six months to transition to the US domestic reporting system. US domestic issuers generally must file their annual reports on Form 10-K within three months following the end of their fiscal year. By contrast, an FPI must file its annual report on Form 20-F within four months of the fiscal year covered by the report. This allows an FPI slightly more time to prepare the required information. An FPI has no legal obligation to file quarterly reports. By contrast, US domestic issuers must file a quarterly report on Form 10-Q. Unlike a US domestic issuer, an FPI has no legal obligation to file proxy solicitation materials on Schedule 14A or 14C in connection with annual or special meetings of its security holders. An FPI has no legal obligation to establish an audit committee. The securities exchanges generally provide alternative corporate governance requirements for listed FPIs, which are less burdensome than those for listed US domestic issuers. An FPI is exempt from the SEC’s disclosure rules for executive compensation on an individual basis, but is required to provide certain information on an aggregate basis. An FPI may prepare its financial statements in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) without reconciliation to US generally accepted accounting principles (US GAAP). An FPI may submit its initial registration statement on a confidential basis to the SEC staff if it is listed or is concurrently listing its securities on a non-US securities exchange, it is being privatised by a foreign government, or it can demonstrate that the public filing of the initial registration statement would conflict with the law of an applicable foreign jurisdiction. An FPI may separately use the confidential registration statement review procedures available to an EGC, if it qualifies as an EGC. An FPI can qualify to be treated as an EGC if it has total gross revenues of under $1 billion during its most recently completed fiscal year. Total annual gross revenues means total revenues as presented on the income statement under US GAAP or IFRS as issued by the IASB, if used as the basis of reporting by an FPI. If the financial statements of an FPI are presented in a currency other than US dollars, total annual gross revenues for purposes of determining whether an FPI is an EGC should be calculated in US dollars using the exchange rate as of the last day of the most recently completed fiscal year. An FPI seeking to raise capital by selling securities (or
ADRs) in the US must file a registration statement on Form F-1 with the SEC. The registration statement on Form F-1 requires significant disclosure about the foreign issuer’s business and operations, and is similar to, but less
34 JOBS Act Quick Start
onerous than, the Form S-1 that most US issuers use for their IPOs. The SEC staff has made clear that an FPI that qualifies as an EGC and that is using a Form F-1 may avail itself of all of the disclosure accommodations available to domestic EGCs. An FPI that is an EGC also may avail itself of all other benefits available to domestic EGCs, including the governance related accommodations, the ability to test-the-waters, and the flexibility to have broker- dealers publish or distribute research reports about the company. A foreign issuer also may decide to access the US capital
markets through an exempt offering, such as an offering to QIBs or an offering made in reliance on Rule 506. Once the SEC rulemaking relating to the relaxation of the prohibition on general solicitation is finalised, foreign issuers will be able to benefit from greater communications flexibility in connection with Rule 506 and Rule 144A offerings. It is not clear whether a foreign issuer will be able to rely on the offering exemption under section 3(b)(2). A foreign issuer cannot rely on the crowdfunding exemption.
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