SEC LIMITS POLICY REGARDING THE NON-PUBLIC SUBMISSION OF INITIAL REGISTRATION STATEMENTS BY FOREIGN PRIVATE ISSUERS

Michael Barloewen, Senior Manager, Assurance & Advisory

On December 8, 2011, the Securities and Exchange Commission (SEC) announced that the Division of Corporation Finance will limit its policy with respect to the non-public submission of initial registration statements by foreign private issuers (FPIs). This new announcement will significantly reduce the number of filers eligible for use of the non-public submission process. This change effectively means that FPIs conducting an IPO only in the United States will now have to file their registration statements publicly via the EDGAR system. Effective immediately, the SEC staff’s non-public review of initial registration statements of foreign issuers that are submitted will be limited only to where the registrant is:

1. A foreign government registering its debt securities
2. A foreign private issuer that is listed or is concurrently listing its securities on a non-U.S. securities exchange
3. A foreign private issuer that is being privatized by a foreign government
4. A foreign private issuer that can demonstrate that the public filing of an initial registration statement would conflict with the law of an applicable foreign jurisdiction

The SEC previously stated that the confidential review policy afforded to FPIs was due to the Staff's recognition that foreign registrants often have special transparency concerns in connection with a public SEC review process, such as when a foreign registrant's securities trade publicly in its home market and the company would be making new and different disclosures as a result of SEC registration. The SEC noted in its December 8 statement that the vast majority of FPIs using the confidential review procedure did not and were not contemplating a listing outside the United States.

Under certain circumstances, The Division of Corporate Finance may request a non-US issuer to publicly file its registration statement even though it would otherwise fall within the new policy. The SEC does not go into detail about what circumstances may give rise to such a request but states that it may be requested in connection with a competing bid in an acquisition transaction or when there is public disclosure about a proposed offering or listing.  Also note that shell companies, blank check companies and "issuers with no or substantially no business operations" will also not be permitted to use confidential submission.

The SEC stated that non-public submissions that do not come within one of the above categories and that were received by the staff before December 8 will continue to be reviewed by the staff without a public filing.  Subsequent amendments of those submissions, whether in response to comments issued by the staff or otherwise, must be filed on the EDGAR system. The SEC also stated that circumstances may develop in which the staff will request a foreign issuer to publicly file its registration statement even though it comes within the general parameters of the policy.

How does this affect ongoing deals? Let's say you are currently in the middle of the confidential submission process but don't meet the new policy. In that case, the SEC Staff will require the next draft of the registration to be filed publicly on EDGAR.

This announcement represents a change in the SEC's previous policy which allowed FPIs and foreign governments to submit initial drafts of registration statements on a confidential basis, permitting the staff to review and comment on disclosure, and the issuer to respond to staff comments, before a public filing is made through the EDGAR system. In the past, FPIs routinely submitted their first-time registration statements on a non-public basis.

Given the SEC's new limitations on non-public submissions from FPIs, it is uncertain whether FPIs will seek in the future to list concurrently on a non- US securities exchange in order to be able to take advantage of the confidential submission process.

Read the SEC statement here.