SEC seeks input from the public on defining foreign private issuers

The Securities and Exchange Commission (SEC) recently released a concept paper seeking feedback on the classification of foreign private issuers. This move is part of the SEC’s ongoing efforts to gather public input on regulatory frameworks. The concept paper aims to gather perspectives from various stakeholders to ensure that the definition of foreign private issuer remains relevant and effective in the ever-changing landscape of the global financial markets.

A foreign private issuer refers to a company that is incorporated outside of the United States but has securities registered in the U.S. or exceeds certain thresholds that require reporting to the SEC. The classification as a foreign private issuer carries important implications for regulatory requirements, disclosure obligations, and governance standards. As the global economy evolves and markets become increasingly interconnected, it is vital to review and update the definition of foreign private issuer to reflect current market realities.

One of the key areas of focus in the concept paper is the threshold for determining foreign private issuer status. Currently, a company qualifies as a foreign private issuer if a majority of its voting shares are held by non-U.S. residents. However, this criterion may not capture the complexity of modern shareholding structures, where ownership can be dispersed across multiple jurisdictions. Stakeholders are invited to provide feedback on whether this threshold effectively identifies companies with significant foreign market interests.

Another important aspect highlighted in the concept paper is the treatment of companies with dual-class share structures. In recent years, there has been an increasing trend of companies going public with dual-class share structures, where certain classes of shares have enhanced voting rights. The SEC is seeking input on how dual-class share structures should be considered in the classification of foreign private issuers and whether they pose any unique challenges from a regulatory perspective.

Additionally, the concept paper explores the impact of technological advancements on the classification of foreign private issuers. With the rise of digital technologies and online trading platforms, investors can easily access and trade securities issued by foreign companies. This raises questions about whether the current definition of foreign private issuer adequately captures companies that have a significant presence in the U.S. market through online channels.

Overall, the concept paper on the definition of foreign private issuers reflects the SEC’s commitment to ensuring that regulatory frameworks remain effective in a rapidly changing global financial landscape. Stakeholders are encouraged to provide their feedback and insights to help shape the future classification of foreign private issuers and promote transparency, investor protection, and market integrity.