Responses To The SEC's Concept Release On Foreign Private Issuer Eligibility

On June 4, 2025, the U.S. Securities and Exchange Commission (the "SEC") published a Concept Release on Foreign Private Issuer Eligibility (the "Concept Release") soliciting public comment on proposed changes to the definition of foreign private issuer ("FPI"). The Concept Release highlights numerous changes to the FPI population since the rules were adopted in 2003, including that global trading of FPIs' equity securities has become increasingly concentrated in U.S. capital markets over the last decade, and approximately 55% of FPIs, as of FY 2024, appear to have had no or minimal trading of their equity securities on any non-U.S. market and appear to maintain listings of their equity securities only on U.S. national securities exchanges. Further, in FY 2003, the two jurisdictions most frequently represented among FPIs in terms of both incorporation and location of headquarters were Canada and the United Kingdom. In contrast, in FY 2023, the Cayman Islands was the most common jurisdiction of incorporation and mainland China was the most common jurisdiction of headquarters.

In light of these changes, the SEC is considering whether accommodations for FPIs, in combination with the fact that many FPIs are not currently subject to stringent home country reporting obligations, means there is less information available to U.S. investors, which could create increased risk. It posits two primary reasons for potential changes to the FPI definition, including to ensure that (i) U.S. investors receive appropriate disclosure and remain adequately protected when investing in FPIs' securities and (ii) the discrepancy in regulatory requirements between FPIs and U.S. domestic issuers does not have unintended negative competitive implications for U.S. domestic issuers.

The Concept Release includes 69 requests for comment on potential changes to the FPI definition, centered around six potential ideas for a new regulatory scheme: (i) update existing FPI eligibility criteria; (ii) require FPIs to have a certain percentage of the trading volume of securities in a market or markets outside the U.S. over a preceding time period at a certain threshold; (iii) include a major foreign exchange listing requirement; (iv) incorporate an SEC assessment of foreign regulations applicable to FPIs, requiring that each FPI be incorporated or headquartered in a jurisdiction that the SEC has determined to have a robust regulatory and oversight framework for issuers, and subject to such securities regulations; (v) establish a new mutual recognition system; or (vi) implement an international cooperation arrangement requirement.

As of September 10, 2025, the SEC had posted approximately 70 responses to the Concept Release on its website. The response letters, in large part, come from law firms, FPIs and other industry groups, and can be broken into three main groups:\

• Many of the letters are generally supportive of the SEC's policy goals and understand the intentions behind the proposed changes to the FPI definition; however, these supportive letters also explore alternatives to or explain potential negative consequences of the proposals in the Concept Release.
• In the alternative, many letters share the view that "a change in the nature of the FPI population alone may not in and of itself be a reason for change in the FPI regulatory framework."¹ These letters ask the SEC to provide data and quantitative support that the changing FPI population actually creates risk to investors or otherwise that would warrant rule changes.
• Other letters share the view that the current definition of FPI is working effectively, and changing it could have unintended and unforeseen negative consequences. For example, one commenter wrote that the "current framework appropriately balances the information needs of American investors with the benefits afforded to them by having access to investment opportunities in foreign companies;" "proposed changes to the FPI eligibility standards may discourage new-entrant foreign companies from accessing the U.S. public markets or lead publicly reporting FPIs to pursue 'going private' transactions or otherwise avail themselves of streamlined deregistration procedures available to FPIs to exit the U.S. reporting system in favor of alternative capital raising forums—in each case, depriving American investors of investment opportunities afforded by, and with the protections of, the robust FPI regulatory framework."²

Within these general categories, there are a number of specific themes repeated across the letters:

• A very large number of letters argued that the SEC should narrowly tailor any changes to the specific problems it intends to solve, since broad based changes may have unintended and unwanted consequences. More specifically, some letters request narrowly tailored disclosure changes focusing only on issuers that have failed to provide robust disclosure necessary to ensure the protection of U.S. investors (i.e., making "targeted, incremental changes to existing disclosure requirements applicable to FPIs accessing the U.S. markets through registered offerings or as reporting issuers").³
• Other letters favored limited, specifically tailored changes to the FPI definition for other reasons, arguing that any changes should be made in a manner that considers the impact of the definition on other terms and rules under the federal securities laws, including Regulation S and Exchange Act Rule 12g3-2(b).
• Similarly, a number of commenters stated that the SEC should be wary of potential changes that are duplicative of or contrary to existing home requirements to which FPIs adhere, and understand that the additional burden and cost of navigating the two regimes could be significant, such that some issuers may choose to exit the U.S. markets.
• Many letters argued in favor of continued reporting in IFRS, either for FPIs or for all issuers. In the alternative, if foreign issuers that lose FPI status must report in U.S. GAAP, the SEC should provide guidance and a suitable transition period (several commenters suggested a minimum of two or three years). Concern about switching from IFRS to U.S. GAAP was the most commonly repeated idea across all letters.

Footnotes

1. See Davis Polk & Wardwell LLP, s7202501-648927-1945014.pdf.

2. See Jones Day, s7202501-648747-1944014.pdf.

3. See Mariam Patterson, Senior Director, ICMA Primary Markets, International Capital Market Association, s7202501- 651647-1950614.pdf.

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