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

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Chapter 1 – Key statutes and conceptsPractice point:Failure to submit Form 6-Ks when required will preventa foreign private issuer from using Form F-2 orForm F-3, the “short form” Securities Act registrationstatements. As a result, foreign private issuers shouldtake care to submit Form 6-Ks on a timely basis.Practice point:Form 6-K submissions do not need to be certified byan issuer’s CEO and CFO under Sections 302 and906 of Sarbanes-Oxley. 11(iii) Other consequences of ExchangeAct reportingA reporting foreign private issuer becomes subject to avariety of other provisions of the US federal securitieslaws, including:• Books and records; internal accounting controls: 12 Areporting issuer must maintain and keep books,records and accounts that accurately and fairly reflectthe transactions and dispositions of assets of the issuer,and design and maintain a system of adequate internalaccounting controls.• Limitations on payments to foreign officials: 13 Areporting issuer may not make corrupt payments toforeign officials, foreign political parties or theirintermediaries.• Audit requirements: 14 A reporting issuer’s audit mustinclude procedures for the detection of illegal acts,and the issuer’s auditors are required to take certainsteps if illegal acts are found. Those steps includeinforming the issuer’s management and auditcommittee, and potentially include a requirement toresign from the engagement or notify the SEC (if theissuer’s board fails to take certain steps).• Sarbanes-Oxley: 15 A reporting issuer is subject to theprovisions of the Sarbanes-Oxley Act.Other relevant statutesIn addition to the Securities Act and the Exchange Act,a foreign private issuer may trigger a number of otherstatutes when it issues securities in the United States,including:• the Sarbanes-Oxley Act, which represents the mostcomprehensive restructuring of the regulatory systemgoverning the US capital markets since the enactmentof the Exchange Act in 1934;• the US Investment Company Act of 1940 (theInvestment Company Act), which regulates offersand sales of securities by investment companies.Some foreign private issuers may be “investmentcompanies” within the meaning of the InvestmentCompany Act even though their primary activitiesare not investment related;• US federal tax laws, which impose particular taxtreatment on securities of passive foreign investmentcompanies (PFICs) within the meaning of the USInternal Revenue Code (the Code). Certain foreignprivate issuers may be PFICs despite their operationalactivities; and• the US Trust Indenture Act of 1939, which requiresthat indentures used for public offerings of debtsecurities in the United States meet varioussubstantive and procedural requirements.What is a foreign private issuer?(i) DefinitionA “foreign private issuer” means any issuer (other thana foreign government) incorporated or organized underthe laws of a jurisdiction outside of the United Statesunless: 16• more than 50% of its outstanding voting securities aredirectly or indirectly owned of record by USresidents; andwww.iflr.comUS SECURITIES OFFERINGS: A GUIDE FOR NON-US ISSUERS3
Chapter 1 – Key statutes and concepts• any of the following applies:- the majority of its executive officers or directorsare US citizens or residents;- more than 50% of its assets are located in theUnited States; or- its business is administered principally in theUnited States.(ii) How is ownership determined?Generally, an issuer may rely upon a review of theaddresses of its security holders in its records indetermining whether or not it is a foreign privateissuer. 17 However, securities held of record by a broker,dealer, or bank (or nominee for any of them) for theaccounts of customers resident in the United States willbe counted as held in the United States by the numberof separate accounts for which the securities are held. 18The issuer may rely in good faith on information as tothe number of these separate accounts supplied bybrokers, dealers, banks or nominees. 19An issuer’s inquiry as to ownership of its securities by USresidents may be limited to those brokers, dealers andbanks (and other nominees) that are record holders of theissuer’s securities and that are located in (i) the UnitedStates, (ii) the issuer’s jurisdiction of incorporation, and(iii) the jurisdiction of the issuer’s primary trading marketfor its voting securities. 20 If, after reasonable inquiry, theissuer is unable to obtain information about the amountof securities represented by accounts of customersresident in the United States, it may assume that thesecustomers are residents of the jurisdiction in which it hasits principal place of business. 21(iii) Benefits for foreign private issuersUnder the US federal securities laws and the SEC’s rulesand practice, foreign private issuers are not regulated inprecisely the same way as domestic US issuers. Inparticular, foreign private issuers are allowed a numberof key benefits not available to domestic US issuers.These include the following:• Quarterly reports: Unlike domestic US issuers,foreign private issuers are not required to file quarterlyreports (including quarterly financial information)with the SEC. 22 Some foreign private issuers,however, choose (or are required by contract) to filethe same forms with the SEC that domestic US issuersuse. In that case, they must report quarterly as if theywere a domestic US issuer. 23• SEC staff policy on confidential submissions: Foreignprivate issuers that are registering for the first timewith the SEC may generally submit registrationstatements on a confidential basis to the SEC staff. Bycontrast, domestic US companies must file theirregistration statements publicly. Confidentialsubmissions can be a significant advantage becausethe procedure allows the complicated issues oftenencountered in an initial SEC review to be resolvedbehind closed doors. A foreign private issuer will stillbe required to file its registration statement publiclyprior to going on a road show or selling its securities(and will have to file any future registrationstatements publicly).Practice point:Previously, the SEC staff was willing to review draftregistration statements of all foreign private issuers ona confidential basis. The SEC has changed its policyon confidential review, and will now generally onlyaccept confidential submissions of draft registrationstatements by first-time foreign registrants.• Proxy rules: The US proxy rules – which specify theprocedures and required documentation for solicitingshareholder votes – are not applicable to foreignprivate issuers. 244 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 and 14: US SECURITIES OFFERINGS: A GUIDE FO
Page 15: 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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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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Endnotes335 Regulation G, Rule 100(
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Endnotes552 Id. at 86,381.553 Id.55
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Securities PracticeLatham & Watkins
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