U.S. Securities and Exchange Commission launches concept release on foreign private issuer eligibility

The U.S. Securities and Exchange Commission has issued a concept release seeking input on whether the current framework for foreign private issuer (FPI) eligibility and associated regulatory accommodations remains appropriate given changes in the profile and trading patterns of foreign issuers accessing U.S. markets. In a statement accompanying the release, Commissioner Hester M. Peirce highlighted that the FPI regime has historically relied in part on the premise that foreign issuers are subject to meaningful home-country regulation and disclosure, but noted that the composition of Form 20-F filers has shifted materially since the SEC last examined the framework in 2008. She pointed to data suggesting that, compared with earlier periods when 20-F FPIs were predominantly incorporated and headquartered in Canada, more recent cohorts show the Cayman Islands and China as the preferred locations of incorporation and headquarters, respectively, and that FPIs increasingly trade almost exclusively in the United States. Peirce criticized one potential approach discussed in the concept release that would condition FPI status on being incorporated or headquartered in, and overseen by, a jurisdiction whose securities authority is a signatory to the International Organization of Securities Commissions Multilateral Memorandum of Understanding or Enhanced MMoU, arguing this would not ensure U.S. investors receive material disclosure and could effectively cede control of elements of the FPI definition. The concept release invites public feedback on the questions and potential approaches, and Peirce specifically raised issues around how the SEC will ensure FPIs and relevant jurisdictions are aware of the release and what transition period might be contemplated if the SEC were to pursue changes.