers to file financial statements with the Commission that are prepared in accordance with IFRS, as issued by the IASB, without reconciliation to U.S. GAAP. In our implementation of the provisions of the Sarbanes- Oxley Act of 2002,²⁵ we also provided several accommodations to foreign private issuers. For example, we permitted foreign private issuers to comply with the requirement to include in their annual reports managements report on the companys internal control over financial reporting and the auditors attestation on a delayed basis compared to some domestic issuers.²⁶ Foreign private issuers are also permitted to report changes in their internal controls over financial reporting on an annual basis, rather than on a quarterly basis as is required of domestic issuers.²⁷ In addition, with respect to the audit committee independence requirements under Section 301 of the Sarbanes-Oxley Act, foreign private issuers listed on U.S. exchanges were accorded certain accommodations that recognized non-U.S. practices and requirements.²⁸ More recently, in a companion release,²⁹ we are proposing amendments to Exchange Act Rule 12g3-2(b)³⁰ to modify the availability of this exemption from registration under Section 12(g)³¹ of the Exchange Act for foreign private issuers, so that a qualified foreign private issuer that meets specified conditions can claim the exemption automatically without regard to the number of its U.S. shareholders.

As the nature of the global capital markets have evolved, and because of marked advancements in technology with respect to the gathering and processing of information, some of the disclosure accommodations that we provided to foreign private issuers almost 30 years ago may no longer be appropriate. As a result, we are proposing today amendments to rules and forms that should enhance the reporting of information by foreign private issuers, as well as the timeframe within which investors can have access to this information.

The amendments that we are proposing today balance our dual objectives of enhancing the disclosures that foreign private issuers provide to investors in the U.S. public markets, and improving the accessibility of our public markets to these issuers.

Our principal proposals are as follows:

• Permit reporting foreign issuers to assess their eligibility to use the special forms and rules available to foreign private issuers once a year on the last business day of their second fiscal quarter, rather than on a continuous basis, which is currently required;
• Accelerate the reporting deadline for annual reports filed on Form 20-F by foreign private issuers from six months to 90 days after the issuers fiscal year-end in the case of large accelerated filers and accelerated filers, and to

120 days after the issuers fiscal year-end for all other issuers, after a two-year transition period;

• Amend Form 20-F by eliminating an instruction to Item 17 of that Form that permits certain foreign private issuers to omit segment data from their U.S. GAAP financial statements; and
• Amend Exchange Act Rule 13e-3, which pertains to going private transactions by reporting issuers or their affiliates, to reference the recently adopted deregistration and termination of reporting rules applicable to foreign private issuers.

In addition, we are also seriously considering other possible amendments that would affect foreign private issuers, and are seeking public comment on these proposals. These matters include the following:

• Eliminate the availability of the limited U.S. GAAP reconciliation option that is contained in Item 17 of Form 20-F for foreign private issuers that are only listing a class of securities on a U.S. national securities exchange, or only registering a class of equity securities under Section 12(g) of the Exchange Act, and not conducting a public offering. We are also proposing to eliminate this limited reconciliation option for annual reports filed on Form 20-F, and for certain non-capital raising offerings, such as offerings pursuant to reinvestment plans, offerings upon the conversion of securities, or offerings of investment grade securities. Thus, all foreign private issuers that are required to provide a U.S. GAAP reconciliation must do so pursuant to Item 18 of Form 20-F, although required third party financial statements could continue to be prepared pursuant to Item 17 of Form 20-F;
• Amend Form 20-F to require disclosure in annual reports filed on that Form about any changes in the registrants certifying accountant;
• Amend Form 20-F to require annual disclosure of the fees and other charges paid by holders of American Depositary Receipts (ADRs) to depositaries, as well as any payments made by depositaries to the foreign private issuers whose securities underlie the ADRs;
• Amend Form 20-F to require annual disclosure of the significant differences in the corporate governance practices of listed foreign private issuers compared to the corporate governance practices applicable to domestic companies under the relevant exchanges listing standards; and
• Amend Form 20-F to require foreign private issuers to present information about highly significant, completed acquisitions that are significant at the 50% or greater level.

II. Proposed Changes

A. Annual Test for Foreign Private Issuer Status

The Commission has a longstanding policy of facilitating the access of foreign companies to the U.S. capital markets, as evidenced by the accommodations to foreign practices and policies that are accorded to foreign companies that qualify as "foreign private issuers."³² For example, foreign private issuers are exempt from the Commissions proxy rules,³³ and from the insider stock trading reports and short-swing profit recovery provisions under Section 16³⁴ of the Exchange Act.³⁵ They also provide any interim reports on the basis of home country regulatory and stock exchange practices, rather than the quarterly reports that are required of U.S. issuers,³⁶ and executive compensation disclosure on an aggregate basis if the information is reported on such a basis in the issuers home country.³⁷

For many companies, the determination of whether they qualify as a foreign private issuer is important because of these various accommodations and exemptions. However, to make sure that it qualifies for these accommodations, a foreign private issuer that has close to 50% of its outstanding voting securities held of record by U.S. residents may find that it must monitor on a continuous basis the different factors used to assess foreign private issuer status.³⁸ This can result in some uncertainty for foreign private issuers as to which reporting and regulatory requirements will apply to them within a given period of time, as well as result in confusion for investors if an issuer needs to move between foreign and domestic reporting forms in the same fiscal year. For example, if a foreign issuer concludes that it does not qualify as a foreign private issuer in the middle of its fiscal year, it may find it difficult to change its basis of accounting to U.S. GAAP in order to comply on a timely basis with the reporting requirements applicable to domestic issuers under the Exchange Act. These issuers also face the challenge of modifying their information and processing systems to comply with the domestic reporting and registration regime, as well as the executive compensation disclosure requirements, proxy rules and Section 16 reporting requirements that are applicable to domestic issuers. To provide greater certainty to both issuers and investors as to the status of these foreign issuers within a given period of time, we are proposing to permit foreign private issuers to assess their status once a year. Aside from facilitating a smoother transition when foreign private issuers change status in the middle of a fiscal year, we believe that this approach would benefit investors by eliminating confusion in the markets as to an issuers status. This approach would also be more consistent with our approach to determining accelerated filer and smaller reporting company status, and should simplify compliance with the Commissions regulations.

We are proposing to permit reporting foreign issuers to assess their status on the last business day of their second fiscal quarter,³⁹ which is the same date used to determine accelerated filer status under Exchange Act Rule 12b-2⁴⁰ and smaller reporting company status in Item 10(f)(2)(i)⁴¹ of Regulation S-K.⁴² We believe that selecting this date would provide regulatory consistency and ease of issuer application, as opposed to different dates for determining filing status. In addition, if a foreign issuer determines that it no longer qualifies as a foreign private issuer on the last business day of its second fiscal quarter, it would be required to comply with the reporting requirements and use the forms prescribed for domestic companies beginning on the first day of the fiscal year following the determination date. For example, a foreign issuer that did not qualify as a foreign private issuer as of the end of its second fiscal quarter in 2009 would file a Form 10-K in 2010 for its 2009 fiscal year. The issuer would also begin complying with the proxy rules and Section 16, and become subject to reporting on Forms 8-K and 10-Q on the first day of its 2010 fiscal year. This would give such issuers six months advance notice that they will need to transition to the domestic forms and applicable reporting requirements.

On the other hand, we are proposing to permit a reporting company that qualifies as a foreign private issuer to avail itself of the foreign private issuer accommodations, including use of the foreign private issuer forms and reporting requirements, beginning on the determination date on which it establishes its eligibility as a foreign private issuer. We are proposing this distinction because we believe the new foreign private issuer, who would be eligible to file its annual report for that fiscal year on Form 20-F, need not continue to provide reports on Form 8-K and 10-Q for the remainder of that fiscal year. Instead, the issuer would be required to provide reports on Form 6-K.

Under the proposed amendment, a Canadian issuer that files registration statements and Exchange Act reports using the multijurisdictional disclosure system ("MJDS")⁴³ would also be required to test its status as a foreign private issuer only as of the last business day of its second fiscal quarter. Currently, a Canadian issuer that is eligible to file a Form 40-F⁴⁴ annual report at the end of a fiscal year is presumed to be eligible to use that Form, as well as Form 6-K, from the date of filing until the end of its next fiscal year.⁴⁵ If adopted, the proposed amendment would require a Canadian issuer that plans to use the MJDS to test its foreign private issuer status earlier in the year. However, as noted in the adopting release to the MJDS, it would have to test its eligibility to file annual reports on Form 40-F based on all of the other requirements of that Form, such as public float, at the end of the fiscal year.⁴⁶ The proposed amendment would not change the responsibility of the Canadian issuer to check its eligibility to use Forms 40-F and 6-K at the end of its fiscal year, or the requirement that a Canadian issuer test its ability to use the MJDS Securities Act registration statement forms at the time of filing.

Comments solicited

1. Is it appropriate for foreign issuers to have six months notice that they no longer qualify as foreign private issuers, and therefore must use the domestic registration and reporting forms as of the beginning of the next fiscal year? Should issuers who have been foreign private issuers, but who fail to qualify as foreign private issuers, be required to use the domestic forms immediately, as is currently required?

2. Is it likely that foreign issuers will attempt to manipulate the amount of their voting securities that are held by U.S. residents at the end of the second fiscal quarter as a result of the proposed test? Are there other factors under the definition of foreign private issuer that may be susceptible to manipulation on the test date, such as the resignation and reappointment of officers and directors, or the transfer of non-physical assets such as cash, receivables or securities out of the United States?

3. If a foreign issuer that has been filing on domestic issuer forms qualifies as a foreign private issuer on the last business day of its second fiscal quarter, should it be allowed to switch over immediately to the foreign private issuer forms, such as Forms 20F and 6-K? In some cases, an event may trigger the filing of a Form 8-K, but a Form 6-K might not be required because the foreign issuers home jurisdiction or stock exchange does not require the publication of information about the event.⁴⁷ If a foreign issuer would have been required to file a Form 8-K shortly after the end of its second fiscal quarter, but qualifies as a foreign private issuer on the last business day of the second quarter, should it be allowed to forgo the filing of the Form 8-K even if a Form 6-K would not be required? Should the foreign issuer be required to file the Form 8-K and make all the filings it would otherwise be required to make on the domestic forms until it files a Form 20-F or furnishes its first Form 6-K? Even if a foreign issuer is permitted to switch to the foreign private issuer forms immediately, should the foreign issuer be required to file a Form 8-K in the scenario described above because the event that triggered the filing occurred during its second fiscal quarter?

4. Because of the many accommodations provided to foreign private issuers, should foreign issuers be required to test their status twice a year, rather than just once a year? For example, should foreign issuers be required to test their status as of the last business day of their second fiscal quarter, as well as at the end of the fiscal year?

5. If we adopt the proposed amendment, to avoid confusion by investors, should a foreign issuer be required to notify the market when it has determined that it has switched its status from domestic issuer to foreign private issuer, or vice versa? If so, how should this notification be made, e.g., press release, notice on its website?

6. How should we address the potential flowback of securities into the United States if a reporting foreign issuer concludes that it does not qualify as a foreign private issuer in its third fiscal quarter and, under the proposed rule, is able to qualify as a Category 2⁴⁸ issuer under Regulation S⁴⁹ and also avoid the restrictions of Category 3⁵⁰ and Rule 905⁵¹ of Regulation S for unregistered offshore offerings of its equity securities for almost a year and half after it has made this determination?

7. Should MJDS filers be required to test their foreign private issuer status on the last business day of their most recent second fiscal quarter, as well as at the end of the fiscal year? Would it be reasonable to require MJDS filers to assess their status twice a year because they must test their qualification to use the Form 40-F at the end of the fiscal year in any case? Would such a testing requirement be reasonable in light of the accommodations made for MJDS filers, e.g., they comply with the disclosure requirements of their home jurisdiction?

8. As proposed, a Canadian MJDS filer that did not qualify as a foreign private issuer on the last day of its second fiscal quarter would immediately not be able to use the MJDS forms for Securities Act offerings, since the eligibility to use the MJDS Securities Act forms is tested at the time that the registration statement is filed. In that case, the issuer would still be able to use the other foreign private issuer registration statement forms, such as Form F-3, until the end of its fiscal year. Should these issuers be permitted to file on the foreign private issuer registration statement forms in this circumstance? Alternatively, should these issuers be permitted to use the MJDS Securities Act registration statement forms until the end of their fiscal year?

B. Accelerating the Reporting Deadline for Form 20-F Annual Reports

As the Commission noted when it proposed to accelerate the filing dates for periodic reports filed by domestic issuers,⁵² technological advances have made it easier for companies to process and disseminate information quickly. At the same time, investors evaluate and react to information in a shorter timeframe, and many now expect to receive information on a faster basis. Although some information about foreign private issuers is available through their earnings releases and other announcements, investors may not have access to the more complete disclosure contained in an issuers Form 20-F annual reports until six months after the end of the issuers fiscal year. The longer filing due date for these reports was initially established as an accommodation to the different disclosure requirements in the foreign private issuers home jurisdictions.⁵³ However, many companies that operate in the international markets gather and evaluate information on a vastly expedited basis compared to 29 years ago, when Form 20-F was adopted, so that such a delayed filing date for these reports may no longer be necessary. Today, foreign private issuers in many jurisdictions are expected to file annual reports with their home securities regulator on a faster timetable,⁵⁴ so that a significant portion of the information required in a Form 20-F is readily available.

Consistent with our efforts to modernize the periodic reporting system for domestic issuers, we are now proposing to shorten the filing due date for annual reports filed by foreign private issuers on Form 20-F.⁵⁵ Currently, a foreign private issuer must file its annual report on Form 20-F within six months after its fiscal year-end. We are proposing to accelerate the due date for annual reports filed on Form 20-F to within 90 days after the foreign private issuers fiscal year-end in the case of large accelerated and accelerated filers, and to within 120 days after the issuers fiscal year-end for all other issuers, after a two-year transition period. We note that the proposed due dates for Form 20-F would still provide an accommodation to many foreign private issuers, since large accelerated and accelerated domestic filers are required to file annual reports on Form 10K⁵⁶ within 60 days and 75 days, respectively, of their fiscal year-ends.⁵⁷ All other domestic issuers are required to file annual reports on Form 10-K within 90 days after their fiscal year-end.⁵⁸

When we proposed to accelerate the periodic report filing dates for domestic issuers, we solicited comments on whether the deadline for annual reports filed on Form 20-F should be shortened to four or five months after the end of the issuers fiscal year.⁵⁹ Several commenters indicated that they supported accelerating the deadline for filing annual reports on Form 20-F, citing considerations such as recent technological and information processing improvements, as well as concerns about the potential competitive disadvantage faced by domestic companies as a result of the large discrepancy in reporting deadlines applicable to domestic versus foreign companies.⁶⁰ However, others noted the additional challenges faced by foreign registrants, such as requirements to reconcile their financial statements to U.S. GAAP, to prepare English translations, and to comply with home country reporting requirements.⁶¹ These commenters expressed concern that accelerating the Form 20-F deadlines for foreign private issuers would result in additional costs and burdens that would discourage foreign issuers from accessing the U.S. capital markets.

Since the adoption of the accelerated reporting deadlines for domestic companies, the Commission has adopted rule amendments that addressed some of the specific concerns highlighted by commenters. For example, as noted previously, we adopted rule amendments that free foreign private issuers that prepare financial statements in accordance with IFRS as issued by the IASB from the obligation to reconcile their financial statements to U.S. GAAP.⁶² When we proposed that rule, we noted that some investor representatives at a March 2007 roundtable on IFRS organized by the Commissions staff ("March 2007 IFRS Roundtable") commented that IFRS financial statements would be more useful if issuers filed their Form 20-F annual reports on an accelerated basis.⁶³ As a result, we solicited comment again on whether the deadline for annual reports filed on Form 20-F should be accelerated.⁶⁴

Many of the commenters supported accelerating the deadline for Form 20-F filers, although several expressed concern that any deadline should not impede the ability of foreign private issuers to fulfill their obligations to file annual reports with their home regulators on a timely basis. To that end, some commenters urged a deadline that was later than the foreign private issuers home filing requirements to permit sufficient time for translation of the annual report into English and compliance with the additional disclosure requirements imposed by the Commission.⁶⁵ In contrast, other commenters supported a deadline that was consistent with the deadline faced by the foreign private issuers in its home jurisdiction.⁶⁶ Others noted that dropping the requirement to reconcile financial statements prepared in accordance with IFRS, as issued by the IASB, to U.S. GAAP would expedite the preparation of Form 20-F, so that an accelerated deadline would be feasible.⁶⁷

After carefully considering the concerns expressed by all of the commenters, we believe that it is appropriate to propose accelerating the deadline for filing annual reports on Form 20-F. Annual reports that are filed on an expedited basis would provide investors with more timely access to these filings, and would improve the delivery and flow of reliable information to investors and the capital markets, thereby helping to improve the efficiency of the markets. The current six-month deadline was adopted at a time when many of the current technologies to gather information and to process it were not available. A number of foreign private issuers already file their annual reports on Form 20-F well before the current six-month deadline. In addition, the recent rule amendments that would exempt foreign private issuers from the reconciliation requirement if they prepare their financial statements according to IFRS as issued by the IASB should make it easier for many foreign private issuers to prepare their annual reports on Form 20-F. We estimate that in the next several years a majority of the foreign private issuers who file annual reports with the Commission will have incentives to use either U.S. GAAP, or IFRS as issued by the IASB as more countries adopt IFRS as their basis of accounting, or permit companies to use IFRS as issued by the IASB as their basis of accounting. We are not proposing to change the age of financial statement requirements for registration statements under the Securities Act or Exchange Act.⁶⁸

Accelerating the deadline for filing annual reports on Form 20-F should enable investors in the U.S. markets to get annual reports on the more current basis in which they are provided in other jurisdictions.

If the Commission decides to adopt amendments to accelerate the deadline for filing annual reports on Form 20-F, several commenters who responded to our IFRS Proposing Release⁶⁹ urged the Commission to provide a transition period for any accelerated deadline that was adopted.⁷⁰ We expect that the proposal, if adopted, would provide a two-year transition period. For example, if the proposal is adopted this year, the Form 20-F filing deadline would change for the fiscal years ending on or after December 15, 2010. For foreign private issuers that are large accelerated or accelerated filers, the Form 20-F due date would be 90 days after the fiscal year-end, and for all other foreign private issuers, annual reports filed on Form 20-F would be due 120 days after the fiscal year end, for fiscal years ending on or after December 15, 2010. In addition to these proposed amendments, we are proposing a conforming deadline for transition reports filed on Form 20-F, so that the deadline is the same as the deadline for annual reports filed on Form 20-F.⁷¹

Comments solicited

9. Would accelerating the due date for Form 20-F annual reports be beneficial for investors? Given the differences in the reporting requirements that exist among the various foreign reporting regimes, would accelerating the due date for Form 20-F annual reports have different impacts on foreign private issuers or investors depending on the particular country or the nature of the issuers business? Would any of these differences affect the usefulness of the information to investors? If you believe that the due date should be accelerated, are the proposed due dates appropriate? Should different due dates be applied to foreign private issuers depending on the worldwide market value of their common equity held by non-affiliates, similar to the different annual report filing deadlines that are applied to domestic issuers? Should foreign private issuers with a larger worldwide market value be required to provide reports on a faster basis than other foreign private issuers because they presumably have additional resources and a better developed infrastructure that would enable them to comply with an accelerated due date?

10. Would accelerating the due date for filing annual reports on Form 20-F impose any unreasonable burdens on foreign private issuers, who may have to collect and provide more information in that Form than may be required in their home jurisdictions, and may also have to translate the information into English? Would the proposed accelerated due dates impose any burdens on foreign private issuers that may be required to file annual reports on Form 20-F with the Commission before they are required to provide annual reports in their home jurisdictions? Should the due date be accelerated to within 120 days of the foreign private issuers fiscal year-end for all foreign private issuers, including large accelerated and accelerated filers?

11. Should different due dates be imposed on foreign private issuers depending on whether they file financial statements using U.S. GAAP, IFRS as issued by the IASB, or another GAAP with a reconciliation to U.S. GAAP? Should different due dates be imposed on foreign private issuers depending on whether their disclosure was originally prepared in a foreign language and needs to be translated into English?

12. Should the deadline for filing Form 20-F annual reports be linked to the issuers home country requirements for filing annual reports? If so, should the deadline be the same as the one in the issuers home country, or should it be on a delayed basis, such as one or two months later? If you believe that the deadline for filing Form 20-F should be linked to the issuers home country requirements, should the foreign private issuer be responsible for submitting supporting materials that indicate when annual reports are due in its home jurisdiction, such as the applicable legislation or regulation, to the Commission at the time of its Form 20-F submission? Would varying deadlines according to home country requirements cause confusion for investors?

13. Would a different transition period be more appropriate for implementation of the accelerated deadline? For example, should foreign private issuers be subject to the accelerated deadline after a longer or shorter transition period instead?

14. Do foreign private issuers face unique challenges in preparing transition reports that would render a reduced filing period for those reports unduly burdensome?

C. Segment Data Disclosure

Under Item 17 of Form 20-F, foreign private issuers that present financial statements otherwise fully in compliance with U.S. GAAP may omit segment data from their financial statements, and also are permitted to have a qualified U.S. GAAP audit report as a result of this omission. We estimate that fewer than 10 foreign private issuers currently use this accommodation. We are proposing to amend Form 20-F by eliminating this narrow accommodation.

The reporting permitted by this accommodation is inconsistent with recent international developments in financial reporting. For example, in order to file financial statements without reconciliation to U.S. GAAP, foreign private issuers must comply fully with IFRS as issued by the IASB, including presentation of segment data. An accommodation that permits a foreign private issuer to present incomplete and non- compliant U.S. GAAP financial statements may no longer be necessary or appropriate. Accordingly, we are proposing to amend Item 17 of Form 20-F by removing Instruction 3 to that Form, which currently permits the omission of segment data from U.S. GAAP financial statements.

Comments solicited

15. In Part III.A. of this release, we propose an amendment to eliminate the option to prepare financial statements according to Item 17 of Form 20-F. Under that proposed amendment, foreign private issuers would be required to prepare their financial statements according to the requirements of Item 18 of Form 20-F, which requires all of the information required by U.S. GAAP and Regulation S-X. If that proposal is adopted, would it still be useful to eliminate the exemption from providing segment data?

16. Should we provide an exemption for foreign private issuers that are currently preparing financial statements under U.S. GAAP that omit segment data pursuant to Instruction 3 of Item 17? If we adopt the proposed amendment, should we provide a "grandfather" provision or an exemptive order to permit the small number of foreign private issuers to continue to not report segment data?

D. Exchange Act Rule 13e-3

We are proposing to amend Exchange Act Rule 13e-3,⁷² which pertains to going private transactions by reporting issuers or their affiliates, to reflect the recently adopted rules pertaining to the ability of foreign private issuers to terminate their Exchange Act registration and reporting obligations.⁷³ Currently, Rule 13e-3 is triggered when an issuer and/or any of its affiliates are engaged in a specified transaction or series of transactions⁷⁴ that have either a reasonable likelihood or a purpose of causing (i) any class of equity securities of the issuer that is subject to Section 12(g) or Section 15(d)⁷⁵ of the Exchange Act to be held of record by less than 300 persons, or (ii) the securities to be neither listed on any national securities exchange nor authorized to be quoted on an inter-dealer quotation system of any registered national securities association.

Rule 13e-3 requires any issuer or affiliate that engages in a Rule 13e-3 transaction to file a Schedule 13E-3⁷⁶ disclosing its plan to take the company private, and to make prompt amendments to reflect certain information about the proposed transaction. In the Schedule 13E-3, the filing party must disclose the purposes for the transaction, whether any alternative means for accomplishing the stated purposes were considered, the reasons for the structure of the transaction and why it was being undertaken at the time, the effects that the transaction would have on the issuer and its unaffiliated security holders, whether or not the filing party believes the transaction is fair to unaffiliated security holders, and the factors considered in determining fairness. Rule 13e-3(f)⁷⁷ also requires dissemination of the information required by Schedule 13E-3 to security holders within specified time periods.

When the Commission adopted Rule 13e-3, we indicated that the Rule would be triggered if a specified transaction has either the reasonable likelihood or purpose of causing the termination of reporting obligations under the Exchange Act because the class of securities would be held of record by less than 300 persons as a result of the transaction.⁷⁸ Recently, we adopted amendments to the deregistration provisions applicable to foreign private issuers that would permit them to terminate their reporting obligations under the Exchange Act by meeting a quantitative benchmark designed to measure relative U.S. market interest for their equity securities that does not depend on a head count of the issuers U.S. security holders.⁷⁹ Although Rule 13e-3 does not reflect the termination of registration and reporting provisions that were previously applicable to foreign private issuers, we propose to amend the Rule to better reflect the current deregistration provisions. As a result, we are proposing to amend Rule 13e3(a)(3)(ii)(A)⁸⁰ to specify that the cited effect is deemed to have occurred when a domestic or foreign issuer becomes eligible to deregister under Exchange Act Rules 12g4⁸¹ and 12h-6, ⁸² respectively.

When a foreign private issuer engages in a Rule 13e-3 transaction that would cause the termination of its registration or reporting obligations under the Exchange Act, Rule 13e-3 is intended to provide the issuers security holders with one last opportunity to obtain information about the company and consider their alternatives. This is equally true in the context of a foreign private issuer that is deregistering as it is for a domestic or foreign company that is ceasing to file reports because the number of its shareholders falls below 300.

Comments Solicited

17. Is it appropriate to amend Rule 13e-3 by using the quantitative benchmark set forth in the new termination of reporting and deregistration provisions?

18. Instead of referencing the applicable termination of reporting and deregistration provisions, is there another threshold that should be applied in Rule 13e3(a)(3)(ii)(A) to foreign private issuers?

19. If the proposed amendment is adopted, would more registrants be required to comply with Rule 13e-3 than intended because they may be engaged in one of the transactions described in Rule 13e-3(a)(3)(i) as a step toward terminating their registration or reporting obligations with respect to a class of securities, transactions that previously might not have resulted in the application of Rule 13e-3?

20. To what extent may foreign private issuers engage in ordinary course securities transactions (such as buybacks or repurchases) that may trigger Rule 13e-3, and is it necessary to provide exceptions so that these transactions do not trigger Rule 13e-3?

III. Other Matters Under Consideration

The Commission is considering whether it is appropriate to amend Form 20-F in order to revise the disclosure elicited from foreign private issuers in annual reports and registration statements. The proposals discussed in this section touch on a number of different areas. Unlike our proposal relating to the annual report filing deadline, we have not discussed these matters in previous releases and we are especially interested in comments from investors, foreign issuers and others as to whether we should impose these new disclosure requirements.

In addition to the specific proposals discussed below, we would also welcome commenters views regarding other areas as to which we should consider revising our disclosure requirements applicable to foreign private issuers, either with respect to requiring new areas of disclosure or eliminating current disclosure requirements.

A. Requiring Item 18 Reconciliation in Annual Reports and Registration Statements Filed on Form 20-F

Currently, a foreign private issuer that is only listing a class of securities on a national securities exchange, or only registering a class of securities under Exchange Act Section 12(g), without conducting a public offering of those securities may provide financial statements according to Item 17 of Form 20-F. Foreign private issuers may also provide financial statements according to Item 17 for their annual reports on Form 20-F. Under Item 17, a foreign private issuer must prepare its financial statements and schedules in accordance with U.S. GAAP, or IFRS as issued by the IASB. If its financial statements and schedules are prepared in accordance with another basis of accounting, the issuer must include a reconciliation to U.S. GAAP. This reconciliation must include a narrative discussion of reconciling differences, a reconciliation of net income for each year and any interim periods presented, a reconciliation of major balance sheet captions for each year and any interim periods, and a reconciliation of cash flows for each year and any interim periods.⁸³ In contrast, if a foreign private issuer that presents its financial statements on a basis other than U.S. GAAP, or IFRS as issued by the IASB provides financial statements under Item 18 of Form 20-F, it must provide all the information required by U.S. GAAP and Regulation S-X, in addition to the reconciling information for the line items specified in Item 17.

We are proposing to eliminate this distinction between the disclosure provided to the primary and secondary markets by requiring Item 18 information for foreign private issuers that are only listing a class of securities on an exchange, or only registering a class of securities under Exchange Act Section 12(g), without conducting a public offering. We are also proposing to require Item 18 information for foreign private issuers that file annual reports on Form 20-F. In addition, foreign private issuers that are making certain non-capital raising offerings, such as an offerings pursuant to reinvestment plans, offerings upon the conversion of securities or offerings of investment grade securities, currently are permitted to provide Item 17 financial statements in their registration statements under the Securities Act. To ensure that the same type of financial information is provided regardless of the type of offering that is being made, we are also proposing to require foreign private issuers to file financial statements that comply with Item 18 when registering these types of offerings under the Securities Act.

The majority of foreign private issuers who do not prepare financial statements in accordance with U.S. GAAP elect to provide financial information pursuant to Item 18, rather than Item 17, of Form 20-F.⁸⁴ In our view, a reconciliation that includes the footnote disclosures required by U.S. GAAP and Regulation S-X⁸⁵ can provide important additional information.⁸⁶ As a result, we are proposing to amend Form 20-F and the registration statement forms available to foreign private issuers under the Securities Act (Forms F-1, F-3 and F-4) to require the disclosure of financial information according to Item 18 of Form 20-F for registration statements filed under both the Exchange Act and the Securities Act, as well as for annual reports. However, we are not proposing to eliminate the availability of Item 17 disclosures for Canadian MJDS filers in light of the special recognition accorded to MJDS filings. In addition, more countries are expected to adopt IFRS as their basis of accounting, or to permit companies to use IFRS as issued by the IASB as their basis of accounting in the next few years. We therefore believe that eliminating the availability of Item 17 in MJDS registration statements would not be necessary. Item 17 would also continue to be available for financial statements of non-registrants that are required to be included in a foreign or domestic issuers registration statement, annual report or other Exchange Act report. These include significant acquired businesses under Rule 3-05⁸⁷ of Regulation S-X, significant equity method investees under Rule 3-09⁸⁸ of Regulation S-X, entities whose securities are pledged as collateral under Rule 3-16⁸⁹ of Regulation S-X, and exempt guarantors under Rule 310(i)⁹⁰ of Regulation S-X.

If this amendment is adopted, we propose to establish a compliance date that would provide foreign private issuers with sufficient time to transition to the Item 18 requirements when preparing their financial statements. We anticipate that if this amendment is adopted in 2008, a foreign private issuer that currently prepares its financial statements according to Item 17 of Form 20-F would not be required to prepare financial statements pursuant to Item 18 until it files an annual report for its first fiscal year ending on or after December 15, 2009.

Comments solicited

21. Would the proposed amendment to eliminate the availability of the Item 17 option benefit investors?

22. Is it appropriate to provide a transition period for foreign private issuers that are currently preparing financial statements in accordance with Item 17 of Form 20-F? Is a compliance date that provides a transition period in the best interests of investors? If so, is the suggested transition period appropriate in length, or should it be shorter or longer than proposed?

23. As proposed, Item 17 will now only be available for the presentation of financial information for non-issuer entities required to be included in a foreign or domestic issuers registration statement or Exchange Act report. Is there any reason for retaining the Item 17 financial information option for non-capital raising offerings made by foreign private issuers or annual reports?

24. Would the elimination of the Item 17 option increase costs for companies? If so, what types of compliance costs would be affected? Are there ways to mitigate the costs?

25. To what extent are the benefits to investors from the additional Item 18 financial disclosure linked to more timely filing of Form 20-F? If we decide not to accelerate the deadline for filing Form 20-F as proposed, should we still require the additional Item 18 financial disclosure?

26. Should we provide an exemption for foreign private issuers that are currently preparing financial statements pursuant to Item 17? If we adopt the proposed amendment, should we provide a "grandfather" provision or an exemptive order to permit these foreign private issuers to continue to provide financial information pursuant to Item 17?

B. Disclosure About Changes in a Registrants Certifying Accountant

Domestic companies currently report any changes in and disagreements with their certifying accountant in a current report on Form 8-K and in a registration statement on Form 10⁹¹ under the Exchange Act,⁹² as well as in their registration statements filed on Forms S-1⁹³ and S-4⁹⁴ under the Securities Act. Among other things, this disclosure provides information about potential opinion shopping situations by issuers. "Opinion shopping" generally refers to the search for an auditor that is willing to support a proposed accounting treatment that is designed to help a company achieve its reporting objectives, even though that treatment could frustrate reliable reporting.⁹⁵

Foreign private issuers have not been required to provide this disclosure. When we proposed the adoption of Form 20-F, we proposed a disclosure requirement soliciting information about changes in the registrants certifying accountant.⁹⁶ The disclosure item was not included in Form 20-F.⁹⁷ However, the issues underlying the need for this disclosure also apply to foreign private issuers, and the relationship between issuers and their auditors in this area would seem to be as important for investors. Moreover, foreign private issuers that are listed on the New York Stock Exchange (NYSE) are already required by that Exchange to notify the market about a change in their auditors, ⁹⁸ although this information is required to be furnished under cover of Form 6-K, which does not have the substantive disclosure requirements of Form 8-K.⁹⁹ As a result, we are proposing amendments that would require substantially the same types of disclosures currently provided by domestic issuers about changes in and disagreements with their certifying accountant.

We are proposing to amend Form 20-F by adding an Item 16F that would elicit the same types of change of accountant disclosures obtained in Item 4.01 (Changes in Registrants Certifying Accountant) of Form 8-K,¹⁰⁰ including the disclosure requirements of Item 304(a) of Regulation S-K,¹⁰¹ which are referenced in Form 8-K, and Item 9 (Changes in and Disagreements with Accountants on Accounting and Financial Disclosure) of Form 10-K,¹⁰² which refers to the disclosure requirements of Item 304(b) of Regulation S-K. Among other things, Item 304(a) of Regulation S-K requires an issuer to disclose whether an independent accountant that was previously engaged as the principal accountant to audit the issuers financial statements, or a significant subsidiary on which the accountant expressed reliance in its report, has resigned, declined to stand for re-election, or was dismissed. Item 304(a) of Regulation S-K also requires an issuer to disclose any disagreements or reportable events that occurred within the issuers latest two fiscal years and any interim period preceding the change of accountant. Item 304(b) of Regulation S-K solicits disclosure about whether, during the fiscal year in which the change of accountants took place or during the subsequent year, the issuer had similar, material transactions to those which led to the disagreements with the former accountants, and whether such transactions were accounted for or disclosed in a manner different from that which the former accountants would have concluded was required. If so, Item 304(b) requires the issuer to disclose the existence and nature of the disagreement or reportable event, and also disclose the effect on the financial statements if the method that would have been required by the former accountants had been followed. Because foreign private issuers do not file Forms 8-K and 10-K and are not otherwise subject to Item 304 of Regulation S-K, we are proposing that they provide disclosure about changes in and disagreements with their certifying accountants in their annual reports on Form 20-F, as well as in their initial registration statements filed on Forms 20-F, F-1 and F-4.

We are also proposing to amend Forms F-1 and F-4, which are used to register public offerings of securities by foreign private issuers under the Securities Act, to require the new Item 16F disclosure requirement about the issuers changes in and disagreements with their certifying accountant for first-time registrants with the Commission. We are not proposing to require Item 16F disclosure for repeat registrants because this information would be included in annual reports on Form 20-F filed by repeat registrants. Although we do not make this distinction in Forms S-1 and S-4, domestic issuers are subject to a Form 8-K current report requirement for change of accountant disclosure. Requiring this disclosure for repeat filers using S-1 and S-4 does not create an additional disclosure burden for them.

As proposed, Item 16F is virtually identical to Item 304 of Regulation S-K. However, we have eliminated or modified some of the due dates described in Item 304(a)(3) of Regulation S-K because the disclosure is being made on an annual basis, rather than on a current basis. For example, although Item 16F would require the issuer to provide a copy of the disclosures that it is making in response to Item 16F to the former accountant, it would not require the issuer to provide the disclosures no later than the day that the disclosures are filed with the Commission, as is required by Item 304(a)(3) of Regulation S-K. In addition, we expect that the former accountant would be able to furnish the issuer with a letter stating whether it agrees with the statements made by the issuer in response to Item 16F and, if not, stating the respects in which it does not agree, and that the issuer would be able to file the former accountants letter as an exhibit to the annual report that contains this disclosure at the time that the annual report is due. Item 304(a)(3) provides that if the former accountants letter is not available at the time that the report or registration statement is filed, then the issuer can file the letter with the Commission within ten business days after the filing of the report or registration statement. Because foreign private issuers would be permitted to provide the proposed disclosure in their annual reports, we believe that this accommodation would not be necessary for annual reports unless the change in accountant occurred less than 30 days prior to the filing of the annual report.¹⁰³ As proposed, Item 16F would permit a delayed filing of the former accountants letter in an annual report only if the change in accountant occurred within this 30-day timeframe.

Comments solicited

27. Should foreign private issuers be required to provide information about changes in and disagreements with their certifying accountant? Would this disclosure be useful to investors? If so, should foreign private issuers be subject to the same disclosure requirements that apply to domestic issuers, or would a different disclosure requirement be more appropriate?

28. Should foreign private issuers be permitted to provide the letter from the former accountant in their annual reports on a delayed basis for a change of accountants that occurs less than 30 days before the annual report is filed, as proposed? Is 30 days an appropriate parameter? Alternatively, should foreign private issuers be permitted to provide the letter from the former accountant on a delayed basis for a change in accountant that occurs up to 45 days or 60 days before the annual report is filed, or only if the change in accountant occurs less than 15 days before the annual report is filed? Because foreign private issuers provide this disclosure on a delayed basis compared to domestic issuers, is this accommodation necessary?

29. Are there restrictions under a foreign issuers home country law or regulations that would prohibit an auditor from reporting to a foreign regulator about disagreements with the issuer? If so, how should we address such restrictions?

30. Should the proposed change of accountant disclosure requirements contained in Item 16F be extended to registration statements filed by all foreign private issuers under the Securities Act, not just first-time registrants? Would this impose an undue burden on foreign private issuers that may not be subject to such a disclosure requirement in their home jurisdictions?

C. Annual Disclosure About ADR Fees and Payments

The Commission has long been interested in improving the disclosure provided to investors about the fees and other charges paid in connection with ADR facilities.¹⁰⁴ We continue to believe that ADR holders can benefit from enhanced disclosure in this area, especially in light of new depositary fees that are being charged to ADR holders in connection with sponsored ADR facilities. For example, many depositaries are now charging an annual fee for general depositary services, a fee that was formerly prohibited by some exchanges.¹⁰⁵

Currently, disclosures about fees and other payments made by ADR holders to the depositary are provided in the Form 20-F that is filed to register the deposited securities under the Exchange Act, ¹⁰⁶ but are not disclosed in the annual report. The information provided is also generic, providing maximums paid on the deposit and withdrawal of the securities underlying the ADRs. Although ADR fees are disclosed in the ADR itself,¹⁰⁷ ADR holders frequently purchase their ADRs in book-entry form and do not see the disclosures provided in the physical certificate. We are proposing to amend Form 20-F by revising Item 12.D.3. and the Instructions to Item 12 to solicit disclosure of these fees on an annual basis, including the annual fee for general depositary services. In addition, some depositaries may make certain payments to the foreign issuers whose securities underlie the ADRs. These types of payments should also be disclosed because the cost of these payments may be passed on to ADR holders through the fees and other charges that they pay to the depositary. The proposed amendments to Item 12.D.3. and the Instructions to Item 12 of Form 20-F would require disclosure of these payments in the registration statement on Form 20-F that is filed for the deposited securities, as well as in the annual report, for sponsored ADR facilities.

Comments solicited

31. Would it be useful to investors to receive information about ADR fees and payments made by depositaries on an annual basis? Is there other information relating to ADRs that would be useful to investors on an annual basis, such as the number of ADRs outstanding? Are there other methods by which investors can readily obtain this information? Should foreign private issuers be required to disclose the information in their Form 20-F annual reports only if the information is not disclosed on their websites?

32. Should Item 12 be amended to also explicitly solicit a brief discussion of the reasons why the depositary is making payments to the foreign private issuer, or is disclosure of the amount paid to the issuer sufficient?

33. Should depositaries be required to disclose payments that they make to third parties? Are these payments necessarily passed on to ADR holders?

34. Should Regulation S-K and Form 10-K be amended to elicit similar disclosure from foreign issuers that are not foreign private issuers and that file annual reports on Form 10-K, but that have securities traded in ADR form?

D. Disclosure About Differences in Corporate Governance Practices

Foreign private issuers are subject to different legal and regulatory requirements in their home jurisdictions, and as a result frequently follow different corporate governance practices from domestic companies. In recognition of this, many U.S. securities exchanges exempt listed foreign private issuers from many of their corporate governance requirements.¹⁰⁸ However, these exchanges require these issuers to disclose the significant ways in which their corporate governance practices differ from those followed by domestic companies under the relevant exchanges listing standards. Foreign private issuers may provide this disclosure either in their annual reports, and/or on their websites.¹⁰⁹ Although disclosure of differences in corporate governance practices does not imply a preference for any particular type of corporate governance regime, this disclosure is useful to investors because it facilitates their ability to monitor the issuers corporate governance practices.

Foreign private issuers frequently opt to provide this disclosure on their websites, rather than in their annual reports. We are proposing to require disclosure of this information in the Form 20-F annual reports filed by all foreign private issuers whose securities are listed on a U.S. exchange. This would consolidate all of the relevant corporate governance disclosure about a listed company in one central location. Currently, foreign private issuers are required to provide in their annual reports the disclosure required by Exchange Act Rule 10A-3(d)¹¹⁰ regarding an exemption from the listing standards for audit committees.¹¹¹

We propose to add a new Item 16G in Form 20-F that would require foreign private issuers to provide a concise summary in their annual reports of the significant ways in which the foreign private issuers corporate governance practices differ from the corporate governance practices of domestic companies listed on the same exchange. We expect that the disclosure provided in response to the proposed Item 16G would be similar to the disclosure that foreign private issuers currently provide in response to the corporate governance disclosure requirements of the exchange on which their securities are listed.

Comments solicited

35. Would disclosure of significant differences in the corporate governance practices of foreign private issuers in their annual reports enable investors to better monitor the corporate governance practices of the issuers in which they are investing?

36. Instead of the narrative discussion that is proposed, is there an alternative format, such as a tabular presentation of the differences in corporate governance practices, that would make the information provided in the annual report easier to understand and thus more useful to investors?

37. Is it sufficiently clear what differences in corporate governance should be disclosed? Are there important elements of corporate governance that investors should be informed of and that should be specifically addressed in a companys disclosure under this proposed requirement?

E. Financial Information for Significant, Completed Acquisitions

We propose to amend Item 17(a) of Form 20-F to require foreign private issuers to provide, in additional circumstances, the financial information required by Rule 3-05 and Article 11¹¹² of Regulation S-X, which pertain, respectively, to the financial statements that must be provided for significant, completed acquisitions and the preparation of pro forma financial statements. Although domestic companies must present the financial statements of significant acquired businesses and pro forma financial information in their registration statements under both the Securities Act and the Exchange Act, as well in a Form 8-K, foreign private issuers only provide this information in the registration statements that they file under the Securities Act and the Exchange Act.

Item 2.01 of Form 8-K¹¹³ requires domestic issuers to disclose certain information when they or one of their majority-owned subsidiaries complete an acquisition or disposition of a significant amount of assets, other than in the ordinary course of business. The Form 8-K filed to report this acquisition or disposition must be filed within four business days after the event has occurred.¹¹⁴ For a business acquisition significant at the 20% or greater level that must be disclosed pursuant to Item 2.01, Item 9.01 of Form 8-K requires the financial statements of the acquired business to be filed with the initial report of the acquisition on Form 8-K, or by amendment no later than 71 calendar days after the date that the initial report on Form 8-K is due.¹¹⁵ The financial information must be presented in accordance with Rule 3-05 of Regulation S-X, and the pro forma financial information must be presented pursuant to Article 11 of Regulation S-X.¹¹⁶

Foreign private issuers have not been required to present financial information about significant, completed acquisitions in their annual reports under the Exchange Act. When we first proposed Form 20-F, we proposed a disclosure requirement that would have solicited substantially similar information about the acquisition or disposition of assets that is required by Item 2.01 of Form 8-K.¹¹⁷ This proposal was not adopted,¹¹⁸ and the corresponding Rule 3-05 and Article 11 financial statement disclosures were also not implemented as a disclosure requirement for foreign private issuers.

We are now proposing to require foreign private issuers to provide the financial information solicited by Rule 3-05 and Article 11 of Regulation S-X in their Exchange Act annual reports. Because foreign private issuers do not file current reports on Form 8K, we are not proposing to impose a requirement that this financial information be presented on a more current basis than annually. As proposed, foreign private issuers would provide financial information in their annual report on Form 20-F about highly significant acquisitions completed during the most recent fiscal year covered by their annual report on that Form. We are aware that imposing a disclosure requirement in annual reports would incrementally increase compliance costs for foreign private issuers, but we believe that if a single business acquisition is significant at the 50% or greater level, this information is particularly useful to investors and should be disclosed. As proposed, the disclosure requirement would be triggered at the 50% or greater level,¹¹⁹ and would require the provision of financial statements for three fiscal years as prescribed by Rule 3-05(b)(2)(iv) of Regulation S-X.

We are not proposing to require annual reports filed on Form 20-F to contain the information required by Rule 3-05 and Article 11 of Regulation S-K if the information has already been provided previously in a registration statement. In addition, we are not proposing to require financial information about probable acquisitions, or financial information for the aggregation of individually insignificant acquisitions.

Comments solicited

38. If the information about significant, completed acquisitions is disclosed on an annual, as opposed to current, basis, would the information still be useful to investors? Would investors find the information useful even though the disclosure would be provided at least several months after the acquisition was completed?

39. What types of burdens, if any, would be placed on foreign private issuers if they are required to provide financial information disclosure about highly significant, completed acquisitions annually on Form 20-F?

40. As proposed, a foreign private issuer would be required to provide information about a highly significant, completed acquisition in its annual report on Form 20-F. In light of the proposal to accelerate the reporting deadline for annual reports filed on Form 20-F, should foreign private issuers be provided additional time to disclose information about a highly significant, completed acquisition on an amended annual report? If so, should the due date for the filing of this information be based upon the time that the acquisition was consummated? For example, information about a significant acquisition that was consummated early in the calendar year would be due with the annual report filed on Form 20-F, whereas financial information for a highly significant acquisition that occurred late in the calendar year could be provided on a delayed basis beyond the reporting deadline for the annual report filed on Form 20-F.

41. Should foreign private issuers be required to provide financial information for business acquisitions that are significant at the 50% or greater level, or should the test of significance be at the 20% or greater level, as for domestic issuers? Would another significance level between 20% and 50% be more appropriate? To ensure that only very large transactions are required to be presented, should the test of significance be limited to the comparison of the purchase price to the issuers assets? Alternatively, should a new test be developed for this purpose in which the comparison for significance is based on the size of the issuers public float?

42. Would it be useful to investors to require annual reports filed on Form 20-F to disclose the information required by Rule 3-05 and Article 11 of Regulation S-K even if the information has been provided previously in a registration statement? What kind of benefits would investors derive from disclosure in the annual reports?

IV. General Request for Comments

We request and encourage any interested person to submit comments on any aspect of our proposals and any of the matters that might have an impact on the proposed amendments. We request comment from investors, issuers, and other users of the information that may be affected by the proposals. We also request comment from service professionals, such as law and accounting firms. With respect to any comments, we note that they are of greatest assistance to our rulemaking initiatives if accompanied by supporting data and analysis of the issues addressed in those comments.

V. Paperwork Reduction Act

A. Background

The proposed amendments contain "collection of information" requirements within the meaning of the Paperwork Reduction Act of 1995 ("PRA").¹²⁰ We are submitting the proposed amendments to the Office of Management and Budget ("OMB") for review in accordance with the PRA.¹²¹ The titles for the affected collections of information are:

(1)"Form 20-F" (OMB Control No. 3235-0288); (2)"Form F-1" (OMB Control No. 3235-0258); (3)"Form F-3" (OMB Control No. 3235-0256); and (4)"Form F-4" (OMB Control No. 3235-0325).

Form 20-F sets forth the disclosure requirements for annual reports and registration statements filed by foreign private issuers under the Exchange Act, as well as many of the disclosure requirements for registration statements filed by foreign private issuers under the Securities Act. Forms F-1, F-3 and F-4 were adopted pursuant to the Securities Act, and set forth the disclosure requirements for registration statements filed by foreign private issuers to offer securities to the public.

The hours and costs associated with preparing, filing and sending these forms and complying with these rules constitute reporting and cost burdens imposed by each collection of information. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The information collection requirements related to Forms 20-F, F1, F-3 and F-4 are mandatory. There is no mandatory retention period for the information disclosed, and the information disclosed would be made publicly available on the EDGAR filing system. We have based our estimates of the effect that the proposed rule and form amendments would have on those collections of information primarily on our review of the most recently completed PRA submissions for the affected rules and forms.

The proposed amendments, if adopted, would: (1) Amend Rule 405 of Regulation C under the Securities Act and Exchange Act Rule 3b-4 to permit foreign issuers to test their qualification to use the forms and rules available to foreign private issuers on an annual basis, rather than on the continuous basis that is currently required; (2) Amend Form 20-F to accelerate the filing deadline for annual reports filed by foreign private issuers on Form 20-F, subject to a two-year transition period, and amend Exchange Act Rules 13a-10 and 15d-10 to conform the deadline for transition reports filed by foreign private issuers on Form 20-F with the deadline for annual reports filed on that Form; (3) Amend Form 20-F by eliminating an instruction to Item 17 of that Form, which permits certain foreign private issuers to omit segment data from their U.S. GAAP financial statements; (4) Amend Rule 13e-3, which pertains to going private transactions by reporting issuers or their affiliate, to reflect the recently adopted rules pertaining to the ability of foreign private issuers to terminate their Exchange Act registration and reporting obligations; (5) Amend Form 20-F and Forms F-1, F-3 and F-4 to require foreign private issuers that are required to provide a U.S. GAAP reconciliation to do so pursuant to Item 18 of Form 20-F; (6) Amend Form 20-F, Forms F-1 and F-4 to require foreign private issuers to disclose information about a change in the issuers certifying accountant; (7) Amend Form 20-F to require foreign private issuers to disclose the fees and charges paid by ADR holders, the payments made by the depositary to the foreign issuer whose securities underlie the ADRs, and for listed issuers, the differences in the foreign private issuers corporate governance practices and those applicable to domestic companies under the relevant exchanges listing rules; and (8) Amend Form 20-F to require foreign private issuers to provide certain financial information in their annual reports on Form 20-F about a significant, completed acquisition that is significant at the 50% or greater level when that acquisition is completed after the issuers first fiscal quarter.

We have based the annual burden and cost estimates of the proposed amendments on the following estimates and assumptions:

• A foreign private issuer incurs or will incur 25% of the annual burden required to produce each Form 20-F, Form F-1, Form F-3, or Form F-4; and
• Outside firms, including legal counsel, accountants and other advisors, incur or will incur 75% of the burden required to produce each Form 20-F, Form F-1, Form F-3, or Form F-4 at an average cost of $400 per hour.¹²²

We estimated the average number of hours each entity spends completing the forms and the average hourly rate for outside professionals. That estimate includes the time and the cost of in-house preparers, reviews by executive officers, in-house counsel, outside counsel, independent auditors and members of the audit committee.

B. Burden and Cost Estimates Related to the Proposed Amendments

1. Form 20-F

We estimate that currently foreign private issuers file 942 Form 20-Fs each year. We assume that 25% of the burden required to produce the Form 20-Fs is borne internally by foreign private issuers, resulting in 614,891 annual burden hours borne by foreign private issuers out of a total of 2,459,564 annual burden hours. Thus, we estimate that 2,611 total burden hours per response are currently required to prepare the Form 20- F. We further assume that 75% of the burden to produce the Form 20-Fs is carried by outside professionals retained by foreign private issuers at an average cost of $400 per hour, for a total cost of $737,868,600.

The proposed amendment to amend Form 20-F to accelerate the filing deadline for annual reports and transitions reports filed on that Form would not change the amount of information required to be included in Exchange Act reports. In connection with this proposal, we are also proposing to amend Exchange Act Rules 13a-10 and 15d-10, which pertain to transition reports filed on Form 20-F. Our proposed amendments would conform the deadline for transition reports filed on Form 20-F with the proposed deadline for annual reports filed on Form 20-F. These amendments also would not change the amount of information required to be included in Exchange Act reports. Therefore, these proposed amendments would neither increase nor decrease the amount of burden hours necessary to prepare annual reports on Form 20-F for the purposes of the PRA.

With respect to our proposed amendment to require foreign private issuers that are required to provide a U.S. GAAP reconciliation to do so pursuant to Item 18 of Form 20F, we estimate that approximately 200 companies that file Form 20-F will be impacted by the proposal. We expect that, if adopted, the proposed amendment would cause those foreign private issuers to have more burden hours. We estimate that for each of the companies affected by the proposal, there would occur an increase of 2% (52.22 hours) in the number of burden hours required to prepare their Form 20-F, for a total increase of 10,444 hours as a result of this proposal. We expect that 25% of those increased burden hours (2,611 hours) will be incurred by foreign private issuers. We further expect that 75% of these increased burden hours (7,833 hours) will be incurred by outside firms, at an average cost of $400 per hour, for a total of $3,133,200 in increased costs to the respondents of the information collection as a result of this proposal.

With respect to our proposed amendment to require disclosure about a change in the issuers certifying accountant in annual reports and registration statements filed on Form 20-F, we estimate that approximately 90 companies that file Form 20-F will be impacted by the proposal. We expect that, if adopted, the proposed amendment would cause those foreign private issuers to have more burden hours. We estimate that for each of the companies affected by the proposal, there would occur an increase of .75% (19.58 hours) in the number of burden hours required to prepare their Form 20-F, for a total increase of 1,762.2 hours. We expect that 25% of those increased burden hours (440.55 hours) will be incurred by foreign private issuers. We further expect that 75% of these increased burden hours (1,321.65 hours) will be incurred by outside firms, at an average cost of $400 per hour, for a total of $528,660 in increased costs to the respondents of the information collection as a result of the proposal.

With respect to our proposed amendment to require disclosure about ADR fees and payments on an annual basis, we estimate that approximately 442 companies that file Form 20-F will be impacted by the proposal. We expect that, if adopted, the proposed amendment would cause those foreign private issuers to have more burden hours. We estimate that for each of the companies affected by the proposal, there would occur an increase of .25% (6.53 hours) in the number of burden hours required to prepare their Form 20-F, for a total increase of 2,886.26 hours. We expect that 25% of those increased burden hours (721.57 hours) will be incurred by foreign private issuers. We further expect that 75% of these increased burden hours (2,164.71 hours) will be incurred by outside firms, at an average cost of $400 per hour, for a total of $865,884 in increased costs to the respondents of the information collection as a result of these proposal.

With respect to our proposed amendment to require annual disclosure about differences in a listed foreign private issuers corporate practices and those applicable to domestic companies under the relevant exchanges listing rule, we estimate that approximately 783 companies that file Form 20-F will be impacted by the proposal. We expect that, if adopted, the proposed amendment would not cause a significant change in the burden hours for those foreign private issuers because they already prepare this information for the exchanges on which they are listed.

With respect to our proposed amendment to eliminate an instruction to Item 17 of Form 20-F, which permits certain foreign private issuers to omit segment data from their U.S. GAAP financial statements, we estimate that approximately 5 companies that file Form 20-F will be currently impacted by the proposal. We expect that, if adopted, the proposed amendment would cause those foreign private issuers to have more burden hours. We estimate that for each of the companies affected by the proposal, there would occur an increase of 2% (52.22 hours) in the number of burden hours required to prepare their Form 20-F, for a total increase of 261.1 hours. We expect that 25% of those increased burden hours (65.3 hours) will be incurred by foreign private issuers. We further expect that 75% of these increased burden hours (195.83 hours) will be incurred by outside firms, at an average cost of $400 per hour, for a total of $78,332 in increased costs to the respondents of the information collection as a result of the proposal.

With respect to our proposed amendment to amend Form 20-F to require foreign private issuers to provide certain financial information in their annual reports on that Form about a significant, completed acquisition that is significant at the 50% or greater level when that acquisition is completed after the issuers first fiscal quarter, we estimate that approximately 45 companies that file Form 20-F will be currently impacted by the proposal. We expect that, if adopted, the proposed amendment would cause those foreign private issuers to have more burden hours. We estimate that for each of the companies affected by the proposal, there would occur an increase of 20% (522.2 hours) in the number of burden hours required to prepare their Form 20-F, for a total increase of 23,499 hours. We expect that 25% of those increased burden hours (5,874.75 hours) will be incurred by foreign private issuers. We further expect that 75% of these increased burden hours (17,624.25 hours) will be incurred by outside firms, at an average cost of $400 per hour, for a total of $7,049,700 in increased costs to the respondents of the information collection as a result of this proposal.

Thus, we estimate that the proposed amendments to Form 20-F would increase the annual burden borne by foreign private issuers in the preparation of Form 20-F from 614,891 hours to 624,604 hours. We further estimate that the proposed amendments would increase the total annual burden associated with Form 20-F preparation to 2,498,417 burden hours, which would increase the average number of burden hours per response to 2652. We further estimate that the proposed amendment would increase the total annual costs attributed to the preparation of Form 20-F by outside firms to $749,524,376.

2. Form F-1

We estimate that currently foreign private issuers file 42 registration statements on Form F-1 each year. We assume that 25% of the burden required to produce a Form F1 is borne by foreign private issuers, resulting in 18,890 annual burden hours incurred by foreign private issuers out of a total of 75,560 annual burden hours. Thus, we estimate that 1,799 total burden hours per response are currently required to prepare a registration statement on Form F-1. We further assume that 75% of the burden to produce a Form F-1 1 is carried by outside professionals retained by foreign private issuers at an average cost of $400 per hour, for a total cost of $22,667,400.

We estimate that currently approximately 4 companies that file registration statements on Form F-1 will be impacted by the proposal to require foreign private issuers to provide disclosure about a change in their certifying accountant in their initial registration statements. We expect that, if adopted, the proposed amendment would cause those foreign private issuers to have more burden hours. We estimate that each company affected by the proposal would have a .75% increase (13.49 hours) in the number of burden hours required to prepare their registration statements on Form F-1, for a total increase of 54 hours. We expect that 25% of these increased burden hours (13.5 hours) will be incurred by foreign private issuers. We further expect that 75% of the increased burden hours (40.5 hours) will be incurred by outside firms, at an average cost of $400 per hour, for a total of $16,200 in increased costs to the respondents of the information collection as a result of the proposal.

We estimate that none of the companies that file registration statements on Form F-1 will be impacted by the proposal to require foreign private issuers that are required to provide a U.S. GAAP reconciliation to do so pursuant to Item 18 of Form 20-F. In our experience, the companies that use Form F-1 are engaging in capital raising transactions, so that all registrants have been providing financial information according to Item 18. The proposed amendment would be a technical change to the Form without any expected impact on the companies using that Form.

Thus, we estimate that the proposed amendments to Form F-1 would increase the annual burden incurred by foreign private issuers in the preparation of Form F-1 from 18,890 hours to 18,904 hours. We further estimate that the proposed amendment would increase the total annual burden associated with Form F-1 preparation to 75,614 burden hours, which would increase the average number of burden hours per response to 1800. We further estimate that the proposed amendment would increase the total annual costs attributed to the preparation of Form F-1 by outside firms to $22,683,600.

3. Form F-3

We estimate that currently foreign private issuers file 106 registration statements on Form F-3 each year. We assume that 25% of the burden required to produce a Form F3 is borne by foreign private issuers, resulting in 4,399 annual burden hours incurred by foreign private issuers out of a total of 17,596 annual burden hours. Thus, we estimate that 166 total burden hours per response are currently required to prepare a registration statement on Form F-3. We further assume that 75% of the burden to produce a Form F-3 is carried by outside professionals retained by foreign private issuers at an average cost of $400 per hour, for a total cost of $5,278,800.

We estimate that currently approximately 20 companies that file registration statements on Form F-3 will be impacted by the proposal to require foreign private issuers that are required to provide a U.S. GAAP reconciliation to do so pursuant to Item 18 of Form 20-F. We expect that, if adopted, the proposed amendment would cause those foreign private issuers to have more burden hours. We estimate that each company affected by the proposal would have a 2% increase (3.32 hours) in the number of burden hours required to prepare their registration statements on Form F-3, for a total increase of 66.4 hours. We expect that 25% of these increased burden hours (16.6 hours) will be incurred by foreign private issuers. We further expect that 75% of the increased burden hours (49.8 hours) will be incurred by outside firms, at an average cost of $400 per hour, for a total of $19,920 in increased costs to the respondents of the information collection as a result of the proposal.

Thus, we estimate that the proposed amendment to Form F-3 would increase the annual burden incurred by foreign private issuers in the preparation of Form F-3 from 4,399 hours to 4,416 hours. We further estimate that the proposed amendment would increase the total annual burden associated with Form F-3 preparation to 17,663 burden hours, which would increase the average number of burden hours per response to 167. We further estimate that the proposed amendment would increase the total annual costs attributed to the preparation of Form F-3 by outside firms to $5,298,720.

4. Form F-4

We estimate that currently foreign private issuers file 68 registration statements on Form F-4 each year. We assume that 25% of the burden required to produce a Form F-4 is borne internally by foreign private issuers, resulting in 24,497 annual burden hours incurred by foreign private issuers out of a total of 97,988 annual burden hours. Thus, we estimate that 1,441 total burden hours per response are currently required to prepare a registration statement on Form F-4. We further assume that 75% of the burden to produce a Form F-4 is carried by outside professionals retained by foreign private issuers at an average cost of $400 per hour, for a total cost of $29,396,400.

We estimate that currently approximately none of the companies that file registration statements on Form F-4 will be impacted by the proposal to require foreign private issuers that are required to provide a U.S. GAAP reconciliation to do so pursuant to Item 18 of Form 20-F. In our experience, the companies that use Form F-4 have all been providing financial information according to Item 18 because of the types of transactions that are registered on that Form, so the proposed amendment would be a technical change to the Form without any expected impact on the companies using it.

We estimate that currently approximately 5 companies that file registration statements on Form F-4 will be impacted by the proposal to require foreign private issuers to provide disclosure about a change in their certifying accountant in their initial registration statements. We expect that, if adopted, the proposed amendment would cause those foreign private issuers to have more burden hours. We estimate that each company affected by the proposal would have a .75% increase (10.81 hours) in the number of burden hours required to prepare their registration statements on Form F-1, for a total increase of 54 hours. We expect that 25% of these increased burden hours (13.5 hours) will be incurred by foreign private issuers. We further expect that 75% of the increased burden hours (40.5 hours) will be incurred by outside firms, at an average cost of $400 per hour, for a total of $16,200 in increased costs to the respondents of the information collection as a result of the proposal.

Thus, we estimate that the proposed amendments to Form F-4 would increase the annual burden incurred by foreign private issuers in the preparation of Form F-4 from 24,497 hours to 24,511 hours. We further estimate that the proposed amendment would increase the total annual burden associated with Form F-4 preparation to 98,042 burden hours, which would decrease the average number of burden hours per response to 1,442. We further estimate that the proposed amendment would increase the total annual costs attributed to the preparation of Form F-4 by outside firms to $29,412,600.

5. Other proposed amendments

The proposed amendments to Securities Act Rule 405 and Exchange Act Rule 3b4 would revise the definition of "foreign private issuer" to permit foreign issuers to test their status as "foreign private issuers" on the last business day of their second fiscal quarter, rather than continuously, as is currently the case. Our proposed amendments would not change the amount of information required to be included in Securities Act registration statements or Exchange Act reports. Therefore, they would neither increase nor decrease the amount of burden hours necessary to prepare documents under either of those Acts for the purposes of the PRA.

In addition, we also expect the proposed amendment to Exchange Act Rule 13e-3 to have a neutral effect on foreign private issuers. We do not expect a change in the number of foreign private issuers who would be required to comply with Rule 13e-3, or the burden hours required to prepare a Schedule 13E-3.

C. Request for Comment

Pursuant to 44 U.S.C. 3506(c)(2)(B), we request comment in order to:

• Evaluate whether the proposed collections of information are necessary for the proper performance of the functions of the Commission, including whether the information will have practical utility;
• Evaluate the accuracy of our estimates of the burden of the proposed collections of information;
• Determine whether there are ways to enhance the quality, utility, and clarity of the information to be collected;
• Evaluate whether there are ways to minimize the burden of the collections of information on those who respond, including through the use of automated collection techniques or other forms of information technology; and
• Evaluate whether the proposed amendments will have any effects on any other collections of information not previously identified in this section.

Any member of the public may direct to us any comments concerning the accuracy of these burden estimates and any suggestions for reducing the burdens. Persons who desire to submit comments on the collection of information requirements should direct their comments to the OMB, Attention: Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Washington, DC 20503, and send a copy of the comments to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090, with reference to File No. S7-05-08. Requests for materials submitted to the OMB by us with regard to these collections of information should be in writing, refer to File No. S7-05-08 and be submitted to the Securities and Exchange Commission, Records Management, Office of Filings and Information Services, 100 F Street NE, Washington DC 20549. Because the OMB is required to make a decision concerning the collections of information between 30 and 60 days after publication, your comments are best assured of having their full effect if the OMB receives them within 30 days of publication.

VI. Cost-Benefit Analysis

We are proposing amendments to our rules and forms relating to foreign private issuers that are intended to improve the accessibility of the U.S. public capital markets to these issuers, as well as to enhance the information that is available to investors. The Commission has considered the costs and benefits as described below and encourages commenters to identify, discuss, analyze, and supply relevant data regarding any additional costs or benefits. Specifically, the Commission requests data to quantify the costs and the value of each of the benefits identified. The Commission also seeks estimates and views regarding the identified costs and benefits of the proposals for particular types of market participants and any other costs or benefits that may result from the adoption of the proposed rule.

1. Annual Test for Foreign Private Issuer Status

A. Expected Benefits

The proposed amendments to the definition of "foreign private issuer" contained in Securities Act Rule 405 and Exchange Act Rule 3b-4 would permit reporting foreign issuers to assess their eligibility to use the special forms and rules available to foreign private issuers once a year on the last business day of their second fiscal quarter, rather than continuously, as is currently the case. This is the same date used to determine accelerated filer status under Exchange Act Rule 12b-2 and smaller reporting company status in Item 10(f)(2)(i) of Regulation S-K. As a result, these proposed amendments should simplify compliance with the Commissions regulations by establishing one date that is used to ascertain an issuers status. Foreign issuers should benefit as a result of this simplification of their compliance requirements, which could make the U.S. markets more attractive to them as a source of capital and thereby enhance the competitiveness of the U.S. markets compared to other markets. The proposed amendments are expected to reduce the cost for foreign issuers of monitoring whether they qualify as foreign private issuers, including the time spent by management in tracking this information. If more foreign issuers are encouraged to remain in the U.S. markets and to make public offerings, investors should also benefit because this will enhance their ability to invest in the securities of foreign issuers that have been registered with the Commission, and that are thus subject to the disclosure requirements and investor protections provided by the federal securities laws.

Once a foreign issuer determines that it no longer qualifies as a foreign private issuer, the proposed amendments would provide the issuer with at least six months advance notice that it must comply with the domestic issuer forms and rules. This would provide these issuers with more time to comply with the reporting requirements applicable to domestic issuers under the Exchange Act, and to modify their information and processing systems to comply with the domestic reporting and registration regime. This includes the requirements to comply with the more extensive executive compensation disclosure requirements that apply to domestic issuers, as well as the proxy rules and Section 16 reporting requirements under the Exchange Act, which do not apply to foreign private issuers. Because the proposed amendments would provide foreign issuers with advance notice when their status changes, more foreign issuers may be encouraged to remain in the U.S. markets, and investors should benefit from the increased opportunities to invest in foreign securities in the United States.

The proposed amendments should mitigate a burden on foreign issuers by reducing the amount of time and the resources they expend to determine their status pursuant to the four-factor test set forth in the definition of "foreign private issuer." In this respect, the proposed amendments would be most beneficial to reporting foreign private issuers that have close to 50% of their outstanding voting securities held of record by U.S. residents, since they are most at risk of no longer qualifying as foreign private issuers. The current requirement that foreign issuers continuously test their status can result in confusion for investors if a foreign issuer needs to move between foreign and domestic reporting forms in the same fiscal year. For example, investors may be confused if a foreign issuer determines that it no longer qualifies as a foreign private issuer, and then switches from the foreign private issuer forms (Form 6-K and Form 20F) to the domestic forms (e.g., quarterly reports on Form 10-Q) in the same fiscal year. The proposed amendments would benefit U.S. investors by eliminating this confusion. However, the proposed amendments may not be as helpful in reducing investor confusion with respect to foreign private issuers that have been reporting under the domestic regime and that would now be permitted to switch immediately to the foreign private issuer reporting regime upon the determination of their eligibility to do so.

At the same time, foreign issuers that previously did not qualify as foreign private issuers, but that determine that they would qualify as foreign private issuers, would be able to use the foreign private issuer rules and forms immediately under the proposed amendments. This accommodation could encourage more foreign issuers to enter the U.S markets and to make public offerings, and should benefit investors by enhancing their ability to invest in foreign securities that have been registered with the Commission.

B. Expected Costs

Investors could incur costs from the proposed amendments if foreign issuers that have been reporting under the domestic reporting regime immediately switch over to the foreign private issuer forms once they qualify as foreign private issuers. Because foreign private issuers have different Exchange Act reporting obligations than domestic issuers and file on different forms, some investors may find it confusing if a foreign issuer that had been reporting under the domestic reporting regime switches reporting regimes midyear. In addition, once a foreign issuer switches status from a domestic issuer to a foreign private issuer, investors will no longer have the benefit of the disclosures that were once provided by the foreign issuer on the domestic forms.

Currently, when a foreign issuer no longer qualifies as a foreign private issuer, it must