Securities offerings and listings in the US: an ... - Latham & Watkins

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Chapter 1 – Key statutes and conceptsChapter 1Key statutes and conceptsUS Securities Act of 1933; USSecurities Exchange Act of 1934The two principal federal securities statutes in the UnitedStates are the US Securities Act of 1933 (the SecuritiesAct) and the US Securities Exchange Act of 1934 (theExchange Act). To simplify considerably, the SecuritiesAct governs the offer and sale of securities in the UnitedStates, while the Exchange Act regulates the trading ofsecurities on a US national securities exchange such as theNew York Stock Exchange (the NYSE) or the NasdaqStock Market (Nasdaq), ongoing periodic and annualreporting, and tender and exchange offers.The US Securities and Exchange Commission (theSEC) has issued a comprehensive body of rules andregulations under the Securities Act and the ExchangeAct. These rules have the force of law.Registration under the SecuritiesAct and the Exchange ActRegistration is a core concept in the US federalsecurities laws. The Securities Act requires issuers toregister transactions. By contrast, the Exchange Actrequires issuers to register classes of securities.(i) Securities Act registrationThe Securities Act requires registration with the SEC ofany transaction involving the offer or sale of a security,unless the security is of a type that is exempt fromregistration or the transaction is structured to takeadvantage of an available exemption from registration.The terms “offer and sale” and “security” are verybroadly defined.As we discuss in more detail below, registeredtransactions involve filing a registration statement withthe SEC and meeting detailed and specific disclosureand financial statement requirements. In addition,registered transactions trigger the wide-rangingprovisions of the US Sarbanes-Oxley Act of 2002 (theSarbanes-Oxley Act or Sarbanes-Oxley) and a comprehensiveliability scheme.By contrast, the requirements of unregisteredtransactions are generally less demanding. A foreignprivate issuer will not typically become subject toSarbanes-Oxley merely by issuing securities in anunregistered transaction, and the liability regimegoverning unregistered transactions is more circumscribed.Foreign private issuers contemplating anunregistered transaction look to exemptions such as:• Offshore transactions: offers and sales made outsideof the United States pursuant to Regulation S underthe Securities Act (Regulation S);• Private placements: offers and sales not involving apublic offering pursuant to Section 4(2) of theSecurities Act or Regulation D under the SecuritiesAct (Regulation D); and• Rule 144A transactions: private placements involvingresales to qualified institutional buyers (QIBs)pursuant to Securities Act Rule 144A.The decision whether to issue in a registered orunregistered transaction involves balancing business andlegal objectives. Broadly speaking, registeredtransactions are more complex and time-consuming.www.iflr.comUS SECURITIES OFFERINGS: A GUIDE FOR NON-US ISSUERS1
Chapter 1 – Key statutes and conceptsBut not all securities issuances can take the form of anunregistered transaction. If a foreign private issuerwishes to list its securities in the United States, or tomake a public offering of securities to retail investors inthe United States, the transaction will have to beregistered.(ii) Exchange Act registrationA foreign private issuer must register a class of securitiesunder the Exchange Act if that class will be listed on aUS national securities exchange (such as the NYSE orAmerican Stock Exchange) or quoted on Nasdaq. 2 Inaddition, if a foreign private issuer has assets in excess of$10 million 3 and a class of equity securities held by atleast 500 shareholders (of whom at least 300 are residentin the United States) it must register those securities, 4unless it can claim the benefit of the exemption fromregistration provided by Exchange Act Rule 12g3-2(b).In order to qualify for the Rule 12g3-2(b) exemption, aforeign private issuer must first submit an application tothe SEC. Then, on an ongoing basis, the foreign privateissuer must furnish to the SEC certain materialinformation (such as information regarding the issuer’sfinancial condition, changes in business andmanagement, acquisitions or disposition of assets,issuances of securities, and transactions withmanagement or principal security holders) 5 that: 6• it has made or is required to make public pursuant tothe law of the country of its domicile or in which itis incorporated or organized;• it has filed or is required to file with a stock exchangeon which its securities are traded and that was madepublic by that exchange; or• it has distributed or is required to distribute to itssecurity holders.The Rule 12g3-2(b) exemption is not available undercertain circumstances. For example, an issuer may notclaim the exemption if, during the prior 18 months, ithad securities registered under the Exchange Act orotherwise had an obligation to file periodic reports withthe SEC.Exchange Act reportingOnce a foreign private issuer has registered with theSEC under the Securities Act or the Exchange Act, itmust make certain filings and submissions to the SECunder the Exchange Act. 7 Reporting foreign privateissuers also become subject to various other provisionsof the US federal securities laws.(i) Annual report on Form 20-FA reporting foreign private issuer must file an annualreport on Form 20-F with the SEC within six monthsafter the end of its fiscal year. 8 Form 20-F containsdetailed financial and non-financial disclosurerequirements. We include a checklist for non-financialdisclosure items in Annex A.Practice point:Annual reports on Form 20-F must be certified by anissuer’s chief executive officer (CEO) and chief financialofficer (CFO) under Sections 302 and 906 ofSarbanes-Oxley.(ii) Current reports on Form 6-KA reporting foreign private issuer must submit currentreports to the SEC on Form 6-K. 9 Form 6-K reportsmust contain all material information that the issuer:• makes or is required to make public pursuant to thelaws of its country of incorporation or organization;• files or is required to file with a stock exchange onwhich its securities are traded and which was madepublic by that exchange; or• distributes or is required to distribute to its securityholders. 102 US SECURITIES OFFERINGS: A GUIDE FOR NON-US ISSUERS www.iflr.com
Page 1 and 2: IFLRinternational Financial Law Rev
Page 3 and 4: About Latham & WatkinsLatham & Watk
Page 5 and 6: EditorNigel SavageProduction editor
Page 7 and 8: Table of contentsChapter 3 - Key ex
Page 9 and 10: Table of contentsSpecial considerat
Page 11 and 12: Table of contentsChapter 10 - Concl
Page 13: US SECURITIES OFFERINGS: A GUIDE FO
Page 17 and 18: Chapter 1 - Key statutes and concep
Page 19 and 20: Chapter 2- The registration process
Page 29 and 30: Chapter 3 - Key exemptions from Sec
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Chapter 6 - The US Sarbanes-Oxley A
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Chapter 7 - Liability under the US
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Chapter 8 - Communications with res
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Chapter 9 - Other relevant statutes
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Annex A - Non-financial disclosure
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Annex B -NYSE and Nasdaq quantitati
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Annex C - Effective dates for certa
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EndnotesEndnotes1 We do not discuss
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Endnotesparticular class of persons
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Endnotes210 Id. Item 17(c)(2)(iii).
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Endnotesparent has independent asse
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Endnotes335 Regulation G, Rule 100(
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Endnotes463 Id. Rule 500. A “fore
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Endnotes552 Id. at 86,381.553 Id.55
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Securities PracticeLatham & Watkins
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Securities offerings and listings in the US: an ... - Latham & Watkins

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