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Foreign private issuers<br />
Other specialized disclosure requirements:<br />
A foreign private issuer must comply with<br />
the SEC’s specialized disclosure rules<br />
adopted under the Dodd-Frank Act. There<br />
are two principal types of disclosure, each<br />
of which will be made on a new Form SD<br />
beginning in 2014. First, an issuer must file<br />
Form SD if certain “conflict minerals” or<br />
certain of their derivatives are necessary<br />
to the functionality or production of its<br />
products. Second, an issuer involved in the<br />
commercial development or extraction of oil,<br />
natural gas or minerals must file Form SD to<br />
disclose payments it makes to governments<br />
in connection with those activities.<br />
A foreign private issuer is also<br />
required to disclose in its annual reports<br />
on Form 20-F certain activities relating<br />
to Iran, materials likely to be used for<br />
human rights abuses and transactions with<br />
persons designated for their support of<br />
terrorist activity or the proliferation of<br />
weapons of mass destruction.<br />
A foreign private issuer that operates<br />
mines in the United States may be subject<br />
to disclosure requirements concerning<br />
health and safety violations at those mines.<br />
Duty to correct and update: If an issuer<br />
discovers that a public statement was<br />
materially inaccurate or misleading when<br />
made, it should promptly correct the<br />
statement to reduce its risk of liability.<br />
Even if it was accurate when made, a<br />
forward-looking statement may need to be<br />
updated if changed circumstances make it<br />
inaccurate or misleading. U.S. courts have<br />
reached conflicting conclusions on whether<br />
this kind of duty to update exists.<br />
Selective disclosure and Regulation<br />
FD: Under Regulation FD, if an issuer<br />
discloses material nonpublic information<br />
to market professionals (e.g., research<br />
analysts) or to investors under<br />
circumstances in which it is reasonably<br />
foreseeable that the recipient will<br />
trade on the basis of the information,<br />
it must make general public disclosure<br />
of that information at the same time.<br />
Selective disclosure can also lead<br />
to insider trading liability in some<br />
circumstances. Regulation FD does not<br />
apply to foreign private issuers, but<br />
many comply voluntarily or look to it<br />
for guidance as a “best practice” and to<br />
avoid potential liability. A foreign private<br />
issuer seeking to comply voluntarily with<br />
Regulation FD may make the general<br />
public disclosure by filing a Form 6-K,<br />
distributing a press release, conducting<br />
a public webcast (announced in advance)<br />
or other means designed to provide<br />
broad, nonexclusionary access to the<br />
information. See Section 5.5 for a more<br />
detailed discussion of Regulation FD.<br />
Use of non-GAAP financial measures: As<br />
noted in Section 5.5, special disclosure<br />
rules apply when an issuer presents<br />
certain financial information in a way that<br />
is different from its financial statement<br />
presentation based on GAAP. A financial<br />
measure that triggers these SEC rules<br />
is referred to as a “non-GAAP financial<br />
measure” (even if the issuer uses IFRS or<br />
another body of accounting principles<br />
rather than U.S. GAAP). Use of non-GAAP<br />
financial measures in a public statement<br />
(whether written or oral) is subject to<br />
Regulation G, which requires that the<br />
non-GAAP measure be accompanied<br />
by a presentation of the most directly<br />
comparable GAAP financial measure<br />
and a quantitative reconciliation of the<br />
two measures. A foreign private issuer,<br />
however, is exempt from the requirements<br />
of Regulation G if (1) its securities are<br />
listed or quoted on a securities exchange or<br />
inter-dealer quotation system outside the<br />
United States, (2) the non-GAAP financial<br />
measure is not derived from or based on a<br />
U.S. GAAP measure and (3) the disclosure<br />
is made outside the United States or<br />
included in a written communication<br />
released outside the United States.<br />
When a foreign private issuer<br />
includes non-GAAP financial measures<br />
in a report filed with the SEC, it must<br />
comply with more stringent disclosure<br />
requirements and consider whether the<br />
measure comes within a category of non-<br />
GAAP financial measures not permitted<br />
in filed materials. Generally speaking,<br />
materials submitted to the SEC on Form<br />
6-K are not considered “filed” with the<br />
SEC, so those materials are not subject<br />
to these more stringent rules—except<br />
that if the Form 6-K is incorporated by<br />
reference into a securities registration<br />
statement, it is treated as filed. For<br />
further information on the rules<br />
concerning non-GAAP financial<br />
measures, see Section 5.5.<br />
Stock exchange notifications and<br />
affirmations: A NYSE listed foreign<br />
private issuer must comply with<br />
requirements to notify the exchange on<br />
an ongoing basis with regard to, among<br />
other things, record dates, dividends,<br />
shareholder meetings, changes in listed<br />
securities and certain corporate actions.<br />
Beyond the notice requirements, NYSE<br />
requires that a listed foreign private<br />
issuer submit an annual affirmation<br />
concerning compliance with NYSE’s<br />
audit committee and corporate<br />
governance-related requirements within<br />
30 days after the filing of a Form 20-F<br />
(or 40-F). NYSE also requires that, on<br />
an interim basis, a foreign private issuer<br />
submit an affirmation in the event of<br />
certain changes to its audit committee or<br />
the loss of foreign private issuer status.<br />
(b) Disclosure controls, internal controls,<br />
and certifications<br />
Internal control over financial reporting:<br />
As of the end of each fiscal year, a foreign<br />
private issuer, like a U.S. issuer, is<br />
required to evaluate its internal control<br />
over financial reporting. ICFR is a set of<br />
processes designed to provide reasonable<br />
assurance of the reliability of financial<br />
reporting and preparation of financial<br />
statements in accordance with GAAP. Even<br />
though the evaluation of IFCR is based on<br />
the issuer’s primary financial statements,<br />
it should take into account controls<br />
related to U.S. GAAP reconciliation (if<br />
reconciliation is required).<br />
An internal control report must be<br />
included in the foreign private issuer’s<br />
annual report on Form 20-F. The report<br />
must contain:<br />
• a statement of management’s<br />
responsibility for establishing and<br />
maintaining adequate ICFR for the<br />
issuer;<br />
• a statement identifying the framework<br />
used by management to evaluate the<br />
effectiveness of ICFR;<br />
• an assessment by management of the<br />
effectiveness of ICFR as of the end of<br />
the most recent fiscal year, including<br />
a statement as to whether ICFR is<br />
effective; and<br />
NYSE IPO Guide<br />
105