United States: SEC Staff Issues New C&DIs Related To Foreign Issuers And Other Matters

The Securities and Exchange Commission (the "SEC") released new compliance and disclosure interpretations ("C&DIs") on December 8, 2016. These C&DIs provided the following:

Definition of Foreign Private Issuer.

FPIs are corporations or other organizations incorporated or organized under the laws of a foreign country, unless as of the last business day of its most recent second (2nd) fiscal quarter:

Fiscal Year End

Determination Date









the company meets the following conditions:

Component 1

More than fifty percent (50%) of the company's outstanding voting securities are directly or indirectly owned of record by United States ("U.S.") residents


Component 2(a)

The majority of the company's executive officers or directors (each as a separate group) are U.S. citizens or residents


Not a foreign private issuer


Component 2(b)

More than fifty percent (50%) of the company's assets are located in the U.S.


Not a foreign private issuer


Component 2(c)

The company's business is administered principally in the U.S.


Not a foreign private issuer

Each component requires due diligence and final determination by the company and its legal counsel. The recent C&DIs provided additional information on each of these components, as follows:

For Component 1

  • In determining residency, individuals with permanent resident status in the U.S. ("green card holders") are presumed to be residents of the U.S. (Question 203.18);
  • In determining residency, if an individual does not have permanent resident status, companies can determine that individual's residency using a variety of factors (including, but not limited to: tax residency, nationality, mailing address, physical presence, or immigration status); however, the factors must be applied consistently to each individual (Question 203.18); and
  • For companies with multiple classes of voting stock with different voting rights, companies may choose from two (2) methods (to be applied on a consistent basis) to determine whether fifty percent (50%) of its outstanding voting securities are directly or indirectly owned by residents of the U.S.:
    1. Determining whether U.S. residents own more than fifty percent (50%) of the voting power of the classes on a combined basis; or
    2. Determining whether U.S. residents own more than fifty percent (50%) of the number of outstanding voting securities (Question 203.17).

For Component 2(a)

  • In making a determination for this Component, there is a four (4)-part inquiry:
    1. Citizenship status of each executive officer;
    2. Citizenship status of each director;
    3. Residency status of each executive officer;
    4. Residency status of each director (Question 203.19).
  • If a company has two (2) boards, the determination should be made with regard to the board that most closely performs the functions of those undertaken by a U.S.-styled board of directors; if, however, the functions are divided between those two (2) boards, then the boards should be aggregated for the determination (Question 203.20)

For Component 2(b)

  • In making a determination for this Component, companies may use the geographic segment information prepared for its financial statements or any other reasonable methodology (Question 203.21)

For Component 2(c)

  • In making a determination for this Component, companies must assess the location from which its officers, partners or managers primarily direct, control and coordinate the company's activities on a consolidated basis (Question 203.22)
  • However, there is no single determinative factor; for instance, the SEC explicitly stated that: (a) holding an annual or special meeting of shareholders or (b) holding occasional meetings of the company's board of directors in the United States are not determinative (Questions 110.08 and 203.22)

Registration under the Securities Act.

The SEC clarified registration requirements where an FPI guarantees the securities of its subsidiary when the subsidiary is not an FPI. The SEC stated that Rule 3-10 of Regulation S-X permits modified reporting by subsidiary issuers of guaranteed securities and subsidiary guarantors.

If the parent is an FPI and the entities are able to (a) consolidate financial statements in accordance with Regulation S-X (specifically, Rules 3-10(b) through Rules 3-10(d)) and all other conditions of Rule 3-10 are followed, or (b) present narrative disclosure in lieu of condensed consolidating financial information under Rule 3-10, an F-series registration statement may be used to register an offering of guarantees and guaranteed securities that are issued by a non-FPI (Question 102.03).

Conversely, if a non-FPI subsidiary guarantees or co-issues securities issued by its parent FPI, an F-Series registration statement may be used if separate financial statements are not required under Rule 3-10(e) or 3-10(f) and all other conditions of Rule 3-10 are followed (Question 102.04).

Exchange Act Reporting.

The C&DIs addressed a few different scenarios and matters:

  • For a non-FPI subsidiary that registers its securities using an F-series registration statement (as discussed above in Registration under the Securities Act), the subsidiary may use Form 20-F with respect to any of its reporting obligations associated with the registration statement (Question 110.03). Additionally, a non-FPI subsidiary guarantor or co-issuer may use Form 20-F with respect to any of its reporting obligations associated with an F-series registration statement (as discussed above in Registration under the Securities Act) (Question 110.04).
  • If a non-reporting FPI acquires a reporting FPI using its shares as consideration for the holders of the securities of the acquired FPI, the acquiring FPI succeeds the acquiree's reporting obligations and should:
    • File Form 6-K announcing its succession using the Form 8-K submission type; and
    • Make all other Exchange Act filings as appropriate (Question 150.02).
  • FPIs may terminate their Exchange Act registration under Rule 12h-6. In order to terminate its registration, an FPI must maintain a listing of its securities for at least twelve (12) months on one (1) or more non-U.S. exchanges that, either singly or together with the trading of the securities in another foreign jurisdiction, constitutes the primary trading market for those securities. "Primary trading market" means at least fifty-five percent (55%) of the trading in the securities took place in a single foreign jurisdiction or in no more than two (2) foreign jurisdictions during a recent twelve (12)-month period. Now, the SEC allows the European Union to be considered a single foreign jurisdiction for purposes of this test (Question 155.01).
  • Forms 20-F are due four (4) months after the end of a company's fiscal year. The SEC stated that, where the last day of the company's fiscal year is the last day of a month, the annual report is due four (4) complete months after that day. The SEC provided two (2) examples of this:
    • Where the company has a February 28 fiscal year end, Form 20-F is due June 30; and
    • Where the company has a February 20 fiscal year end, Form 20-F is due June 20 (Question 110.05).
  • Wholly-owned subsidiaries of FPIs are permitted to omit certain information from their Form 20-F in the same manner that a wholly-owned subsidiary may do so on its Form 10-K as long as the company includes a prominent statement on the cover page of its Form 20-F that it meets the conditions set forth in General Instruction I(1)(a) and (b) to Form 10-K (Question 110.06).
  • Exchange Act Rule 12b-23 permits incorporation by reference in answer, or partial answer, to any items required to be disclosed by Form 20-F, including previously filed Forms 6-K, as long as the reference is identified with specificity (Question 110.07).

Rule 144A.

  • For purposes of Rule 144A, a QIB must own and invest at least $100,000,000 in securities. The C&DIs provided insight into determining an entity's qualifications as a QIB, particularly in meeting the $100,000,000 threshold, including:
    • Securities purchased and continued to be held on margin may used in calculating the threshold, as long as they are not subject to a repurchase agreement (Question 138.05);
    • Securities owned but loaned to borrowers may be used in calculating the threshold (Question 138.06);
    • Securities borrowed may not be included in calculating the threshold (Question 138.07); and
    • Short positions in securities may not be included in calculating the threshold (Question 138.08).
  • In determining its status as a QIB under Rule 144A, an investment company that is not registered under the Investment Company Act of 1940 may not aggregate investments with other funds that are "part of [the same] family of funds." Only registered investment companies may use the aggregation method for determining QIB status under Rule 144A (Question 138.09).
  • Under Rule 144A, an entity will be deemed a QIB if all of its equity owners are QIBs. In the case of limited partnerships, the equity owners are the limited partners and, unless also a limited partner, general partners are not considered equity owners for this purpose (Question 138.10).

For a complete listing of the new C&DIs, please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.