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Foreign private issuers before the roadshow to make its first public filing—in contrast, an emerging growth company proceeding under the JOBS Act confidential review process must make a public filing at least 21 days in advance of the roadshow. The issuer must resubmit all previously submitted draft registration statements, SEC staff comment letters and issuer response letters at the time of the public filing of its registration statement, and these will be posted publicly on the SEC’s EDGAR system. For a discussion of SEC fees associated with the filing of a registration statement, see Section 3.2(f). (b) Prospectus The prospectus will be distributed to prospective investors in preliminary form during the “waiting” period in order to market the IPO. The disclosures included in the prospectus are described in more detail in Section 3.3(a), but they generally include a description of the issuer’s business, its operating and financial history and a description of the securities being offered. Foreign private issuers should pay particularly close attention to the requirements concerning the financial statements that must be included in the prospectus. If the issuer’s financial statements are not presented under U.S. GAAP or IFRS as approved by the IASB, they must include a reconciliation of certain items to U.S. GAAP. For further information concerning the particular rules that apply to foreign private issuers. 9.6 Reporting requirements Cleary Gottlieb Steen & Hamilton LLP (a) Ongoing reporting-related requirements After the initial public offering, an issuer must file regular periodic and other reports with the SEC in accordance with the requirements of the Exchange Act. The reports required for a foreign private issuer differ from those required for a U.S. issuer described in Section 6.1(a). Annual reports: The primary report for a foreign private issuer is the annual report on Form 20-F. (A Canadian company may use Form 40-F.) Form 20-F must be filed with the SEC within four months of the end of each fiscal year. The contents of Form 20-F are similar to the IPO prospectus, including with respect to the required audited financial statements. There are, however, some differences, including disclosures about controls and officer certifications, as well as information about stock repurchases and the use of IPO proceeds. The SEC does not automatically review the annual report on Form 20-F, but it is required to review each issuer’s annual report on Form 20-F at least once every three years and may provide comments to improve disclosure or remedy noncompliance at any time. Unlike Form 10-K, which requires detailed information on an issuer’s compensation of its directors and executive officers, a foreign private issuer may provide an aggregate amount for director and officer compensation, and individual employment contracts and compensatory plans need not be filed as exhibits to the Form 20-F so long as the issuer has not made such data, contracts or plans public elsewhere. A foreign private issuer is required to disclose in the Form 20-F fees to investors associated with its ADR facility and any payments to the issuer by the ADR depositary. A foreign private issuer is not subject to the U.S. proxy rules and so need not prepare a U.S.-style proxy statement, although many choose to prepare a “glossy” annual report in addition to the annual report on Form 20-F. A foreign private issuer whose shares or ADRs are listed on the NYSE is, however, required to solicit proxies from U.S. shareholders for shareholder meetings. Current reports: Unlike U.S. issuers, foreign private issuers are not required to file quarterly financial information on Form 10-Q or to disclose the items specified on Form 8-K within four business days. Instead, a foreign private issuer is required to furnish material information “promptly” to the SEC on Form 6-K if the information is otherwise disclosed because it (1) must be made public in the foreign private issuer’s country of domicile or incorporation pursuant to the law of that country, (2) is filed with any foreign stock exchange on which its securities are listed and made public by such exchange or (3) is distributed to the foreign private issuer’s security holders. Form 6-K specifies that the information required to be furnished is information that is material with respect to the issuer and its subsidiaries concerning: • changes in business; • changes in management or control; • acquisitions or dispositions of assets; • bankruptcy or receivership; • changes in certifying accountants; • financial condition and the results of operations; • changes in securities or in the security for registered securities; • defaults upon senior securities; • material increases or decreases in the amount outstanding of securities or indebtedness; • the results of submission of matters to a vote of security holders; • transactions with directors, officers, or principal security holders; • the granting of options or payment of other consideration to directors or officers; and • any other information which the issuer deems of material importance to security holders. Form 6-K is very simple, consisting of a cover and signature pages to which the relevant information is attached. The form must be signed by an authorized officer, but no certification by the CEO or CFO is required. The information submitted need not be in English, but a full English translation is required for press releases, annual or interim financial information and information sent directly to security holders. For other information, an English summary will suffice. The SEC reportedly has considered revising Form 6-K because of the number of foreign private issuers using the United States as their sole listing jurisdiction. The SEC staff is concerned that these issuers may make limited disclosures as a result of not having obligations to make information public under home country laws. Foreign private issuers are generally required to comply with stock exchange rules requiring prompt disclosure of material events as discussed in Section 6.1(a). 104 NYSE IPO Guide
Foreign private issuers Other specialized disclosure requirements: A foreign private issuer must comply with the SEC’s specialized disclosure rules adopted under the Dodd-Frank Act. There are two principal types of disclosure, each of which will be made on a new Form SD beginning in 2014. First, an issuer must file Form SD if certain “conflict minerals” or certain of their derivatives are necessary to the functionality or production of its products. Second, an issuer involved in the commercial development or extraction of oil, natural gas or minerals must file Form SD to disclose payments it makes to governments in connection with those activities. A foreign private issuer is also required to disclose in its annual reports on Form 20-F certain activities relating to Iran, materials likely to be used for human rights abuses and transactions with persons designated for their support of terrorist activity or the proliferation of weapons of mass destruction. A foreign private issuer that operates mines in the United States may be subject to disclosure requirements concerning health and safety violations at those mines. Duty to correct and update: If an issuer discovers that a public statement was materially inaccurate or misleading when made, it should promptly correct the statement to reduce its risk of liability. Even if it was accurate when made, a forward-looking statement may need to be updated if changed circumstances make it inaccurate or misleading. U.S. courts have reached conflicting conclusions on whether this kind of duty to update exists. Selective disclosure and Regulation FD: Under Regulation FD, if an issuer discloses material nonpublic information to market professionals (e.g., research analysts) or to investors under circumstances in which it is reasonably foreseeable that the recipient will trade on the basis of the information, it must make general public disclosure of that information at the same time. Selective disclosure can also lead to insider trading liability in some circumstances. Regulation FD does not apply to foreign private issuers, but many comply voluntarily or look to it for guidance as a “best practice” and to avoid potential liability. A foreign private issuer seeking to comply voluntarily with Regulation FD may make the general public disclosure by filing a Form 6-K, distributing a press release, conducting a public webcast (announced in advance) or other means designed to provide broad, nonexclusionary access to the information. See Section 5.5 for a more detailed discussion of Regulation FD. Use of non-GAAP financial measures: As noted in Section 5.5, special disclosure rules apply when an issuer presents certain financial information in a way that is different from its financial statement presentation based on GAAP. A financial measure that triggers these SEC rules is referred to as a “non-GAAP financial measure” (even if the issuer uses IFRS or another body of accounting principles rather than U.S. GAAP). Use of non-GAAP financial measures in a public statement (whether written or oral) is subject to Regulation G, which requires that the non-GAAP measure be accompanied by a presentation of the most directly comparable GAAP financial measure and a quantitative reconciliation of the two measures. A foreign private issuer, however, is exempt from the requirements of Regulation G if (1) its securities are listed or quoted on a securities exchange or inter-dealer quotation system outside the United States, (2) the non-GAAP financial measure is not derived from or based on a U.S. GAAP measure and (3) the disclosure is made outside the United States or included in a written communication released outside the United States. When a foreign private issuer includes non-GAAP financial measures in a report filed with the SEC, it must comply with more stringent disclosure requirements and consider whether the measure comes within a category of non- GAAP financial measures not permitted in filed materials. Generally speaking, materials submitted to the SEC on Form 6-K are not considered “filed” with the SEC, so those materials are not subject to these more stringent rules—except that if the Form 6-K is incorporated by reference into a securities registration statement, it is treated as filed. For further information on the rules concerning non-GAAP financial measures, see Section 5.5. Stock exchange notifications and affirmations: A NYSE listed foreign private issuer must comply with requirements to notify the exchange on an ongoing basis with regard to, among other things, record dates, dividends, shareholder meetings, changes in listed securities and certain corporate actions. Beyond the notice requirements, NYSE requires that a listed foreign private issuer submit an annual affirmation concerning compliance with NYSE’s audit committee and corporate governance-related requirements within 30 days after the filing of a Form 20-F (or 40-F). NYSE also requires that, on an interim basis, a foreign private issuer submit an affirmation in the event of certain changes to its audit committee or the loss of foreign private issuer status. (b) Disclosure controls, internal controls, and certifications Internal control over financial reporting: As of the end of each fiscal year, a foreign private issuer, like a U.S. issuer, is required to evaluate its internal control over financial reporting. ICFR is a set of processes designed to provide reasonable assurance of the reliability of financial reporting and preparation of financial statements in accordance with GAAP. Even though the evaluation of IFCR is based on the issuer’s primary financial statements, it should take into account controls related to U.S. GAAP reconciliation (if reconciliation is required). An internal control report must be included in the foreign private issuer’s annual report on Form 20-F. The report must contain: • a statement of management’s responsibility for establishing and maintaining adequate ICFR for the issuer; • a statement identifying the framework used by management to evaluate the effectiveness of ICFR; • an assessment by management of the effectiveness of ICFR as of the end of the most recent fiscal year, including a statement as to whether ICFR is effective; and NYSE IPO Guide 105
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