[Federal Register Volume 73, Number 49 (Wednesday, March 12, 2008)]
[Proposed Rules]
[Pages 13404-13428]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-4366]



[[Page 13403]]

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Part IV





Securities and Exchange Commission





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17 CFR Parts 230, 239, 240 and 249



Foreign Issuer Reporting Enhancements; Proposed Rule

  Federal Register / Vol. 73, No. 49 / Wednesday, March 12, 2008 / 
Proposed Rules  

[[Page 13404]]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 230, 239, 240 and 249

[Release Nos. 33-8900; 34-57409; International Series Release No. 1308; 
File No. S7-05-08]
RIN 3235-AK03


Foreign Issuer Reporting Enhancements

AGENCY: Securities and Exchange Commission.

ACTION: Proposed amendments to forms and rules.

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SUMMARY: We are proposing a number of changes to our rules relating to 
foreign private issuers that are intended to improve the accessibility 
of the U.S. public capital markets to these issuers, as well as to 
enhance the information that is available to investors. These 
amendments are part of a series of initiatives that seek to address 
changes in our disclosure and other requirements applicable to foreign 
private issuers in light of market developments, new technologies and 
other matters in a manner that promotes investor protection, cross-
border capital flows and the elimination of unnecessary barriers to our 
capital markets. We are proposing amendments that would enable foreign 
issuers to test their qualification to use the forms and rules 
available to foreign private issuers once a year, rather than 
continuously. We are also proposing amendments to change the deadline 
for annual reports filed by foreign private issuers and to eliminate an 
option under which foreign private issuers are permitted to omit 
segment data from their U.S. GAAP financial statements, and an 
amendment to the rule pertaining to going private transactions to 
reflect the new termination of reporting and deregistration rules for 
foreign private issuers. In addition, we are soliciting comment on 
proposals that would revise the annual report and registration 
statement forms used by foreign private issuers to improve certain 
disclosures provided in these forms.

DATES: Comments should be received on or before May 12, 2008.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/proposed.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number S7-05-08 on the subject line; or
     Use the Federal Rulemaking ePortal (http://www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number S7-05-08. The file number 
should be included on the subject line if e-mail is used. To help us 
process and review your comments more efficiently, please use only one 
method. The Commission will post all comments on the Commission's 
Internet Web site http://www.sec.gov/rules/proposed/shtml). Comments 
are also available for public inspection and copying in the 
Commission's Public Reference Room, 100 F Street, NE., Washington, DC 
20549, on official business days between the hours of 10 a.m. and 3 
p.m. All comments received will be posted without change; we do not 
edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly.

FOR FURTHER INFORMATION CONTACT: Felicia H. Kung, Senior Special 
Counsel, Office of International Corporate Finance, Division of 
Corporation Finance, at (202) 551-3450, or Craig Olinger, Deputy Chief 
Accountant, Division of Corporation Finance, at (202) 551-3400, or 
Katrina A. Kimpel, Professional Accounting Fellow, Office of the Chief 
Accountant, at (202) 551-5300, U.S. Securities and Exchange Commission, 
100 F Street, NE., Washington, DC 20549-3628.

SUPPLEMENTARY INFORMATION: We are proposing amendments to Rule 405 \1\ 
of Regulation C,\2\ Form F-1,\3\ Form F-3 \4\ and Form F-4 \5\ under 
the Securities Act of 1933 (``Securities Act''),\6\ Form 20-F \7\ under 
the Securities Exchange Act of 1934 (``Exchange Act''),\8\ and Exchange 
Act Rules 3b-4,\9\ 13a-10,\10\ 13e-3,\11\ and 15d-10.\12\ Our proposed 
amendments would: (1) Permit foreign issuers to test their 
qualification to use the forms and rules available to foreign private 
issuers on an annual basis, rather than on the continuous basis that is 
currently required; (2) Accelerate the filing deadline for annual 
reports filed on Form 20-F by foreign private issuers under the 
Exchange Act by shortening the filing deadline from 6 months to within 
90 days after the foreign private issuer's fiscal year-end in the case 
of large accelerated and accelerated filers, and to within 120 days 
after a foreign private issuer's fiscal year-end for all other issuers, 
after a two-year transition period; (3) Eliminate an instruction to 
Item 17 of Form 20-F that permits certain foreign private issuers to 
omit segment data from their U.S. GAAP financial statements; and (4) 
Amend Rule 13e-3 under the Securities Exchange Act by adding cross-
references to the new termination of reporting and deregistration rules 
for foreign private issuers.
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    \1\17 CFR 230.405.
    \2\17 CFR 230.400 et seq.
    \3\17 CFR 239.31.
    \4\17 CFR 239.33.
    \5\17 CFR 239.34.
    \6\15 U.S.C. 77a et seq.
    \7\17 CFR 249.220f.
    \8\15 U.S.C. 78a et seq.
    \9\17 CFR 240.3b-4.
    \10\ 17 CFR 240.13a-10.
    \11\17 CFR 240.13e-3.
    \12\17 CFR 240.15d-10.
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    In addition, we are soliciting comments on proposals to: (5) 
Require foreign private issuers that are required to provide a U.S. 
GAAP reconciliation to do so pursuant to Item 18 of Form 20-F; (6) 
Amend Form 20-F to require foreign private issuers to disclose 
information about changes in the issuer's certifying accountant, the 
fees and charges paid by holders of American Depositary Receipts, the 
payments made by the depositary to the foreign issuer whose securities 
underlie the American Depositary Receipts, and, for listed issuers, the 
differences in the foreign private issuer's corporate governance 
practices and those applicable to domestic companies under the relevant 
exchange's listing rules; and (7) Require foreign private issuers to 
provide certain financial information in annual reports on Form 20-F 
about a significant, completed acquisition that is significant at the 
50% or greater level.

Table of Contents

I. Overview of the Proposed Amendments
II. Proposed Changes
    A. Annual Test for Foreign Private Issuer Status
    B. Accelerating the Reporting Deadline for Form 20-F Annual 
Reports
    C. Segment Data Disclosure
    D. Exchange Act Rule 13e-3
III. Other Matters Under Consideration
    A. Requiring Item 18 Reconciliation in Annual Reports and 
Registration Statements Filed on Form 20-F
    B. Disclosure About Changes in a Registrant's Certifying 
Accountant
    C. Annual Disclosure About ADR Fees and Payments
    D. Disclosure About Differences in Corporate Governance 
Practices
    E. Financial Information for Significant, Completed Acquisitions

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IV. General Request for Comments
V. Paperwork Reduction Act
VI. Cost-Benefit Analysis
VII. Consideration of Impact on the Economy, Burden on Competition, 
and Promotion of Efficiency, Competition, and Capital Formation
VIII. Regulatory Flexibility Act Certification
IX. Statutory Authority and Text of the Proposed Amendments

I. Overview of the Proposed Amendments

    When the Commission adopted Form 20-F in 1979,\13\ the form used by 
foreign private issuers \14\ to register a class of securities under 
the Exchange Act and to file annual reports,\15\ we indicated our basic 
philosophy that U.S. investors should be provided with information that 
is equal ``as nearly as possible and practicable'' to that provided by 
domestic issuers in our markets.\16\ Our objective in adopting Form 20-
F was to place the disclosures required of foreign private issuers on a 
more equal footing to that required of domestic issuers. At the same 
time, we acknowledged that differences in the national laws and 
accounting regulations applicable to foreign private issuers should be 
considered when establishing disclosure requirements for foreign 
private issuers.\17\ As a result, we provided certain disclosure 
accommodations in Form 20-F, although we indicated that our assessment 
of the appropriate disclosure requirements for foreign private issuers 
was part of an ongoing evolutionary process.\18\
    In the nearly thirty years since the adoption of Form 20-F, there 
has been a movement toward greater international agreement on the 
accounting and other non-financial statement disclosures that should be 
provided by issuers. Last December, we published rules to permit 
foreign private issuers to file financial statements with the 
Commission that comply with International Financial Reporting Standards 
(IFRS), as issued by the International Accounting Standards Board 
(IASB), without reconciliation to generally accepted accounting 
principles (GAAP) used in the United States.\19\ These rules support 
the efforts of the IASB and the Financial Accounting Standards Board 
(FASB) to converge their accounting standards. In addition, through the 
efforts of the International Organization of Securities Commissions 
(IOSCO),\20\ securities regulators around the world are increasingly 
requiring the same types of disclosures in prospectuses used for public 
offerings and listings in their securities markets. In 1998, the IOSCO 
Technical Committee published the International Disclosure Standards 
for Cross-Border Offerings and Initial Listings by Foreign Issuers \21\ 
(``International Equity Disclosure Standards''), which pertains to 
prospectuses prepared by foreign issuers for public offerings and 
listings of equity securities. The Commission explicitly incorporated 
all of the International Equity Disclosure Standards into Form 20-F, 
effective in 2000.\22\ Other members of IOSCO have also based their 
prospectus requirements on the International Equity Disclosure 
Standards.
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    \13\ Release No. 34-16371 (Nov. 29, 1979) [44 FR 70132] 
(hereinafter ``Form 20-F Adopting Release'').
    \14\ The definition for ``foreign private issuer'' is contained 
in Exchange Act Rule 3b-4(c). A foreign private issuer is any 
foreign issuer other than a foreign government, except for an issuer 
that (1) has more than 50% of its outstanding voting securities held 
of record by U.S. residents and (2) any of the following: (i) A 
majority of its officers and directors are citizens or residents of 
the United States, (ii) more than 50 percent of its assets are 
located in the United States, or (iii) its business is principally 
administered in the United States.
    \15\ Form 20-F is the combined registration statement and annual 
report form for foreign private issuers under the Exchange Act. It 
also sets forth disclosure requirements for registration statements 
filed by foreign private issuers under the Securities Act.
    \16\ Form 20-F Adopting Release, supra note 13.
    \17\ See id.
    \18\Form 20-F Adopting Release, supra note 13.
    \19\ Release No. 33-8879 (Dec. 21, 2007) [73 FR 986].
    \20\ IOSCO consists of securities regulators from 188 countries 
(including ordinary, associate, and affiliate members) who are 
committed to working together ``to promote high standards of 
regulation to maintain just, efficient and sound markets.'' IOSCO, 
General Information About IOSCO, at http://www.iosco.org/about/.
    \21\ Available at http://www.iosco.org/library/pubdocs/pdf/IOSCOPD81.pdf. The IOSCO Technical Committee recently published the 
International Disclosure Principles for Cross-Border Offerings and 
Listings of Debt Securities (2007), available at http://www.iosco.org/library/pubdocs/pdf/IOSCOPD242.pdf, which applies to 
prospectuses used by foreign issuers for offerings and listings of 
debt securities. The Commission's prospectus disclosure requirements 
for debt securities offered by foreign private issuers, contained in 
Form 20-F, are consistent with these IOSCO Principles, as well.
    \22\ Release No. 33-7745 (Sept. 28, 1999) [64 FR 53900].
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    At the same time, we remain fully committed to facilitating cross-
border capital flows and eliminating inadvertent barriers to our 
capital markets. In March 2007, we adopted rules that made it easier 
for foreign private issuers to terminate their reporting obligations 
and deregister their securities.\23\ We adopted these rules out of 
concern that the burdens and uncertainties associated with terminating 
their registration and reporting obligations under the Exchange Act 
could serve as a disincentive to foreign private issuers accessing the 
U.S. public capital markets.\24\ As noted previously, we adopted rules 
last December to permit foreign private issuers to file financial 
statements with the Commission that are prepared in accordance with 
IFRS, as issued by the IASB, without reconciliation to U.S. GAAP. In 
our implementation of the provisions of the Sarbanes-Oxley Act of 
2002,\25\ we also provided several accommodations to foreign private 
issuers. For example, we permitted foreign private issuers to comply 
with the requirement to include in their annual reports management's 
report on the company's internal control over financial reporting and 
the auditor's attestation on a delayed basis compared to some domestic 
issuers.\26\ Foreign private issuers are also permitted to report 
changes in their internal controls over financial reporting on an 
annual basis, rather than on a quarterly basis as is required of 
domestic issuers.\27\ In addition, with respect to the audit committee 
independence requirements under Section 301 of the Sarbanes-Oxley Act, 
foreign private issuers listed on U.S. exchanges were accorded certain 
accommodations that recognized non-U.S. practices and requirements.\28\ 
More recently, in a companion release,\29\ we are proposing amendments 
to Exchange Act Rule 12g3-2(b) \30\ to modify the availability of this 
exemption from registration under Section 12(g) \31\ of the Exchange 
Act for foreign private issuers, so that a qualified foreign private 
issuer that meets specified conditions can claim the exemption 
automatically

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without regard to the number of its U.S. shareholders.
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    \23\ Release No. 34-55540 (Mar. 27, 2007) [72 FR 16934].
    \24\ Id.
    \25\ 15 U.S.C. 7201 et seq.
    \26\ See Release No. 33-8392 (Feb. 24, 2004) [69 FR 9722] 
(extending the original compliance dates for accelerated filers to 
fiscal years ending on or after November 15, 2004, and for companies 
that are not accelerated filers and for foreign private issuers, to 
fiscal years ending on or after July 15, 2005); Release No. 33-8545 
(Mar. 2, 2005) [70 FR 11528] (adopting an additional one-year 
extension of the compliance dates for companies that are non-
accelerated filers and for foreign private issuers filing annual 
reports on Forms 20-F or 40-F); Release No. 33-8730A (Aug. 9, 2006) 
[71 FR 47056] (extending for one year the date by which a foreign 
private issuer that is an accelerated filer and that files annual 
reports on Forms 20-F or 40-F must begin to comply with the 
requirement to provide the auditor's attestation report on internal 
control over financial reporting).
    \27\ Release No. 33-8238 (June 5, 2003) [68 FR 36636].
    \28\ Release No. 33-8220 (Apr. 9, 2003) [68 FR 18788].
    \29\ Release No. 34-57350 (Feb. 19, 2008).
    \30\ 17 CFR. 240.12g3-2(b).
    \31\ 15 U.S.C. 78l(g).
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    As the nature of the global capital markets have evolved, and 
because of marked advancements in technology with respect to the 
gathering and processing of information, some of the disclosure 
accommodations that we provided to foreign private issuers almost 30 
years ago may no longer be appropriate. As a result, we are proposing 
today amendments to rules and forms that should enhance the reporting 
of information by foreign private issuers, as well as the timeframe 
within which investors can have access to this information.
    The amendments that we are proposing today balance our dual 
objectives of enhancing the disclosures that foreign private issuers 
provide to investors in the U.S. public markets, and improving the 
accessibility of our public markets to these issuers.
    Our principal proposals are as follows:
     Permit reporting foreign issuers to assess their 
eligibility to use the special forms and rules available to foreign 
private issuers once a year on the last business day of their second 
fiscal quarter, rather than on a continuous basis, which is currently 
required;
     Accelerate the reporting deadline for annual reports filed 
on Form 20-F by foreign private issuers from six months to 90 days 
after the issuer's fiscal year-end in the case of large accelerated 
filers and accelerated filers, and to 120 days after the issuer's 
fiscal year-end for all other issuers, after a two-year transition 
period;
     Amend Form 20-F by eliminating an instruction to Item 17 
of that form that permits certain foreign private issuers to omit 
segment data from their U.S. GAAP financial statements; and
     Amend Exchange Act Rule 13e-3, which pertains to going 
private transactions by reporting issuers or their affiliates, to 
reference the recently adopted deregistration and termination of 
reporting rules applicable to foreign private issuers.
    In addition, we are also seriously considering other possible 
amendments that would affect foreign private issuers, and are seeking 
public comment on these proposals. These matters include the following:
     Eliminate the availability of the limited U.S. GAAP 
reconciliation option that is contained in Item 17 of Form 20-F for 
foreign private issuers that are only listing a class of securities on 
a U.S. national securities exchange, or only registering a class of 
equity securities under Section 12(g) of the Exchange Act, and not 
conducting a public offering. We are also proposing to eliminate this 
limited reconciliation option for annual reports filed on Form 20-F, 
and for certain non-capital raising offerings, such as offerings 
pursuant to reinvestment plans, offerings upon the conversion of 
securities, or offerings of investment grade securities. Thus, all 
foreign private issuers that are required to provide a U.S. GAAP 
reconciliation must do so pursuant to Item 18 of Form 20-F, although 
required third party financial statements could continue to be prepared 
pursuant to Item 17 of Form 20-F;
     Amend Form 20-F to require disclosure in annual reports 
filed on that Form about any changes in the registrant's certifying 
accountant;
     Amend Form 20-F to require annual disclosure of the fees 
and other charges paid by holders of American Depositary Receipts 
(ADRs) to depositaries, as well as any payments made by depositaries to 
the foreign private issuers whose securities underlie the ADRs;
     Amend Form 20-F to require annual disclosure of the 
significant differences in the corporate governance practices of listed 
foreign private issuers compared to the corporate governance practices 
applicable to domestic companies under the relevant exchange's listing 
standards; and
     Amend Form 20-F to require foreign private issuers to 
present information about highly significant completed acquisitions 
that are significant at the 50% or greater level.

II. Proposed Changes

A. Annual Test for Foreign Private Issuer Status

    The Commission has a longstanding policy of facilitating the access 
of foreign companies to the U.S. capital markets, as evidenced by the 
accommodations to foreign practices and policies that are accorded to 
foreign companies that qualify as ``foreign private issuers.'' \32\ For 
example, foreign private issuers are exempt from the Commission's proxy 
rules,\33\ and from the insider stock trading reports and short-swing 
profit recovery provisions under Section 16 \34\ of the Exchange 
Act.\35\ They also provide any interim reports on the basis of home 
country regulatory and stock exchange practices, rather than the 
quarterly reports that are required of U.S. issuers,\36\ and executive 
compensation disclosure on an aggregate basis if the information is 
reported on such a basis in the issuer's home country.\37\
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    \32\ See supra note 14 for the definition of ``foreign private 
issuer.''
    \33\ 17 CFR 240.14a-1 et seq.
    \34\ 15 U.S.C. 78p.
    \35\ These exemptions are contained in Exchange Act Rule 3a12-
3(b) [17 CFR 240.3a12-3(b)].
    \36\ Foreign private issuers submit current reports to the 
Commission on Form 6-K [17 CFR 249.306]. Unlike Form 8-K [17 CFR 
249.308], which is the current report form used by domestic issuers, 
there are no specific substantive disclosures that are required by 
Form 6-K. Instead, foreign private issuers furnish under cover of 
Form 6-K whatever information that they (i) make or are required to 
make public pursuant to the law of the jurisdiction of its domicile 
or in which it is incorporated or organized, or (ii) file or are 
required to file with a stock exchange on which their securities are 
traded and which was made public by that exchange, or (iii) 
distribute or are required to distribute to their securityholders. 
These reports are required to be furnished promptly after the 
material contained in the report is made public.
    \37\ Item 6.B. of Form 20-F.
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    For many companies, the determination of whether they qualify as a 
foreign private issuer is important because of these various 
accommodations and exemptions. However, to make sure that it qualifies 
for these accommodations, a foreign private issuer that has close to 
50% of its outstanding voting securities held of record by U.S. 
residents may find that it must monitor on a continuous basis the 
different factors used to assess foreign private issuer status.\38\ 
This can result in some uncertainty for foreign private issuers as to 
which reporting and regulatory requirements will apply to them within a 
given period of time, as well as result in confusion for investors if 
an issuer needs to move between foreign and domestic reporting forms in 
the same fiscal year. For example, if a foreign issuer concludes that 
it does not qualify as a foreign private issuer in the middle of its 
fiscal year, it may find it difficult to change its basis of accounting 
to U.S. GAAP in order to comply on a timely basis with the reporting 
requirements applicable to domestic issuers under the Exchange Act. 
These issuers also face the challenge of modifying their

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information and processing systems to comply with the domestic 
reporting and registration regime, as well as the executive 
compensation disclosure requirements, proxy rules and Section 16 
reporting requirements that are applicable to domestic issuers. To 
provide greater certainty to both issuers and investors as to the 
status of these foreign issuers within a given period of time, we are 
proposing to permit foreign private issuers to assess their status once 
a year. Aside from facilitating a smoother transition when foreign 
private issuers change status in the middle of a fiscal year, we 
believe that this approach would benefit investors by eliminating 
confusion in the markets as to an issuer's status. This approach would 
also be more consistent with our approach to determining accelerated 
filer and smaller reporting company status, and should simplify 
compliance with the Commission's regulations.
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    \38\ See note 14 above for a description of the factors that 
foreign issuers must monitor. The Commission's staff has taken the 
position that, for the purpose of the exemptions contained in 
Exchange Act Rule 3a12-3(b), foreign private issuers need to assess 
their status at the end of each fiscal quarter. In addition, they 
must assess their status at the completion of any purchase or sale 
by the issuer of its equity securities (other than in connection 
with an employee benefit plan or compensation arrangement, 
conversion of outstanding convertible securities, or exercise of 
outstanding options, warrants or rights), any purchase or sale of 
assets by the issuer other than in the ordinary course of business, 
and any purchase of equity securities of the issuer in a public 
tender offer or exchange offer by a non-affiliate. Foreign Private 
Issuers Relying on Rule 3a12-3(b) under the Exchange Act, SEC No-
Action Letter, [1993 Transfer Binder] Fed. Sec. L. Rep. (CCH) ] 
76,667 (Mar. 30, 1993).
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    We are proposing to permit reporting foreign issuers to assess 
their status on the last business day of their second fiscal 
quarter,\39\ which is the same date used to determine accelerated filer 
status under Exchange Act Rule 12b-2 \40\ and smaller reporting company 
status in Item 10(f)(2)(i) \41\ of Regulation S-K.\42\ We believe that 
selecting this date would provide regulatory consistency and ease of 
issuer application, as opposed to different dates for determining 
filing status. In addition, if a foreign issuer determines that it no 
longer qualifies as a foreign private issuer on the last business day 
of its second fiscal quarter, it would be required to comply with the 
reporting requirements and use the forms prescribed for domestic 
companies beginning on the first day of the fiscal year following the 
determination date. For example, a foreign issuer that did not qualify 
as a foreign private issuer as of the end of its second fiscal quarter 
in 2009 would file a Form 10-K in 2010 for its 2009 fiscal year. The 
issuer would also begin complying with the proxy rules and Section 16, 
and become subject to reporting on Forms 8-K and 10-Q on the first day 
of its 2010 fiscal year. This would give such issuers six months' 
advance notice that they will need to transition to the domestic forms 
and applicable reporting requirements.
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    \39\ The proposed determination date for foreign private issuer 
status differs from the determination date for well-known seasoned 
issuer (WKSI) status. Under Rule 405 under the Securities Act, the 
determination date as to whether an issuer is a WKSI is the latest 
of: (i) The time of filing its most recent shelf registration 
statement, (ii) the time of filing its most recent amendment to a 
shelf registration statement for purposes of complying with Section 
10(a)(3) of the Securities Act, 15 U.S.C. 77j(a)(3), or (iii) in the 
event that the issuer has not filed a shelf registration statement 
or amended a shelf registration statement for purposes of complying 
with section 10(a)(3) of that Act for 16 months, the time of filing 
of the issuer's most recent annual report on Form 10-K [17 CFR 
249.310] or Form 20-F.
    \40\ 17 CFR 240.12b-2.
    \41\ 17 CFR 229.10(f)(2)(i).
    \42\ 17 CFR 229.10 et seq. See also Release No. 33-8876 (Dec. 
19, 2007) [73 FR 934] (adopting amendments to the disclosure and 
reporting requirements under the Securities Act and the Exchange Act 
to expand the number of companies that qualify for the scaled 
disclosure requirements for smaller reporting companies).
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    On the other hand, we are proposing to permit a reporting company 
that qualifies as a foreign private issuer to avail itself of the 
foreign private issuer accommodations, including use of the foreign 
private issuer forms and reporting requirements, beginning on the 
determination date on which it establishes its eligibility as a foreign 
private issuer. We are proposing this distinction because we believe 
the new foreign private issuer, who would be eligible to file its 
annual report for that fiscal year on Form 20-F, need not continue to 
provide reports on Form 8-K and 10-Q for the remainder of that fiscal 
year. Instead, the issuer would be required to provide reports on Form 
6-K.
    Under the proposed amendment, a Canadian issuer that files 
registration statements and Exchange Act reports using the 
multijurisdictional disclosure system (``MJDS'') \43\ would also be 
required to test its status as a foreign private issuer only as of the 
last business day of its second fiscal quarter. Currently, a Canadian 
issuer that is eligible to file a Form 40-F \44\ annual report at the 
end of a fiscal year is presumed to be eligible to use that Form, as 
well as Form 6-K, from the date of filing until the end of its next 
fiscal year.\45\ If adopted, the proposed amendment would require a 
Canadian issuer that plans to use the MJDS to test its foreign private 
issuer status earlier in the year. However, as noted in the adopting 
release to the MJDS, it would have to test its eligibility to file 
annual reports on Form 40-F based on all of the other requirements of 
that Form, such as public float, at the end of the fiscal year.\46\ The 
proposed amendment would not change the responsibility of the Canadian 
issuer to check its eligibility to use Forms 40-F and 6-K at the end of 
its fiscal year, or the requirement that a Canadian issuer test its 
ability to use the MJDS Securities Act registration statement forms at 
the time of filing.
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    \43\ 17 CFR 239.37 to 17 CFR 239.41 and 17 CFR 249.240f.
    \44\ 17 CFR 249.240f. MJDS filers file annual reports on Form 
40-F and current reports on Form 6-K.
    \45\ 45 See Release No. 33-6902 (June 21, 1991) [56 FR 30036] 
(adopting the MJDS system).
    \46\ See id.
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Comments Solicited
    1. Is it appropriate for foreign issuers to have six months' notice 
that they no longer qualify as foreign private issuers, and therefore 
must use the domestic registration and reporting forms as of the 
beginning of the next fiscal year? Should issuers who have been foreign 
private issuers, but who fail to qualify as foreign private issuers, be 
required to use the domestic forms immediately, as is currently 
required?
    2. Is it likely that foreign issuers will attempt to manipulate the 
amount of their voting securities that are held by U.S. residents at 
the end of the second fiscal quarter as a result of the proposed test? 
Are there other factors under the definition of foreign private issuer 
that may be susceptible to manipulation on the test date, such as the 
resignation and reappointment of officers and directors, or the 
transfer of non-physical assets such as cash, receivables or securities 
out of the United States?
    3. If a foreign issuer that has been filing on domestic issuer 
forms qualifies as a foreign private issuer on the last business day of 
its second fiscal quarter, should it be allowed to switch over 
immediately to the foreign private issuer forms, such as Forms 20-F and 
6-K? In some cases, an event may trigger the filing of a Form 8-K, but 
a Form 6-K might not be required because the foreign issuer's home 
jurisdiction or stock exchange does not require the publication of 
information about the event.\47\ If a foreign issuer would have been 
required to file a Form 8-K shortly after the end of its second fiscal 
quarter, but qualifies as a foreign private issuer on the last business 
day of the second quarter, should it be allowed to forgo the filing of 
the Form 8-K even if a Form 6-K would not be required? Should the 
foreign issuer be required to file the Form 8-K and make all the 
filings it would otherwise be required to make on the domestic forms 
until it files a Form 20-F or furnishes its first Form 6-K? Even if a 
foreign issuer is permitted to switch to the foreign private issuer 
forms immediately, should the foreign issuer be required to file a Form 
8-K in the scenario described above because the event that triggered 
the filing occurred during its second fiscal quarter?
---------------------------------------------------------------------------

    \47\ See note 36 above for a discussion for the Form 6-K 
requirements.
---------------------------------------------------------------------------

    4. Because of the many accommodations provided to foreign private 
issuers, should foreign issuers be

[[Page 13408]]

required to test their status twice a year, rather than just once a 
year? For example, should foreign issuers be required to test their 
status as of the last business day of their second fiscal quarter, as 
well as at the end of the fiscal year?
    5. If we adopt the proposed amendment, to avoid confusion by 
investors, should a foreign issuer be required to notify the market 
when it has determined that it has switched its status from domestic 
issuer to foreign private issuer, or vice versa? If so, how should this 
notification be made, e.g., press release, notice on its Web site?
    6. How should we address the potential flowback of securities into 
the United States if a reporting foreign issuer concludes that it does 
not qualify as a foreign private issuer in its third fiscal quarter 
and, under the proposed rule, is able to qualify as a Category 2 \48\ 
issuer under Regulation S \49\ and also avoid the restrictions of 
Category 3 \50\ and Rule 905 \51\ of Regulation S for unregistered 
offshore offerings of its equity securities for almost a year and a 
half after it has made this determination?
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    \48\ 17 CFR 230.903(b)(2).
    \49\ 17 CFR 230.901-230.905 and Preliminary Notes.
    \50\ 17 CFR 230.903(b)(3).
    \51\ 17 CFR 230.905.
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    7. Should MJDS filers be required to test their foreign private 
issuer status on the last business day of their most recent second 
fiscal quarter, as well as at the end of the fiscal year? Would it be 
reasonable to require MJDS filers to assess their status twice a year 
because they must test their qualification to use the Form 40-F at the 
end of the fiscal year in any case? Would such a testing requirement be 
reasonable in light of the accommodations made for MJDS filers, e.g., 
they comply with the disclosure requirements of their home 
jurisdiction?
    8. As proposed, a Canadian MJDS filer that did not qualify as a 
foreign private issuer on the last day of its second fiscal quarter 
would immediately not be able to use the MJDS forms for Securities Act 
offerings, since the eligibility to use the MJDS Securities Act forms 
is tested at the time that the registration statement is filed. In that 
case, the issuer would still be able to use the other foreign private 
issuer registration statement forms, such as Form F-3, until the end of 
its fiscal year. Should these issuers be permitted to file on the 
foreign private issuer registration statement forms in this 
circumstance? Alternatively, should these issuers be permitted to use 
the MJDS Securities Act registration statement forms until the end of 
their fiscal year?

 B. Accelerating the Reporting Deadline for Form 20-F Annual Reports

    As the Commission noted when it proposed to accelerate the filing 
dates for periodic reports filed by domestic issuers,\52\ technological 
advances have made it easier for companies to process and disseminate 
information quickly. At the same time, investors evaluate and react to 
information in a shorter timeframe, and many now expect to receive 
information on a faster basis. Although some information about foreign 
private issuers is available through their earnings releases and other 
announcements, investors may not have access to the more complete 
disclosure contained in an issuer's Form 20-F annual reports until six 
months after the end of the issuer's fiscal year. The longer filing due 
date for these reports was initially established as an accommodation to 
the different disclosure requirements in the foreign private issuers' 
home jurisdictions. \53\ However, many companies that operate in the 
international markets gather and evaluate information on a vastly 
expedited basis compared to 29 years ago, when Form 20-F was adopted, 
so that such a delayed filing date for these reports may no longer be 
necessary. Today, foreign private issuers in many jurisdictions are 
expected to file annual reports with their home securities regulator on 
a faster timetable,\54\ so that a significant portion of the 
information required in a Form 20-F is readily available.
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    \52\ See Release No. 33-8089 (Apr. 12, 2002) [67 FR 19896].
    \53\ Form 20-F Adopting Release, supra note 13 (noting that the 
Commission decided not to adopt a filing due date for Form 20-F 
annual reports of four months after the registrant's fiscal year-end 
in deference to commenters' concerns about the need for more time to 
comply with applicable foreign regulations, which at that time often 
permitted annual reports to be furnished to shareholders more than 
four months after the issuer's fiscal year-end).
    \54\ For example, the European Union's (EU) Transparency 
Directive requires companies listed on an EU regulated market to 
file their annual financial reports four months after the end of 
each financial year at the latest. Directive 2004/109/EC of the 
European Parliament and of the Council (Dec. 15, 2004). All EU 
member states were required to implement the Transparency Directive 
by January 20, 2007. Canadian issuers are also required to file 
their annual financial statements within a similar timeframe. Under 
National Instrument 51-102 Continuous Disclosure Obligations, a 
reporting Canadian issuer must file its annual financial statements 
within 90 to 120 days after its most recently completed financial 
year-end, depending on its status as a ``venture issuer.'' Israeli 
companies are required to file their annual reports within three 
months of the end of their reporting year, provided that the report 
is submitted 14 days or more before the date fixed for convening the 
general meeting at which the company's financial statements will be 
presented, or within three days of the date when the company's 
accountant signed his audit opinion, whichever is earlier. 
Regulation 7, Israeli Securities Regulations (Periodic and Immediate 
Reports).
---------------------------------------------------------------------------

    Consistent with our efforts to modernize the periodic reporting 
system for domestic issuers, we are now proposing to shorten the filing 
due date for annual reports filed by foreign private issuers on Form 
20-F.\55\ Currently, a foreign private issuer must file its annual 
report on Form 20-F within six months after its fiscal year-end. We are 
proposing to accelerate the due date for annual reports filed on Form 
20-F to within 90 days after the foreign private issuer's fiscal year-
end in the case of large accelerated and accelerated filers, and to 
within 120 days after the issuer's fiscal year-end for all other 
issuers, after a two-year transition period. We note that the proposed 
due dates for Form 20-F would still provide an accommodation to many 
foreign private issuers, since large accelerated and accelerated 
domestic filers are required to file annual reports on Form 10-K \56\ 
within 60 days and 75 days, respectively, of their fiscal year-
ends.\57\ All other domestic issuers are required to file annual 
reports on Form 10-K within 90 days after their fiscal year-end.\58\
    When we proposed to accelerate the periodic report filing dates for 
domestic issuers, we solicited comments on whether the deadline for 
annual reports filed on Form 20-F should be shortened to four or five 
months after the end of

[[Page 13409]]

the issuer's fiscal year.\59\ Several commenters indicated that they 
supported accelerating the deadline for filing annual reports on Form 
20-F, citing considerations such as recent technological and 
information processing improvements, as well as concerns about the 
potential competitive disadvantage faced by domestic companies as a 
result of the large discrepancy in reporting deadlines applicable to 
domestic versus foreign companies.\60\ However, others noted the 
additional challenges faced by foreign registrants, such as 
requirements to reconcile their financial statements to U.S. GAAP, to 
prepare English translations, and to comply with home country reporting 
requirements.\61\ These commenters expressed concern that accelerating 
the Form 20-F deadlines for foreign private issuers would result in 
additional costs and burdens that would discourage foreign issuers from 
accessing the U.S. capital markets.
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    \55\ We are not proposing a similar acceleration in the filing 
deadline for annual reports filed on Form 40-F, which is used by 
eligible Canadian issuers under the MJDS. Under the MJDS, issuers 
who file annual reports on Form 40-F must comply with the 
substantive disclosure requirements and filing deadlines established 
by the relevant Canadian securities regulator. In keeping with the 
purpose of MJDS, which is to facilitate cross-border capital flows 
between the United States and Canada by streamlining the 
registration and periodic reporting process for cross-border 
issuers, the Form 40-F must continue to be filed with the Commission 
on the same day that the information is due to be filed with the 
relevant Canadian securities regulatory authority, as set forth in 
General Instruction D.(3) of Form 40-F. However, we note that a 
reporting Canadian issuer that is not a ``venture issuer'' must file 
its annual financial statements on or before 90 days after its most 
recently completed financial year-end, while all other Canadian 
issuers must file their annual financial statements on or before 120 
days after their most recently completed financial year-end. See 
supra note 54.
    \56\ 17 CFR 249.310.
    \57\ See General Instructions A.(2)(a) and (b) of Form 10-K. At 
the time that we first adopted rule and form amendments to 
accelerate the filing of the quarterly and annual reports of 
reporting U.S. issuers, we noted that those amendments would 
increase the discrepancy in the due dates for filing annual reports 
between foreign private issuers and larger seasoned U.S. issuers, 
and indicated that we would continue to consider this issue. Release 
No. 33-8128 (Sept. 5, 2002) [67 FR 58480].
    \58\ See General Instruction A.(2)(c) of Form 10-K.
    \59\ Release No. 33-8089, supra note 52.
    \60\ See, e.g., comment letters from Association for Investment 
Management and Research; Brown-Forman Corporation; Chevron Phillips 
Chemical Company LLP; Comcast Corporation; Deloitte & Touche LLP; 
The Dow Chemical Company; Eastman Kodak Company, Robert Krakauer, 
Markel Corporation; Maverick Capital Ltd.; SBC Communications Inc.
    \61\ See, e.g., comment letters from Cleary, Gottlieb, Steen & 
Hamilton (``Cleary Gottlieb''); The Association of the Bar of the 
City of New York (NYCBA). For a summary of the comments received 
relating to the question of whether the deadline for filing Form 20-
F should be accelerated, see U.S. Securities & Exchange Commission, 
Summary of Comments Relating to Proposed Amendments to Accelerate 
Periodic Report Filing Dates and Disclosure Concerning Web site 
Access to Reports, Section III.C.6., July 1, 2002, at http://www.sec.gov/rules/extra/33-8089summary.htm.
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    Since the adoption of the accelerated reporting deadlines for 
domestic companies, the Commission has adopted rule amendments that 
addressed some of the specific concerns highlighted by commenters. For 
example, as noted previously, we adopted rule amendments that free 
foreign private issuers that prepare financial statements in accordance 
with IFRS as issued by the IASB from the obligation to reconcile their 
financial statements to U.S. GAAP.\62\ When we proposed that rule, we 
noted that some investor representatives at a March 2007 roundtable on 
IFRS organized by the Commission's staff (``March 2007 IFRS 
Roundtable'') commented that IFRS financial statements would be more 
useful if issuers filed their Form 20-F annual reports on an 
accelerated basis.\63\ As a result, we solicited comment again on 
whether the deadline for annual reports filed on Form 20-F should be 
accelerated.\64\
---------------------------------------------------------------------------

    \62\ Release No. 33-8879, supra note 19.
    \63\ See Unedited Transcript, SEC Staff's International 
Financial Reporting Standards Roadmap Roundtable (Mar. 6, 2007), 
available at http://www.sec.gov/spotlight/ifrsroadmap/ifrsroadmap-transcript.txt.
    \64\ Release No. 33-8818 (July 2, 2007) [72 FR 37962] 
(hereinafter ``IFRS Proposing Release'').
---------------------------------------------------------------------------

    Many of the commenters supported accelerating the deadline for Form 
20-F filers, although several expressed concern that any deadline 
should not impede the ability of foreign private issuers to fulfill 
their obligations to file annual reports with their home regulators on 
a timely basis. To that end, some commenters urged a deadline that was 
later than the foreign private issuer's home filing requirements to 
permit sufficient time for translation of the annual report into 
English and compliance with the additional disclosure requirements 
imposed by the Commission.\65\ In contrast, other commenters supported 
a deadline that was consistent with the deadline faced by the foreign 
private issuers in its home jurisdiction.\66\ Others noted that 
dropping the requirement to reconcile financial statements prepared in 
accordance with IFRS, as issued by the IASB, to U.S. GAAP would 
expedite the preparation of Form 20-F, so that an accelerated deadline 
would be feasible.\67\
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    \65\ See, e.g., comment letter from Sullivan & Cromwell 
(supporting the acceleration of the Form 20-F deadline). See also 
comment letter from Cleary Gottlieb (not supporting an accelerated 
Form 20-F deadline, but nonetheless suggesting a deadline after the 
issuer's home country annual report is due if the Commission plans 
to accelerate the deadline).
    \66\ See, e.g., comment letter from HSBC.
    \67\ See, e.g., comment letters from the NYCBA and Swedish 
Export Credit Corporation.
---------------------------------------------------------------------------

    After carefully considering the concerns expressed by all of the 
commenters, we believe that it is appropriate to propose accelerating 
the deadline for filing annual reports on Form 20-F. Annual reports 
that are filed on an expedited basis would provide investors with more 
timely access to these filings, and would improve the delivery and flow 
of reliable information to investors and the capital markets, thereby 
helping to improve the efficiency of the markets. The current six-month 
deadline was adopted at a time when many of the current technologies to 
gather information and to process it were not available. A number of 
foreign private issuers already file their annual reports on Form 20-F 
well before the current six-month deadline. In addition, the recent 
rule amendments that would exempt foreign private issuers from the 
reconciliation requirement if they prepare their financial statements 
according to IFRS as issued by the IASB should make it easier for many 
foreign private issuers to prepare their annual reports on Form 20-F. 
We estimate that in the next several years a majority of the foreign 
private issuers who file annual reports with the Commission will have 
incentives to use either U.S. GAAP, or IFRS as issued by the IASB as 
more countries adopt IFRS as their basis of accounting, or permit 
companies to use IFRS as issued by the IASB as their basis of 
accounting. We are not proposing to change the age of financial 
statement requirements for registration statements under the Securities 
Act or Exchange Act.\68\ Accelerating the deadline for filing annual 
reports on Form 20-F should enable investors in the U.S. markets to get 
annual reports on the more current basis in which they are provided in 
other jurisdictions.
---------------------------------------------------------------------------

    \68\ Under Item 8.A.4. of Form 20-F, the last year of audited 
financial statements may not be older than 15 months at the time of 
the offering or listing.
---------------------------------------------------------------------------

    If the Commission decides to adopt amendments to accelerate the 
deadline for filing annual reports on Form 20-F, several commenters who 
responded to our IFRS Proposing Release \69\ urged the Commission to 
provide a transition period for any accelerated deadline that was 
adopted.\70\ We expect that the proposal, if adopted, would provide a 
two-year transition period. For example, if the proposal is adopted 
this year, the Form 20-F filing deadline would change for the fiscal 
years ending on or after December 15, 2010. For foreign private issuers 
that are large accelerated or accelerated filers, the Form 20-F due 
date would be 90 days after the fiscal year-end, and for all other 
foreign private issuers, annual reports filed on Form 20-F would be due 
120 days after the fiscal year end, for fiscal years ending on or after 
December 15, 2010. In addition to these proposed amendments, we are 
proposing a conforming deadline for transition reports filed on Form 
20-F, so that the deadline is the same as the deadline for annual 
reports filed on Form 20-F.\71\
---------------------------------------------------------------------------

    \69\ IFRS Proposing Release, supra note 64.
    \70\ See, e.g., comment letters from Merrill Lynch; Nippon 
Keidanren.
    \71\ We also took this approach when we adopted amendments to 
accelerate the periodic report filing dates for domestic companies. 
See Release No. 33-8128, supra note 57; Release No. 33-8644 (Dec. 
21, 2005) [70 FR 76626] (adopting further refinements to the 
acceleration rules). See also Release No. 33-6823 (Mar. 13, 1989) 
[54 FR 10306] (conforming the transition report rules to the 
periodic report rules).
---------------------------------------------------------------------------

Comments Solicited
    9. Would accelerating the due date for Form 20-F annual reports be 
beneficial for investors? Given the differences in the reporting 
requirements that exist among the various foreign reporting

[[Page 13410]]

regimes, would accelerating the due date for Form 20-F annual reports 
have different impacts on foreign private issuers or investors 
depending on the particular country or the nature of the issuer's 
business? Would any of these differences affect the usefulness of the 
information to investors? If you believe that the due date should be 
accelerated, are the proposed due dates appropriate? Should different 
due dates be applied to foreign private issuers depending on the 
worldwide market value of their common equity held by non-affiliates, 
similar to the different annual report filing deadlines that are 
applied to domestic issuers? Should foreign private issuers with a 
larger worldwide market value be required to provide reports on a 
faster basis than other foreign private issuers because they presumably 
have additional resources and a better developed infrastructure that 
would enable them to comply with an accelerated due date?
    10. Would accelerating the due date for filing annual reports on 
Form 20-F impose any unreasonable burdens on foreign private issuers, 
who may have to collect and provide more information in that Form than 
may be required in their home jurisdictions, and may also have to 
translate the information into English? Would the proposed accelerated 
due dates impose any burdens on foreign private issuers that may be 
required to file annual reports on Form 20-F with the Commission before 
they are required to provide annual reports in their home 
jurisdictions? Should the due date be accelerated to within 120 days of 
the foreign private issuer's fiscal year-end for all foreign private 
issuers, including large accelerated and accelerated filers?
    11. Should different due dates be imposed on foreign private 
issuers depending on whether they file financial statements using U.S. 
GAAP, IFRS as issued by the IASB, or another GAAP with a reconciliation 
to U.S. GAAP? Should different due dates be imposed on foreign private 
issuers depending on whether their disclosure was originally prepared 
in a foreign language and needs to be translated into English?
    12. Should the deadline for filing Form 20-F annual reports be 
linked to the issuer's home country requirements for filing annual 
reports? If so, should the deadline be the same as the one in the 
issuer's home country, or should it be on a delayed basis, such as one 
or two months later? If you believe that the deadline for filing Form 
20-F should be linked to the issuer's home country requirements, should 
the foreign private issuer be responsible for submitting supporting 
materials that indicate when annual reports are due in its home 
jurisdiction, such as the applicable legislation or regulation, to the 
Commission at the time of its Form 20-F submission? Would varying 
deadlines according to home country requirements cause confusion for 
investors?
    13. Would a different transition period be more appropriate for 
implementation of the accelerated deadline? For example, should foreign 
private issuers be subject to the accelerated deadline after a longer 
or shorter transition period instead?
    14. Do foreign private issuers face unique challenges in preparing 
transition reports that would render a reduced filing period for those 
reports unduly burdensome?

C. Segment Data Disclosure

    Under Item 17 of Form 20-F, foreign private issuers that present 
financial statements otherwise fully in compliance with U.S. GAAP may 
omit segment data from their financial statements, and also are 
permitted to have a qualified U.S. GAAP audit report as a result of 
this omission. We estimate that fewer than 10 foreign private issuers 
currently use this accommodation. We are proposing to amend Form 20-F 
by eliminating this narrow accommodation.
    The reporting permitted by this accommodation is inconsistent with 
recent international developments in financial reporting. For example, 
in order to file financial statements without reconciliation to U.S. 
GAAP, foreign private issuers must comply fully with IFRS as issued by 
the IASB, including presentation of segment data. An accommodation that 
permits a foreign private issuer to present incomplete and non-
compliant U.S. GAAP financial statements may no longer be necessary or 
appropriate. Accordingly, we are proposing to amend Item 17 of Form 20-
F by removing Instruction 3 to that Form, which currently permits the 
omission of segment data from U.S. GAAP financial statements.
Comments Solicited
    15. In Part III.A. of this release, we propose an amendment to 
eliminate the option to prepare financial statements according to Item 
17 of Form 20-F. Under that proposed amendment, foreign private issuers 
would be required to prepare their financial statements according to 
the requirements of Item 18 of Form 20-F, which requires all of the 
information required by U.S. GAAP and Regulation S-X. If that proposal 
is adopted, would it still be useful to eliminate the exemption from 
providing segment data?
    16. Should we provide an exemption for foreign private issuers that 
are currently preparing financial statements under U.S. GAAP that omit 
segment data pursuant to Instruction 3 of Item 17? If we adopt the 
proposed amendment, should we provide a ``grandfather'' provision or an 
exemptive order to permit the small number of foreign private issuers 
to continue to not report segment data?

D. Exchange Act Rule 13e-3

    We are proposing to amend Exchange Act Rule 13e-3,\72\ which 
pertains to going private transactions by reporting issuers or their 
affiliates, to reflect the recently adopted rules pertaining to the 
ability of foreign private issuers to terminate their Exchange Act 
registration and reporting obligations.\73\ Currently, Rule 13e-3 is 
triggered when an issuer and/or any of its affiliates are engaged in a 
specified transaction or series of transactions \74\ that have either a 
reasonable likelihood or a purpose of causing (i) any class of equity 
securities of the issuer that is subject to section 12(g) or section 
15(d) \75\ of the Exchange Act to be held of record by less than 300 
persons, or (ii) the securities to be neither listed on any national 
securities exchange nor authorized to be quoted on an inter-dealer 
quotation system of any registered national securities association.
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    \72\ 17 CFR 240.13e-3.
    \73\ Release No. 34-55540, supra note 23.
    \74\ A ``Rule 13e-3 transaction'' is defined as (i) a purchase 
of any equity security by the issuer of such security or by an 
affiliate, (ii) a tender offer, (iii) a proxy solicitation or 
information statement distribution in connection with a merger or 
similar transaction, (iv) the sale of substantially all the assets 
of an issuer to its affiliate, or (v) a reverse stock split. 17 CFR 
240.13e-3.
    \75\ 15 U.S.C. 78o(d).
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    Rule 13e-3 requires any issuer or affiliate that engages in a Rule 
13e-3 transaction to file a Schedule 13E-3 \76\ disclosing its plan to 
take the company private, and to make prompt amendments to reflect 
certain information about the proposed transaction. In the Schedule 
13E-3, the filing party must disclose the purposes for the transaction, 
whether any alternative means for accomplishing the stated purposes 
were considered, the reasons for the structure of the transaction and 
why it was being undertaken at the time, the effects that the 
transaction would have on the issuer and its unaffiliated security 
holders, whether or not the filing party believes the transaction is 
fair to unaffiliated

[[Page 13411]]

security holders, and the factors considered in determining fairness. 
Rule 13e-3(f) \77\ also requires dissemination of the information 
required by Schedule 13E-3 to security holders within specified time 
periods.
---------------------------------------------------------------------------

    \76\ 17 CFR 240.13e-100.
    \77\ 17 CFR 240.13e-3(f).
---------------------------------------------------------------------------

    When the Commission adopted Rule 13e-3, we indicated that the Rule 
would be triggered if a specified transaction has either the reasonable 
likelihood or purpose of causing the termination of reporting 
obligations under the Exchange Act because the class of securities 
would be held of record by less than 300 persons as a result of the 
transaction.\78\ Recently, we adopted amendments to the deregistration 
provisions applicable to foreign private issuers that would permit them 
to terminate their reporting obligations under the Exchange Act by 
meeting a quantitative benchmark designed to measure relative U.S. 
market interest for their equity securities that does not depend on a 
head count of the issuers' U.S. security holders.\79\ Although Rule 
13e-3 does not reflect the termination of registration and reporting 
provisions that were previously applicable to foreign private issuers, 
we propose to amend the Rule to better reflect the current 
deregistration provisions. As a result, we are proposing to amend Rule 
13e-3(a)(3)(ii)(A) \80\ to specify that the cited effect is deemed to 
have occurred when a domestic or foreign issuer becomes eligible to 
deregister under Exchange Act Rules 12g-4 \81\ and 12h-6,\82\ 
respectively.
---------------------------------------------------------------------------

    \78\ Release No. 33-6100 (Aug. 2, 1979) [44 FR 46736].
    \79\ Release No. 34-55540, supra note 23.
    \80\ 17 CFR 240.13e-3(a)(3)(ii)(A).
    \81\ 17 CFR 240.12g-4.
    \82\ 17 CFR 240.12h-6.
---------------------------------------------------------------------------

    When a foreign private issuer engages in a Rule 13e-3 transaction 
that would cause the termination of its registration or reporting 
obligations under the Exchange Act, Rule 13e-3 is intended to provide 
the issuer's security holders with one last opportunity to obtain 
information about the company and consider their alternatives. This is 
equally true in the context of a foreign private issuer that is 
deregistering as it is for a domestic or foreign company that is 
ceasing to file reports because the number of its shareholders falls 
below 300.
Comments Solicited
    17. Is it appropriate to amend Rule 13e-3 by using the quantitative 
benchmark set forth in the new termination of reporting and 
deregistration provisions?
    18. Instead of referencing the applicable termination of reporting 
and deregistration provisions, is there another threshold that should 
be applied in Rule 13e-3(a)(3)(ii)(A) to foreign private issuers?
    19. If the proposed amendment is adopted, would more registrants be 
required to comply with Rule 13e-3 than intended because they may be 
engaged in one of the transactions described in Rule 13e-3(a)(3)(i) as 
a step toward terminating their registration or reporting obligations 
with respect to a class of securities, transactions that previously 
might not have resulted in the application of Rule 13e-3?
    20. To what extent may foreign private issuers engage in ordinary 
course securities transactions (such as buybacks or repurchases) that 
may trigger Rule 13e-3, and is it necessary to provide exceptions so 
that these transactions do not trigger Rule 13e-3?

III. Other Matters Under Consideration

    The Commission is considering whether it is appropriate to amend 
Form 20-F in order to revise the disclosure elicited from foreign 
private issuers in annual reports and registration statements. The 
proposals discussed in this section touch on a number of different 
areas. Unlike our proposal relating to the annual report filing 
deadline, we have not discussed these matters in previous releases and 
we are especially interested in comments from investors, foreign 
issuers and others as to whether we should impose these new disclosure 
requirements.
    In addition to the specific proposals discussed below, we would 
also welcome commenters' views regarding other areas as to which we 
should consider revising our disclosure requirements applicable to 
foreign private issuers, either with respect to requiring new areas of 
disclosure or eliminating current disclosure requirements.

A. Requiring Item 18 Reconciliation in Annual Reports and Registration 
Statements Filed on Form 20-F

    Currently, a foreign private issuer that is only listing a class of 
securities on a national securities exchange, or only registering a 
class of securities under Exchange Act section 12(g), without 
conducting a public offering of those securities may provide financial 
statements according to Item 17 of Form 20-F. Foreign private issuers 
may also provide financial statements according to Item 17 for their 
annual reports on Form 20-F. Under Item 17, a foreign private issuer 
must prepare its financial statements and schedules in accordance with 
U.S. GAAP, or IFRS as issued by the IASB. If its financial statements 
and schedules are prepared in accordance with another basis of 
accounting, the issuer must include a reconciliation to U.S. GAAP. This 
reconciliation must include a narrative discussion of reconciling 
differences, a reconciliation of net income for each year and any 
interim periods presented, a reconciliation of major balance sheet 
captions for each year and any interim periods, and a reconciliation of 
cash flows for each year and any interim periods.\83\ In contrast, if a 
foreign private issuer that presents its financial statements on a 
basis other than U.S. GAAP, or IFRS as issued by the IASB provides 
financial statements under Item 18 of Form 20-F, it must provide all 
the information required by U.S. GAAP and Regulation S-X, in addition 
to the reconciling information for the line items specified in Item 17.
---------------------------------------------------------------------------

    \83\ See Item 17(c)(2) of Form 20-F.
---------------------------------------------------------------------------

    We are proposing to eliminate this distinction between the 
disclosure provided to the primary and secondary markets by requiring 
Item 18 information for foreign private issuers that are only listing a 
class of securities on an exchange, or only registering a class of 
securities under Exchange Act section 12(g), without conducting a 
public offering. We are also proposing to require Item 18 information 
for foreign private issuers that file annual reports on Form 20-F. In 
addition, foreign private issuers that are making certain non-capital 
raising offerings, such as offerings pursuant to reinvestment plans, 
offerings upon the conversion of securities or offerings of investment 
grade securities, currently are permitted to provide Item 17 financial 
statements in their registration statements under the Securities Act. 
To ensure that the same type of financial information is provided 
regardless of the type of offering that is being made, we are also 
proposing to require foreign private issuers to file financial 
statements that comply with Item 18 when registering these types of 
offerings under the Securities Act.
    The majority of foreign private issuers who do not prepare 
financial statements in accordance with U.S. GAAP elect to provide 
financial information pursuant to Item 18, rather than Item 17, of Form 
20-F.\84\ In our view, a reconciliation

[[Page 13412]]

that includes the footnote disclosures required by U.S. GAAP and 
Regulation S-X \85\ can provide important additional information.\86\ 
As a result, we are proposing to amend Form 20-F and the registration 
statement forms available to foreign private issuers under the 
Securities Act (Forms F-1, F-3 and F-4) to require the disclosure of 
financial information according to Item 18 of Form 20-F for 
registration statements filed under both the Exchange Act and the 
Securities Act, as well as for annual reports. However, we are not 
proposing to eliminate the availability of Item 17 disclosures for 
Canadian MJDS filers in light of the special recognition accorded to 
MJDS filings. In addition, more countries are expected to adopt IFRS as 
their basis of accounting, or to permit companies to use IFRS as issued 
by the IASB as their basis of accounting in the next few years. We 
therefore believe that eliminating the availability of Item 17 in MJDS 
registration statements would not be necessary. Item 17 would also 
continue to be available for financial statements of non-registrants 
that are required to be included in a foreign or domestic issuer's 
registration statement, annual report or other Exchange Act report. 
These include significant acquired businesses under Rule 3-05 \87\ of 
Regulation S-X, significant equity method investees under Rule 3-09 
\88\ of Regulation S-X, entities whose securities are pledged as 
collateral under Rule 3-16 \89\ of Regulation S-X, and exempt 
guarantors under Rule 3-10(i) \90\ of Regulation S-X.
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    \84\ A foreign private issuer's latest annual report filed on 
Form 20-F and all subsequent Form 20-F annual reports are 
incorporated by reference into its Form F-3 shelf registration 
statement. See Item 6 (Incorporation of Certain Information by 
Reference) in Form F-3. General Instruction I.B.1. of Form F-3 
requires foreign private issuers to provide financial statements 
that comply with Item 18 for primary offerings.
    \85\ 17 CFR part 210.1-01 et seq.
    \86\ Under Item 17, an issuer is not required to provide the 
extensive footnote disclosures required by U.S. GAAP and Regulation 
S-X, unless these disclosures are otherwise required under its home 
country GAAP. For example, the footnote disclosures related to 
pension assets, obligations and assumptions, lease commitments, 
business segments, tax attributes, stock compensation awards, 
financial instruments and derivatives, among many others, are not 
required under Item 17 unless they are otherwise required by the 
issuer's home country GAAP.
    \87\ 17 CFR 210.3-05.
    \88\ 17 CFR 210.3-09.
    \89\ 17 CFR 210.3-16.
    \90\ 17 CFR 210.3-10(i).
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    If this amendment is adopted, we propose to establish a compliance 
date that would provide foreign private issuers with sufficient time to 
transition to the Item 18 requirements when preparing their financial 
statements. We anticipate that if this amendment is adopted in 2008, a 
foreign private issuer that currently prepares its financial statements 
according to Item 17 of Form 20-F would not be required to prepare 
financial statements pursuant to Item 18 until it files an annual 
report for its first fiscal year ending on or after December 15, 2009.
Comments Solicited
    21. Would the proposed amendment to eliminate the availability of 
the Item 17 option benefit investors?
    22. Is it appropriate to provide a transition period for foreign 
private issuers that are currently preparing financial statements in 
accordance with Item 17 of Form 20-F? Is a compliance date that 
provides a transition period in the best interests of investors? If so, 
is the suggested transition period appropriate in length, or should it 
be shorter or longer than proposed?
    23. As proposed, Item 17 will now only be available for the 
presentation of financial information for non-issuer entities required 
to be included in a foreign or domestic issuer's registration statement 
or Exchange Act report. Is there any reason for retaining the Item 17 
financial information option for non-capital raising offerings made by 
foreign private issuers or annual reports?
    24. Would the elimination of the Item 17 option increase costs for 
companies? If so, what types of compliance costs would be affected? Are 
there ways to mitigate the costs?
    25. To what extent are the benefits to investors from the 
additional Item 18 financial disclosure linked to more timely filing of 
Form 20-F? If we decide not to accelerate the deadline for filing Form 
20-F as proposed, should we still require the additional Item 18 
financial disclosure?
    26. Should we provide an exemption for foreign private issuers that 
are currently preparing financial statements pursuant to Item 17? If we 
adopt the proposed amendment, should we provide a ``grandfather'' 
provision or an exemptive order to permit these foreign private issuers 
to continue to provide financial information pursuant to Item 17?

B. Disclosure About Changes in a Registrant's Certifying Accountant

    Domestic companies currently report any changes in and 
disagreements with their certifying accountant in a current report on 
Form 8-K and in a registration statement on Form 10 \91\ under the 
Exchange Act,\92\ as well as in their registration statements filed on 
Forms S-1\93\ and S-4 \94\ under the Securities Act. Among other 
things, this disclosure provides information about potential opinion 
shopping situations by issuers. ``Opinion shopping'' generally refers 
to the search for an auditor that is willing to support a proposed 
accounting treatment that is designed to help a company achieve its 
reporting objectives, even though that treatment could frustrate 
reliable reporting.\95\
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    \91\ 17 CFR 249.210.
    \92\ In their annual reports on Form 10-K, domestic issuers do 
not provide the same type of change of accountant disclosure, since 
they should have reported this information on a more current basis 
on Form 8-K. However, they do provide the disclosures required by 
Item 304(b) of Regulation S-K [17 CFR 229.304(b)]. See text infra 
for a discussion of Item 304(b).
    \93\ 17 CFR 239.11.
    \94\ 17 CFR 239.25.
    \95\ See Release No. 33-6766 (Apr. 7, 1988) (adopting amendments 
to Form 8-K, Regulation S-K and Schedule 14A [17 CFR 240.14a-101] 
related to disclosure concerning a change in a registrant's 
certifying accountant).
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    Foreign private issuers have not been required to provide this 
disclosure. When we proposed the adoption of Form 20-F, we proposed a 
disclosure requirement soliciting information about changes in the 
registrant's certifying accountant.\96\ The disclosure item was not 
included in Form 20-F.\97\ However, the issues underlying the need for 
this disclosure also apply to foreign private issuers, and the 
relationship between issuers and their auditors in this area would seem 
to be as important for investors. Moreover, foreign private issuers 
that are listed on the New York Stock Exchange (NYSE) are already 
required by that Exchange to notify the market about a change in their 
auditors,\98\ although this information is required to be furnished 
under cover of Form 6-K, which does not have the substantive disclosure 
requirements of Form 8-K.\99\ As a result, we are proposing amendments 
that would require substantially the same types of disclosures 
currently provided by domestic issuers about changes in and 
disagreements with their certifying accountant.
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    \96\ Release No. 34-14128 (Nov. 2, 1977) [42 FR 58684] 
(contained in proposed Item 24).
    \97\ Form 20-F Adopting Release, supra note 13.
    \98\ Section 204.03 of the NYSE Listed Company Manual.
    \99\ See supra note 36 for a discussion of the differences 
between Forms 6-K and 8-K.
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    We are proposing to amend Form 20-F by adding an Item 16F that 
would elicit the same types of change of accountant disclosures 
obtained in Item 4.01 (Changes in Registrant's Certifying Accountant) 
of Form 8-K,\100\ including the disclosure requirements of Item 304(a) 
of Regulation S-K,\101\ which are referenced in Form 8-K, and Item 9 
(Changes in and Disagreements with Accountants on Accounting and 
Financial Disclosure) of Form 10-K,\102\ which refers to the disclosure

[[Page 13413]]

requirements of Item 304(b) of Regulation S-K. Among other things, Item 
304(a) of Regulation S-K requires an issuer to disclose whether an 
independent accountant that was previously engaged as the principal 
accountant to audit the issuer's financial statements, or a significant 
subsidiary on which the accountant expressed reliance in its report, 
has resigned, declined to stand for re-election, or was dismissed. Item 
304(a) of Regulation S-K also requires an issuer to disclose any 
disagreements or reportable events that occurred within the issuer's 
latest two fiscal years and any interim period preceding the change of 
accountant. Item 304(b) of Regulation S-K solicits disclosure about 
whether, during the fiscal year in which the change of accountants took 
place or during the subsequent year, the issuer had similar, material 
transactions to those which led to the disagreements with the former 
accountants, and whether such transactions were accounted for or 
disclosed in a manner different from that which the former accountants 
would have concluded was required. If so, Item 304(b) requires the 
issuer to disclose the existence and nature of the disagreement or 
reportable event, and also disclose the effect on the financial 
statements if the method that would have been required by the former 
accountants had been followed. Because foreign private issuers do not 
file Forms 8-K and 10-K and are not otherwise subject to Item 304 of 
Regulation S-K, we are proposing that they provide disclosure about 
changes in and disagreements with their certifying accountants in their 
annual reports on Form 20-F, as well as in their initial registration 
statements filed on Forms 20-F, F-1 and F-4.
---------------------------------------------------------------------------

    \100\ Item 4.01 of Form 8-K.
    \101\ 17 CFR 229.304(a).
    \102\ Item 9 of Form 10-K.
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    We are also proposing to amend Forms F-1 and F-4, which are used to 
register public offerings of securities by foreign private issuers 
under the Securities Act, to require the new Item 16F disclosure 
requirement about the issuer's changes in and disagreements with their 
certifying accountant for first-time registrants with the Commission. 
We are not proposing to require Item 16F disclosure for repeat 
registrants because this information would be included in annual 
reports on Form 20-F filed by repeat registrants. Although we do not 
make this distinction in Forms S-1 and S-4, domestic issuers are 
subject to a Form 8-K current report requirement for change of 
accountant disclosure. Requiring this disclosure for repeat filers 
using S-1 and S-4 does not create an additional disclosure burden for 
them.
    As proposed, Item 16F is virtually identical to Item 304 of 
Regulation S-K. However, we have eliminated or modified some of the due 
dates described in Item 304(a)(3) of Regulation S-K because the 
disclosure is being made on an annual basis, rather than on a current 
basis. For example, although Item 16F would require the issuer to 
provide a copy of the disclosures that it is making in response to Item 
16F to the former accountant, it would not require the issuer to 
provide the disclosures no later than the day that the disclosures are 
filed with the Commission, as is required by Item 304(a)(3) of 
Regulation S-K. In addition, we expect that the former accountant would 
be able to furnish the issuer with a letter stating whether it agrees 
with the statements made by the issuer in response to Item 16F and, if 
not, stating the respects in which it does not agree, and that the 
issuer would be able to file the former accountant's letter as an 
exhibit to the annual report that contains this disclosure at the time 
that the annual report is due. Item 304(a)(3) provides that if the 
former accountant's letter is not available at the time that the report 
or registration statement is filed, then the issuer can file the letter 
with the Commission within ten business days after the filing of the 
report or registration statement. Because foreign private issuers would 
be permitted to provide the proposed disclosure in their annual 
reports, we believe that this accommodation would not be necessary for 
annual reports unless the change in accountant occurred less than 30 
days prior to the filing of the annual report.\103\ As proposed, Item 
16F would permit a delayed filing of the former accountant's letter in 
an annual report only if the change in accountant occurred within this 
30-day timeframe.
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    \103\ Under General Instruction C.(b) of Form 20-F, the 
information provided in a Form 20-F annual report should be as of 
the latest practicable date, unless a disclosure item in the Form 
explicitly directs otherwise. As a result, changes in the foreign 
private issuer's certifying accountant that occur after the issuer's 
fiscal year-end, but before the Form 20-F is filed, would be 
disclosed in the issuer's Form 20-F annual report.
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Comments Solicited
    27. Should foreign private issuers be required to provide 
information about changes in and disagreements with their certifying 
accountant? Would this disclosure be useful to investors? If so, should 
foreign private issuers be subject to the same disclosure requirements 
that apply to domestic issuers, or would a different disclosure 
requirement be more appropriate?
    28. Should foreign private issuers be permitted to provide the 
letter from the former accountant in their annual reports on a delayed 
basis for a change of accountants that occurs less than 30 days before 
the annual report is filed, as proposed? Is 30 days an appropriate 
parameter? Alternatively, should foreign private issuers be permitted 
to provide the letter from the former accountant on a delayed basis for 
a change in accountant that occurs up to 45 days or 60 days before the 
annual report is filed, or only if the change in accountant occurs less 
than 15 days before the annual report is filed? Because foreign private 
issuers provide this disclosure on a delayed basis compared to domestic 
issuers, is this accommodation necessary?
    29. Are there restrictions under a foreign issuer's home country 
law or regulations that would prohibit an auditor from reporting to a 
foreign regulator about disagreements with the issuer? If so, how 
should we address such restrictions?
    30. Should the proposed change of accountant disclosure 
requirements contained in Item 16F be extended to registration 
statements filed by all foreign private issuers under the Securities 
Act, not just first-time registrants? Would this impose an undue burden 
on foreign private issuers that may not be subject to such a disclosure 
requirement in their home jurisdictions?

C. Annual Disclosure About ADR Fees and Payments

    The Commission has long been interested in improving the disclosure 
provided to investors about the fees and other charges paid in 
connection with ADR facilities.\104\ We continue to believe that ADR 
holders can benefit from enhanced disclosure in this area, especially 
in light of new depositary fees that are being charged to ADR holders 
in connection with sponsored ADR facilities. For example, many 
depositaries are now charging an annual fee for general depositary 
services, a fee that was formerly prohibited by some exchanges.\105\
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    \104\ We noted the importance of transparency in fee disclosures 
in our 1991 ADR concept release, Release No. 33-6894 (May 23, 1991) 
[56 FR 24420].
    \105\ See Release No. 34-53978 (June 13, 2006) [71 FR 35474] 
(notice of NYSE rule change to eliminate the requirement that 
certain services be provided without charge to ADR holders).
---------------------------------------------------------------------------

    Currently, disclosures about fees and other payments made by ADR 
holders to the depositary are provided in the Form 20-F that is filed 
to register the deposited securities under the Exchange

[[Page 13414]]

Act,\106\ but are not disclosed in the annual report. The information 
provided is also generic, providing maximums paid on the deposit and 
withdrawal of the securities underlying the ADRs. Although ADR fees are 
disclosed in the ADR itself,\107\ ADR holders frequently purchase their 
ADRs in book-entry form and do not see the disclosures provided in the 
physical certificate. We are proposing to amend Form 20-F by revising 
Item 12.D.3. and the Instructions to Item 12 to solicit disclosure of 
these fees on an annual basis, including the annual fee for general 
depositary services. In addition, some depositaries may make certain 
payments to the foreign issuers whose securities underlie the ADRs. 
These types of payments should also be disclosed because the cost of 
these payments may be passed on to ADR holders through the fees and 
other charges that they pay to the depositary. The proposed amendments 
to Item 12.D.3. and the Instructions to Item 12 of Form 20-F would 
require disclosure of these payments in the registration statement on 
Form 20-F that is filed for the deposited securities, as well as in the 
annual report, for sponsored ADR facilities.
---------------------------------------------------------------------------

    \106\ Rule 12a-8 [17 CFR 240.12a-8] exempts depositary shares 
registered on Form F-6 [17 CFR 239.36] under the Securities Act, but 
not the underlying deposited securities, from the operation of 
Section 12(a) of the Exchange Act [15 U.S.C. 78l(a)].
    \107\ As a technical matter, an ADR is the physical certificate 
that evidences American Depositary Shares (ADS), and an ADS is the 
security that represents an ownership interest in deposited 
securities. However, the terms are often used interchangeably by 
market participants.
---------------------------------------------------------------------------

Comments Solicited
    31. Would it be useful to investors to receive information about 
ADR fees and payments made by depositaries on an annual basis? Is there 
other information relating to ADRs that would be useful to investors on 
an annual basis, such as the number of ADRs outstanding? Are there 
other methods by which investors can readily obtain this information? 
Should foreign private issuers be required to disclose the information 
in their Form 20-F annual reports only if the information is not 
disclosed on their websites?
    32. Should Item 12 be amended to also explicitly solicit a brief 
discussion of the reasons why the depositary is making payments to the 
foreign private issuer, or is disclosure of the amount paid to the 
issuer sufficient?
    33. Should depositaries be required to disclose payments that they 
make to third parties? Are these payments necessarily passed on to ADR 
holders?
    34. Should Regulation S-K and Form 10-K be amended to elicit 
similar disclosure from foreign issuers that are not foreign private 
issuers and that file annual reports on Form 10-K, but that have 
securities traded in ADR form?

D. Disclosure About Differences in Corporate Governance Practices

    Foreign private issuers are subject to different legal and 
regulatory requirements in their home jurisdictions, and as a result 
frequently follow different corporate governance practices from 
domestic companies. In recognition of this, many U.S. securities 
exchanges exempt listed foreign private issuers from many of their 
corporate governance requirements.\108\ However, these exchanges 
require these issuers to disclose the significant ways in which their 
corporate governance practices differ from those followed by domestic 
companies under the relevant exchange's listing standards. Foreign 
private issuers may provide this disclosure either in their annual 
reports, and/or on their Websites.\109\ Although disclosure of 
differences in corporate governance practices does not imply a 
preference for any particular type of corporate governance regime, this 
disclosure is useful to investors because it facilitates their ability 
to monitor the issuer's corporate governance practices.
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    \108\ See Section 303A.00 of the NYSE Listed Company Manual 
(noting that foreign private issuers are permitted to follow home 
country practice instead of the applicable corporate governance 
provisions of the NYSE Listed Company Manual, except for the 
requirements pertaining to audit committees, certain certifications, 
and certain corporate governance disclosures); Section 4350(a)(1) of 
the Nasdaq Manual (noting that requirements pertaining to audit 
committees and audit opinions apply, among other things); Section 
110 of the Amex Company Guide (stating that in evaluating the 
listing application of a foreign private issuer, ``the Exchange will 
consider the laws, customs and practices of the applicant's country 
of domicile, to the extent not contrary to the federal securities 
laws'').
    \109\ See Section 303A.11 of the NYSE Listed Company Manual; 
Section 4350(a)(1) of the Nasdaq Manual; Section 110 of the Amex 
Company Guide.
---------------------------------------------------------------------------

    Foreign private issuers frequently opt to provide this disclosure 
on their websites, rather than in their annual reports. We are 
proposing to require disclosure of this information in the Form 20-F 
annual reports filed by all foreign private issuers whose securities 
are listed on a U.S. exchange. This would consolidate all of the 
relevant corporate governance disclosure about a listed company in one 
central location. Currently, foreign private issuers are required to 
provide in their annual reports the disclosure required by Exchange Act 
Rule 10A-3(d)\110\ regarding an exemption from the listing standards 
for audit committees.\111\
---------------------------------------------------------------------------

    \110\ 17 CFR 240.10A-3(d).
    \111\ See Item 16D of Form 20-F.
---------------------------------------------------------------------------

    We propose to add a new Item 16G in Form 20-F that would require 
foreign private issuers to provide a concise summary in their annual 
reports of the significant ways in which the foreign private issuer's 
corporate governance practices differ from the corporate governance 
practices of domestic companies listed on the same exchange. We expect 
that the disclosure provided in response to the proposed Item 16G would 
be similar to the disclosure that foreign private issuers currently 
provide in response to the corporate governance disclosure requirements 
of the exchange on which their securities are listed.
Comments Solicited
    35. Would disclosure of significant differences in the corporate 
governance practices of foreign private issuers in their annual reports 
enable investors to better monitor the corporate governance practices 
of the issuers in which they are investing?
    36. Instead of the narrative discussion that is proposed, is there 
an alternative format, such as a tabular presentation of the 
differences in corporate governance practices, that would make the 
information provided in the annual report easier to understand and thus 
more useful to investors?
    37. Is it sufficiently clear what differences in corporate 
governance should be disclosed? Are there important elements of 
corporate governance that investors should be informed of and that 
should be specifically addressed in a company's disclosure under this 
proposed requirement?

E. Financial Information for Significant, Completed Acquisitions

    We propose to amend Item 17(a) of Form 20-F to require foreign 
private issuers to provide, in additional circumstances, the financial 
information required by Rule 3-05 and Article 11 \112\ of Regulation S-
X, which pertain, respectively, to the financial statements that must 
be provided for significant, completed acquisitions and the preparation 
of pro forma financial statements. Although domestic companies must 
present the financial statements of significant acquired businesses and 
pro forma financial information in their registration statements under 
both the Securities Act and the Exchange Act, as well as in a Form 8-K, 
foreign private issuers only provide this information in the

[[Page 13415]]

registration statements that they file under the Securities Act and the 
Exchange Act.
---------------------------------------------------------------------------

    \112\ 17 CFR 210.11 et seq.
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    Item 2.01 of Form 8-K \113\ requires domestic issuers to disclose 
certain information when they or one of their majority-owned 
subsidiaries complete an acquisition or disposition of a significant 
amount of assets, other than in the ordinary course of business. The 
Form 8-K filed to report this acquisition or disposition must be filed 
within four business days after the event has occurred.\114\ For a 
business acquisition significant at the 20% or greater level that must 
be disclosed pursuant to Item 2.01, Item 9.01 of Form 8-K requires the 
financial statements of the acquired business to be filed with the 
initial report of the acquisition on Form 8-K, or by amendment no later 
than 71 calendar days after the date that the initial report on Form 8-
K is due.\115\ The financial information must be presented in 
accordance with Rule 3-05 of Regulation S-X, and the pro forma 
financial information must be presented pursuant to Article 11 of 
Regulation S-X.\116\
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    \113\ Item 2.01 of Form 8-K.
    \114\ General Instruction B.1. of Form 8-K.
    \115\ Item 9.01(a) of Form 8-K. A domestic issuer or a foreign 
private issuer that is a shell company, however, must report the 
acquisition within 4 business days on Form 8-K or Form 20-F, 
respectively. See Release No. 33-8587 (July 15, 2005) [70 FR 42234].
    \116\ Item 9.01(b) of Form 8-K.
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    Foreign private issuers have not been required to present financial 
information about significant, completed acquisitions in their annual 
reports under the Exchange Act. When we first proposed Form 20-F, we 
proposed a disclosure requirement that would have solicited 
substantially similar information about the acquisition or disposition 
of assets that is required by Item 2.01 of Form 8-K.\117\ This proposal 
was not adopted,\118\ and the corresponding Rule 3-05 and Article 11 
financial statement disclosures were also not implemented as a 
disclosure requirement for foreign private issuers.
---------------------------------------------------------------------------

    \117\ Release No. 34-14128, supra note 96 (proposing this as 
Item 23 to the Form).
    \118\ See Form 20-F Adopting Release, supra note 13.
---------------------------------------------------------------------------

    We are now proposing to require foreign private issuers to provide 
the financial information solicited by Rule 3-05 and Article 11 of 
Regulation S-X in their Exchange Act annual reports. Because foreign 
private issuers do not file current reports on Form 8-K, we are not 
proposing to impose a requirement that this financial information be 
presented on a more current basis than annually. As proposed, foreign 
private issuers would provide financial information in their annual 
report on Form 20-F about highly significant acquisitions completed 
during the most recent fiscal year covered by their annual report on 
that Form. We are aware that imposing a disclosure requirement in 
annual reports would incrementally increase compliance costs for 
foreign private issuers, but we believe that if a single business 
acquisition is significant at the 50% or greater level, this 
information is particularly useful to investors and should be 
disclosed. As proposed, the disclosure requirement would be triggered 
at the 50% or greater level,\119\ and would require the provision of 
financial statements for three fiscal years as prescribed by Rule 3-
05(b)(2)(iv) of Regulation S-X.
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    \119\ The significance of an acquired business is measured by 
the comparison of: (1) The registrant's investment in the acquired 
business (acquisition price) to the registrant's total assets, (2) 
the acquired business's total assets to the total assets of the 
registrant, or (3) the acquired business's pre-tax income to the 
pre-tax income of the registrant. See Rule 1-02(w) [17 CFR 210.1-02] 
of Regulation S-X.
---------------------------------------------------------------------------

    We are not proposing to require annual reports filed on Form 20-F 
to contain the information required by Rule 3-05 and Article 11 of 
Regulation S-K if the information has already been provided previously 
in a registration statement. In addition, we are not proposing to 
require financial information about probable acquisitions, or financial 
information for the aggregation of individually insignificant 
acquisitions.
Comments Solicited
    38. If the information about significant, completed acquisitions is 
disclosed on an annual, as opposed to current, basis, would the 
information still be useful to investors? Would investors find the 
information useful even though the disclosure would be provided at 
least several months after the acquisition was completed?
    39. What types of burdens, if any, would be placed on foreign 
private issuers if they are required to provide financial information 
disclosure about highly significant, completed acquisitions annually on 
Form 20-F?
    40. As proposed, a foreign private issuer would be required to 
provide information about a highly significant, completed acquisition 
in its annual report on Form 20-F. In light of the proposal to 
accelerate the reporting deadline for annual reports filed on Form 20-
F, should foreign private issuers be provided additional time to 
disclose information about a highly significant, completed acquisition 
on an amended annual report? If so, should the due date for the filing 
of this information be based upon the time that the acquisition was 
consummated? For example, information about a significant acquisition 
that was consummated early in the calendar year would be due with the 
annual report filed on Form 20-F, whereas financial information for a 
highly significant acquisition that occurred late in the calendar year 
could be provided on a delayed basis beyond the reporting deadline for 
the annual report filed on Form 20-F.
    41. Should foreign private issuers be required to provide financial 
information for business acquisitions that are significant at the 50% 
or greater level, or should the test of significance be at the 20% or 
greater level, as for domestic issuers? Would another significance 
level between 20% and 50% be more appropriate? To ensure that only very 
large transactions are required to be presented, should the test of 
significance be limited to the comparison of the purchase price to the 
issuer's assets? Alternatively, should a new test be developed for this 
purpose in which the comparison for significance is based on the size 
of the issuer's public float?
    42. Would it be useful to investors to require annual reports filed 
on Form 20-F to disclose the information required by Rule 3-05 and 
Article 11 of Regulation S-K even if the information has been provided 
previously in a registration statement? What kind of benefits would 
investors derive from disclosure in the annual reports?

IV. General Request for Comments

    We request and encourage any interested person to submit comments 
on any aspect of our proposals and any of the matters that might have 
an impact on the proposed amendments. We request comment from 
investors, issuers, and other users of the information that may be 
affected by the proposals. We also request comment from service 
professionals, such as law and accounting firms. With respect to any 
comments, we note that they are of greatest assistance to our 
rulemaking initiatives if accompanied by supporting data and analysis 
of the issues addressed in those comments.

V. Paperwork Reduction Act

A. Background

    The proposed amendments contain ``collection of information'' 
requirements within the meaning of the Paperwork Reduction Act of 1995

[[Page 13416]]

(``PRA'').\120\ We are submitting the proposed amendments to the Office 
of Management and Budget (``OMB'') for review in accordance with the 
PRA.\121\ The titles for the affected collections of information are:
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    \120\ 44 U.S.C. 3501 et seq.
    \121\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
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    (1) ``Form 20-F'' (OMB Control No. 3235-0288);
    (2) ``Form F-1'' (OMB Control No. 3235-0258);
    (3) ``Form F-3'' (OMB Control No. 3235-0256); and
    (4) ``Form F-4'' (OMB Control No. 3235-0325).
    Form 20-F sets forth the disclosure requirements for annual reports 
and registration statements filed by foreign private issuers under the 
Exchange Act, as well as many of the disclosure requirements for 
registration statements filed by foreign private issuers under the 
Securities Act. Forms F-1, F-3 and F-4 were adopted pursuant to the 
Securities Act, and set forth the disclosure requirements for 
registration statements filed by foreign private issuers to offer 
securities to the public.
    The hours and costs associated with preparing, filing and sending 
these forms and complying with these rules constitute reporting and 
cost burdens imposed by each collection of information. An agency may 
not conduct or sponsor, and a person is not required to respond to, a 
collection of information unless it displays a currently valid OMB 
control number. The information collection requirements related to 
Forms 20-F, F-1, F-3 and F-4 are mandatory. There is no mandatory 
retention period for the information disclosed, and the information 
disclosed would be made publicly available on the EDGAR filing system. 
We have based our estimates of the effect that the proposed rule and 
form amendments would have on those collections of information 
primarily on our review of the most recently completed PRA submissions 
for the affected rules and forms.
    The proposed amendments, if adopted, would: (1) Amend Rule 405 of 
Regulation C under the Securities Act and Exchange Act Rule 3b-4 to 
permit foreign issuers to test their qualification to use the forms and 
rules available to foreign private issuers on an annual basis, rather 
than on the continuous basis that is currently required; (2) Amend Form 
20-F to accelerate the filing deadline for annual reports filed by 
foreign private issuers on Form 20-F, subject to a two-year transition 
period, and amend Exchange Act Rules 13a-10 and 15d-10 to conform the 
deadline for transition reports filed by foreign private issuers on 
Form 20-F with the deadline for annual reports filed on that Form; (3) 
Amend Form 20-F by eliminating an instruction to Item 17 of that Form, 
which permits certain foreign private issuers to omit segment data from 
their U.S. GAAP financial statements; (4) Amend Rule 13e-3, which 
pertains to going private transactions by reporting issuers or their 
affiliate, to reflect the recently adopted rules pertaining to the 
ability of foreign private issuers to terminate their Exchange Act 
registration and reporting obligations; (5) Amend Form 20-F and Forms 
F-1, F-3 and F-4 to require foreign private issuers that are required 
to provide a U.S. GAAP reconciliation to do so pursuant to Item 18 of 
Form 20-F; (6) Amend Form 20-F, Forms F-1 and F-4 to require foreign 
private issuers to disclose information about a change in the issuer's 
certifying accountant; (7) Amend Form 20-F to require foreign private 
issuers to disclose the fees and charges paid by ADR holders, the 
payments made by the depositary to the foreign issuer whose securities 
underlie the ADRs, and for listed issuers, the differences in the 
foreign private issuer's corporate governance practices and those 
applicable to domestic companies under the relevant exchange's listing 
rules; and (8) Amend Form 20-F to require foreign private issuers to 
provide certain financial information in their annual reports on Form 
20-F about a significant, completed acquisition that is significant at 
the 50% or greater level when that acquisition is completed after the 
issuer's first fiscal quarter.
    We have based the annual burden and cost estimates of the proposed 
amendments on the following estimates and assumptions:
     A foreign private issuer incurs or will incur 25% of the 
annual burden required to produce each Form 20-F, Form F-1, Form F-3, 
or Form F-4; and
     Outside firms, including legal counsel, accountants and 
other advisors, incur or will incur 75% of the burden required to 
produce each Form 20-F, Form F-1, Form F-3, or Form F-4 at an average 
cost of $400 per hour.\122\
---------------------------------------------------------------------------

    \122\ In connection with other recent rulemakings, we have had 
discussions with several law firms to estimate an hourly rate of 
$400 as the cost to companies for the services of outside 
professional retained to assist in the preparation of these 
disclosures. For Securities Act registration statements, we also 
consider additional reviews of the disclosure by underwriter's 
counsel and underwriters.
---------------------------------------------------------------------------

    We estimated the average number of hours each entity spends 
completing the forms and the average hourly rate for outside 
professionals. That estimate includes the time and the cost of in-house 
preparers, reviews by executive officers, in-house counsel, outside 
counsel, independent auditors and members of the audit committee.

B. Burden and Cost Estimates Related to the Proposed Amendments

1. Form 20-F
    We estimate that currently foreign private issuers file 942 Form 
20-Fs each year. We assume that 25% of the burden required to produce 
the Form 20-Fs is borne internally by foreign private issuers, 
resulting in 614,891 annual burden hours borne by foreign private 
issuers out of a total of 2,459,564 annual burden hours. Thus, we 
estimate that 2,611 total burden hours per response are currently 
required to prepare the Form 20-F. We further assume that 75% of the 
burden to produce the Form 20-Fs is carried by outside professionals 
retained by foreign private issuers at an average cost of $400 per 
hour, for a total cost of $737,868,600.
    The proposed amendment to amend Form 20-F to accelerate the filing 
deadline for annual reports and transitions reports filed on that Form 
would not change the amount of information required to be included in 
Exchange Act reports. In connection with this proposal, we are also 
proposing to amend Exchange Act Rules 13a-10 and 15d-10, which pertain 
to transition reports filed on Form 20-F. Our proposed amendments would 
conform the deadline for transition reports filed on Form 20-F with the 
proposed deadline for annual reports filed on Form 20-F. These 
amendments also would not change the amount of information required to 
be included in Exchange Act reports. Therefore, these proposed 
amendments would neither increase nor decrease the amount of burden 
hours necessary to prepare annual reports on Form 20-F for the purposes 
of the PRA.
    With respect to our proposed amendment to require foreign private 
issuers that are required to provide a U.S. GAAP reconciliation to do 
so pursuant to Item 18 of Form 20-F, we estimate that approximately 200 
companies that file Form 20-F will be impacted by the proposal. We 
expect that, if adopted, the proposed amendment would cause those 
foreign private issuers to have more burden hours. We estimate that for 
each of the companies affected by the proposal, there would occur an 
increase of 2% (52.22 hours) in the number of burden hours required to 
prepare their Form 20-F, for a total increase of 10,444 hours

[[Page 13417]]

as a result of this proposal. We expect that 25% of those increased 
burden hours (2,611 hours) will be incurred by foreign private issuers. 
We further expect that 75% of these increased burden hours (7,833 
hours) will be incurred by outside firms, at an average cost of $400 
per hour, for a total of $3,133,200 in increased costs to the 
respondents of the information collection as a result of this proposal.
    With respect to our proposed amendment to require disclosure about 
a change in the issuer's certifying accountant in annual reports and 
registration statements filed on Form 20-F, we estimate that 
approximately 90 companies that file Form 20-F will be impacted by the 
proposal. We expect that, if adopted, the proposed amendment would 
cause those foreign private issuers to have more burden hours. We 
estimate that for each of the companies affected by the proposal, there 
would occur an increase of .75% (19.58 hours) in the number of burden 
hours required to prepare their Form 20-F, for a total increase of 
1,762.2 hours. We expect that 25% of those increased burden hours 
(440.55 hours) will be incurred by foreign private issuers. We further 
expect that 75% of these increased burden hours (1,321.65 hours) will 
be incurred by outside firms, at an average cost of $400 per hour, for 
a total of $528,660 in increased costs to the respondents of the 
information collection as a result of the proposal.
    With respect to our proposed amendment to require disclosure about 
ADR fees and payments on an annual basis, we estimate that 
approximately 442 companies that file Form 20-F will be impacted by the 
proposal. We expect that, if adopted, the proposed amendment would 
cause those foreign private issuers to have more burden hours. We 
estimate that for each of the companies affected by the proposal, there 
would occur an increase of .25% (6.53 hours) in the number of burden 
hours required to prepare their Form 20-F, for a total increase of 
2,886.26 hours. We expect that 25% of those increased burden hours 
(721.57 hours) will be incurred by foreign private issuers. We further 
expect that 75% of these increased burden hours (2,164.71 hours) will 
be incurred by outside firms, at an average cost of $400 per hour, for 
a total of $865,884 in increased costs to the respondents of the 
information collection as a result of these proposal.
    With respect to our proposed amendment to require annual disclosure 
about differences in a listed foreign private issuer's corporate 
practices and those applicable to domestic companies under the relevant 
exchange's listing rule, we estimate that approximately 783 companies 
that file Form 20-F will be impacted by the proposal. We expect that, 
if adopted, the proposed amendment would not cause a significant change 
in the burden hours for those foreign private issuers because they 
already prepare this information for the exchanges on which they are 
listed.
    With respect to our proposed amendment to eliminate an instruction 
to Item 17 of Form 20-F, which permits certain foreign private issuers 
to omit segment data from their U.S. GAAP financial statements, we 
estimate that approximately 5 companies that file Form 20-F will be 
currently impacted by the proposal. We expect that, if adopted, the 
proposed amendment would cause those foreign private issuers to have 
more burden hours. We estimate that for each of the companies affected 
by the proposal, there would occur an increase of 2% (52.22 hours) in 
the number of burden hours required to prepare their Form 20-F, for a 
total increase of 261.1 hours. We expect that 25% of those increased 
burden hours (65.3 hours) will be incurred by foreign private issuers. 
We further expect that 75% of these increased burden hours (195.83 
hours) will be incurred by outside firms, at an average cost of $400 
per hour, for a total of $78,332 in increased costs to the respondents 
of the information collection as a result of the proposal.
    With respect to our proposed amendment to amend Form 20-F to 
require foreign private issuers to provide certain financial 
information in their annual reports on that Form about a significant, 
completed acquisition that is significant at the 50% or greater level 
when that acquisition is completed after the issuer's first fiscal 
quarter, we estimate that approximately 45 companies that file Form 20-
F will be currently impacted by the proposal. We expect that, if 
adopted, the proposed amendment would cause those foreign private 
issuers to have more burden hours. We estimate that for each of the 
companies affected by the proposal, there would occur an increase of 
20% (522.2 hours) in the number of burden hours required to prepare 
their Form 20-F, for a total increase of 23,499 hours. We expect that 
25% of those increased burden hours (5,874.75 hours) will be incurred 
by foreign private issuers. We further expect that 75% of these 
increased burden hours (17,624.25 hours) will be incurred by outside 
firms, at an average cost of $400 per hour, for a total of $7,049,700 
in increased costs to the respondents of the information collection as 
a result of this proposal.
    Thus, we estimate that the proposed amendments to Form 20-F would 
increase the annual burden borne by foreign private issuers in the 
preparation of Form 20-F from 614,891 hours to 624,604 hours. We 
further estimate that the proposed amendments would increase the total 
annual burden associated with Form 20-F preparation to 2,498,417 burden 
hours, which would increase the average number of burden hours per 
response to 2652. We further estimate that the proposed amendment would 
increase the total annual costs attributed to the preparation of Form 
20-F by outside firms to $749,524,376.
2. Form F-1
    We estimate that currently foreign private issuers file 42 
registration statements on Form F-1 each year. We assume that 25% of 
the burden required to produce a Form F-1 is borne by foreign private 
issuers, resulting in 18,890 annual burden hours incurred by foreign 
private issuers out of a total of 75,560 annual burden hours. Thus, we 
estimate that 1,799 total burden hours per response are currently 
required to prepare a registration statement on Form F-1. We further 
assume that 75% of the burden to produce a Form F-1 is carried by 
outside professionals retained by foreign private issuers at an average 
cost of $400 per hour, for a total cost of $22,667,400.
    We estimate that currently approximately 4 companies that file 
registration statements on Form F-1 will be impacted by the proposal to 
require foreign private issuers to provide disclosure about a change in 
their certifying accountant in their initial registration statements. 
We expect that, if adopted, the proposed amendment would cause those 
foreign private issuers to have more burden hours. We estimate that 
each company affected by the proposal would have a .75% increase (13.49 
hours) in the number of burden hours required to prepare their 
registration statements on Form F-1, for a total increase of 54 hours. 
We expect that 25% of these increased burden hours (13.5 hours) will be 
incurred by foreign private issuers. We further expect that 75% of the 
increased burden hours (40.5 hours) will be incurred by outside firms, 
at an average cost of $400 per hour, for a total of $16,200 in 
increased costs to the respondents of the information collection as a 
result of the proposal.
    We estimate that none of the companies that file registration 
statements on Form F-1 will be impacted by the proposal to require 
foreign private issuers that are required

[[Page 13418]]

to provide a U.S. GAAP reconciliation to do so pursuant to Item 18 of 
Form 20-F. In our experience, the companies that use Form F-1 are 
engaging in capital raising transactions, so that all registrants have 
been providing financial information according to Item 18. The proposed 
amendment would be a technical change to the Form without any expected 
impact on the companies using that Form.
    Thus, we estimate that the proposed amendments to Form F-1 would 
increase the annual burden incurred by foreign private issuers in the 
preparation of Form F-1 from 18,890 hours to 18,904 hours. We further 
estimate that the proposed amendment would increase the total annual 
burden associated with Form F-1 preparation to 75,614 burden hours, 
which would increase the average number of burden hours per response to 
1800. We further estimate that the proposed amendment would increase 
the total annual costs attributed to the preparation of Form F-1 by 
outside firms to $22,683,600.
3. Form F-3
    We estimate that currently foreign private issuers file 106 
registration statements on Form F-3 each year. We assume that 25% of 
the burden required to produce a Form F-3 is borne by foreign private 
issuers, resulting in 4,399 annual burden hours incurred by foreign 
private issuers out of a total of 17,596 annual burden hours. Thus, we 
estimate that 166 total burden hours per response are currently 
required to prepare a registration statement on Form F-3. We further 
assume that 75% of the burden to produce a Form F-3 is carried by 
outside professionals retained by foreign private issuers at an average 
cost of $400 per hour, for a total cost of $5,278,800.
    We estimate that currently approximately 20 companies that file 
registration statements on Form F-3 will be impacted by the proposal to 
require foreign private issuers that are required to provide a U.S. 
GAAP reconciliation to do so pursuant to Item 18 of Form 20-F. We 
expect that, if adopted, the proposed amendment would cause those 
foreign private issuers to have more burden hours. We estimate that 
each company affected by the proposal would have a 2% increase (3.32 
hours) in the number of burden hours required to prepare their 
registration statements on Form F-3, for a total increase of 66.4 
hours. We expect that 25% of these increased burden hours (16.6 hours) 
will be incurred by foreign private issuers. We further expect that 75% 
of the increased burden hours (49.8 hours) will be incurred by outside 
firms, at an average cost of $400 per hour, for a total of $19,920 in 
increased costs to the respondents of the information collection as a 
result of the proposal.
    Thus, we estimate that the proposed amendment to Form F-3 would 
increase the annual burden incurred by foreign private issuers in the 
preparation of Form F-3 from 4,399 hours to 4,416 hours. We further 
estimate that the proposed amendment would increase the total annual 
burden associated with Form F-3 preparation to 17,663 burden hours, 
which would increase the average number of burden hours per response to 
167. We further estimate that the proposed amendment would increase the 
total annual costs attributed to the preparation of Form F-3 by outside 
firms to $5,298,720.
4. Form F-4
    We estimate that currently foreign private issuers file 68 
registration statements on Form F-4 each year. We assume that 25% of 
the burden required to produce a Form F-4 is borne internally by 
foreign private issuers, resulting in 24,497 annual burden hours 
incurred by foreign private issuers out of a total of 97,988 annual 
burden hours. Thus, we estimate that 1,441 total burden hours per 
response are currently required to prepare a registration statement on 
Form F-4. We further assume that 75% of the burden to produce a Form F-
4 is carried by outside professionals retained by foreign private 
issuers at an average cost of $400 per hour, for a total cost of 
$29,396,400.
    We estimate that currently approximately none of the companies that 
file registration statements on Form F-4 will be impacted by the 
proposal to require foreign private issuers that are required to 
provide a U.S. GAAP reconciliation to do so pursuant to Item 18 of Form 
20-F. In our experience, the companies that use Form F-4 have all been 
providing financial information according to Item 18 because of the 
types of transactions that are registered on that Form, so the proposed 
amendment would be a technical change to the Form without any expected 
impact on the companies using it.
    We estimate that currently approximately 5 companies that file 
registration statements on Form F-4 will be impacted by the proposal to 
require foreign private issuers to provide disclosure about a change in 
their certifying accountant in their initial registration statements. 
We expect that, if adopted, the proposed amendment would cause those 
foreign private issuers to have more burden hours. We estimate that 
each company affected by the proposal would have a .75% increase (10.81 
hours) in the number of burden hours required to prepare their 
registration statements on Form F-1, for a total increase of 54 hours. 
We expect that 25% of these increased burden hours (13.5 hours) will be 
incurred by foreign private issuers. We further expect that 75% of the 
increased burden hours (40.5 hours) will be incurred by outside firms, 
at an average cost of $400 per hour, for a total of $16,200 in 
increased costs to the respondents of the information collection as a 
result of the proposal.
    Thus, we estimate that the proposed amendments to Form F-4 would 
increase the annual burden incurred by foreign private issuers in the 
preparation of Form F-4 from 24,497 hours to 24,511 hours. We further 
estimate that the proposed amendment would increase the total annual 
burden associated with Form F-4 preparation to 98,042 burden hours, 
which would decrease the average number of burden hours per response to 
1,442. We further estimate that the proposed amendment would increase 
the total annual costs attributed to the preparation of Form F-4 by 
outside firms to $29,412,600.
5. Other Proposed Amendments
    The proposed amendments to Securities Act Rule 405 and Exchange Act 
Rule 3b-4 would revise the definition of ``foreign private issuer'' to 
permit foreign issuers to test their status as ``foreign private 
issuers'' on the last business day of their second fiscal quarter, 
rather than continuously, as is currently the case. Our proposed 
amendments would not change the amount of information required to be 
included in Securities Act registration statements or Exchange Act 
reports. Therefore, they would neither increase nor decrease the amount 
of burden hours necessary to prepare documents under either of those 
Acts for the purposes of the PRA.
    In addition, we also expect the proposed amendment to Exchange Act 
Rule 13e-3 to have a neutral effect on foreign private issuers. We do 
not expect a change in the number of foreign private issuers who would 
be required to comply with Rule 13e-3, or the burden hours required to 
prepare a Schedule 13E-3.

C. Request for Comment

    Pursuant to 44 U.S.C. 3506(c)(2)(B), we request comment in order 
to:
     Evaluate whether the proposed collections of information 
are necessary for the proper performance of the functions of the 
Commission, including

[[Page 13419]]

whether the information will have practical utility;
     Evaluate the accuracy of our estimates of the burden of 
the proposed collections of information;
     Determine whether there are ways to enhance the quality, 
utility, and clarity of the information to be collected;
     Evaluate whether there are ways to minimize the burden of 
the collections of information on those who respond, including through 
the use of automated collection techniques or other forms of 
information technology; and
     Evaluate whether the proposed amendments will have any 
effects on any other collections of information not previously 
identified in this section.
    Any member of the public may direct to us any comments concerning 
the accuracy of these burden estimates and any suggestions for reducing 
the burdens. Persons who desire to submit comments on the collection of 
information requirements should direct their comments to the OMB, 
Attention: Desk Officer for the Securities and Exchange Commission, 
Office of Information and Regulatory Affairs, Washington, DC 20503, and 
send a copy of the comments to Nancy M. Morris, Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090, 
with reference to File No. S7-05-08. Requests for materials submitted 
to the OMB by us with regard to these collections of information should 
be in writing, refer to File No. S7-05-08 and be submitted to the 
Securities and Exchange Commission, Records Management, Office of 
Filings and Information Services, 100 F Street, NE., Washington DC 
20549. Because the OMB is required to make a decision concerning the 
collections of information between 30 and 60 days after publication, 
your comments are best assured of having their full effect if the OMB 
receives them within 30 days of publication.

VI. Cost-Benefit Analysis

    We are proposing amendments to our rules and forms relating to 
foreign private issuers that are intended to improve the accessibility 
of the U.S. public capital markets to these issuers, as well as to 
enhance the information that is available to investors. The Commission 
has considered the costs and benefits as described below and encourages 
commenters to identify, discuss, analyze, and supply relevant data 
regarding any additional costs or benefits. Specifically, the 
Commission requests data to quantify the costs and the value of each of 
the benefits identified. The Commission also seeks estimates and views 
regarding the identified costs and benefits of the proposals for 
particular types of market participants and any other costs or benefits 
that may result from the adoption of the proposed rule.

1. Annual Test for Foreign Private Issuer Status

A. Expected Benefits
    The proposed amendments to the definition of ``foreign private 
issuer'' contained in Securities Act Rule 405 and Exchange Act Rule 3b-
4 would permit reporting foreign issuers to assess their eligibility to 
use the special forms and rules available to foreign private issuers 
once a year on the last business day of their second fiscal quarter, 
rather than continuously, as is currently the case. This is the same 
date used to determine accelerated filer status under Exchange Act Rule 
12b-2 and smaller reporting company status in Item 10(f)(2)(i) of 
Regulation S-K. As a result, these proposed amendments should simplify 
compliance with the Commission's regulations by establishing one date 
that is used to ascertain an issuer's status. Foreign issuers should 
benefit as a result of this simplification of their compliance 
requirements, which could make the U.S. markets more attractive to them 
as a source of capital and thereby enhance the competitiveness of the 
U.S. markets compared to other markets. The proposed amendments are 
expected to reduce the cost for foreign issuers of monitoring whether 
they qualify as foreign private issuers, including the time spent by 
management in tracking this information. If more foreign issuers are 
encouraged to remain in the U.S. markets and to make public offerings, 
investors should also benefit because this will enhance their ability 
to invest in the securities of foreign issuers that have been 
registered with the Commission, and that are thus subject to the 
disclosure requirements and investor protections provided by the 
federal securities laws.
    Once a foreign issuer determines that it no longer qualifies as a 
foreign private issuer, the proposed amendments would provide the 
issuer with at least six months' advance notice that it must comply 
with the domestic issuer forms and rules. This would provide these 
issuers with more time to comply with the reporting requirements 
applicable to domestic issuers under the Exchange Act, and to modify 
their information and processing systems to comply with the domestic 
reporting and registration regime. This includes the requirements to 
comply with the more extensive executive compensation disclosure 
requirements that apply to domestic issuers, as well as the proxy rules 
and Section 16 reporting requirements under the Exchange Act, which do 
not apply to foreign private issuers. Because the proposed amendments 
would provide foreign issuers with advance notice when their status 
changes, more foreign issuers may be encouraged to remain in the U.S. 
markets, and investors should benefit from the increased opportunities 
to invest in foreign securities in the United States.
    The proposed amendments should mitigate a burden on foreign issuers 
by reducing the amount of time and the resources they expend to 
determine their status pursuant to the four-factor test set forth in 
the definition of ``foreign private issuer.'' In this respect, the 
proposed amendments would be most beneficial to reporting foreign 
private issuers that have close to 50% of their outstanding voting 
securities held of record by U.S. residents, since they are most at 
risk of no longer qualifying as foreign private issuers. The current 
requirement that foreign issuers continuously test their status can 
result in confusion for investors if a foreign issuer needs to move 
between foreign and domestic reporting forms in the same fiscal year. 
For example, investors may be confused if a foreign issuer determines 
that it no longer qualifies as a foreign private issuer, and then 
switches from the foreign private issuer forms (Form 6-K and Form 20-F) 
to the domestic forms (e.g., quarterly reports on Form 10-Q) in the 
same fiscal year. The proposed amendments would benefit U.S. investors 
by eliminating this confusion. However, the proposed amendments may not 
be as helpful in reducing investor confusion with respect to foreign 
private issuers that have been reporting under the domestic regime and 
that would now be permitted to switch immediately to the foreign 
private issuer reporting regime upon the determination of their 
eligibility to do so.
    At the same time, foreign issuers that previously did not qualify 
as foreign private issuers, but that determine that they would qualify 
as foreign private issuers, would be able to use the foreign private 
issuer rules and forms immediately under the proposed amendments. This 
accommodation could encourage more foreign issuers to enter the U.S. 
markets and to make public offerings, and should benefit investors by 
enhancing their ability to invest in foreign securities that have been 
registered with the Commission.

[[Page 13420]]

B. Expected Costs
    Investors could incur costs from the proposed amendments if foreign 
issuers that have been reporting under the domestic reporting regime 
immediately switch over to the foreign private issuer forms once they 
qualify as foreign private issuers. Because foreign private issuers 
have different Exchange Act reporting obligations than domestic issuers 
and file on different forms, some investors may find it confusing if a 
foreign issuer that had been reporting under the domestic reporting 
regime switches reporting regimes mid-year. In addition, once a foreign 
issuer switches status from a domestic issuer to a foreign private 
issuer, investors will no longer have the benefit of the disclosures 
that were once provided by the foreign issuer on the domestic forms.
    Currently, when a foreign issuer no longer qualifies as a foreign 
private issuer, it must immediately file quarterly reports on Form 10-Q 
and current reports on Form 8-K. It must also comply with the 
Commission's proxy rules and the Section 16 insider stock trading and 
short-swing profit recovery provisions. Under the proposed amendments, 
when a foreign issuer determines that it no longer qualifies as a 
foreign issuer, for the six months following the test date, the foreign 
issuer would be permitted to continue relying on the rules applicable 
to foreign private issuers, such as the exemption from the proxy rules 
and Section 16. The foreign issuer would also be allowed to use the 
forms reserved for foreign private issuers, and to provide current 
reports on Form 6-K, rather than Exchange Act reports on Forms 10-Q and 
8-K. During that period, investors would not have the benefit of the 
additional disclosures that the foreign issuer would otherwise be 
required to provide.

2. Proposed Amendments to Form 20-F

    The proposed amendments would make several changes to annual 
reports filed on Form 20-F. We are proposing to accelerate the deadline 
for annual reports filed on Form 20-F by foreign private issuers. We 
are also proposing to amend Form 20-F to require certain additional 
disclosures in annual reports on that Form. The proposed amendments 
would require issuers to disclose any changes in and disagreements with 
the registrant's certifying accountant in their Form 20-F annual 
reports, as well as in the Securities Act registration statements filed 
by first-time registrants with the Commission. The proposed amendments 
would also require disclosure of the fees and other charges paid by ADR 
holders to depositaries, and any payments made by depositaries to the 
foreign issuers whose securities underlie the ADRs. In addition, we are 
proposing to amend Form 20-F to require disclosure in the annual report 
about the significant differences in the corporate governance practices 
of listed foreign private issuers compared to the corporate governance 
practices applicable to domestic companies under the relevant 
exchange's listing standards. Another proposed amendment would 
eliminate an instruction to Item 17 of Form 20-F that permits certain 
foreign private issuers to omit segment data from the U.S. GAAP 
financial statements. The proposed amendments to Form 20-F would also 
amend that Form to require foreign private issuers to present 
information about a significant, completed acquisition that is 
significant at the 50% or greater level, calculated based on assets or 
income from continuing operations, in their annual reports on that 
Form.
    In addition to these amendments, we are proposing to eliminate the 
availability of the limited U.S. GAAP reconciliation option that is 
contained in Item 17 of Form 20-F for foreign private issuers that are 
only listing a class of securities on a U.S. national securities 
exchange, or only registering a class of equity securities under 
Section 12(g) of the Exchange Act, and not conducting a public 
offering. The proposed amendments would apply not only to registration 
statements filed on Form 20-F in the circumstances described above, but 
also to annual reports filed on that Form. Related to this proposed 
amendment, we are proposing to eliminate the Item 17 limited 
reconciliation option for certain non-capital raising offerings, such 
as offerings pursuant to dividend reinvestment plans, offerings upon 
the conversion of securities, or offerings of investment grade 
securities. The Securities Act registration statement forms available 
to foreign private issuers (Form F-1, F-3 and F-4) would be amended 
accordingly.
A. Expected Benefits
    We anticipate that the proposed amendments to Form 20-F and the 
related amendments to the Securities Act registration statement forms 
available to foreign private issuers would provide a significant 
benefit to U.S. investors by providing them with enhanced disclosure 
that is more similar to the disclosures provided by domestic issuers, 
as well as disclosure on an accelerated basis that is more comparable 
to the timeframe within which domestic issuers file annual reports. 
Because of the Commission's integrated disclosure system, in which 
approximately the same information is provided in both the primary and 
secondary markets, the disclosure requirements contained in Form 20-F 
are often more comprehensive than the disclosures required by foreign 
securities regulators. For example, although many foreign regulators 
require audited financial statements and a form of management's report 
in annual reports, they do not require disclosure about executive 
compensation, description about the issuer's business, or a 
Management's Discussion and Analysis (MD&A). These additional 
disclosures are required in the Form 20-F annual reports that foreign 
private issuers file with the Commission.
    Based on our analysis of a sample of Form 20-F annual reports filed 
with the Commission in the past few years, we estimate that 
approximately one-third of all such filers currently file Form 20-F 
annual reports with us within 120 days after their fiscal year-end. The 
proposed amendment to accelerate the due date for Form 20-F annual 
reports would thus affect a majority of the foreign private issuers 
that file on Form 20-F. As a result of the accelerated deadline, 
investors may be better able to compare the performance of foreign and 
domestic issuers, since information about both will be provided on a 
more contemporaneous basis.
    The proposed amendments to require additional disclosure in Form 
20-F annual reports should help investors better compare foreign and 
domestic issuers. Currently, domestic issuers provide disclosure about 
changes in and disagreements with their certifying accountant on a Form 
8-K current report. Listed domestic issuers are also required to comply 
with the corporate governance requirements of the U.S. exchange on 
which their securities are listed, although foreign private issuers 
whose securities are listed on the same exchange are exempt. The 
proposed amendments would provide investors with more comparable 
information about foreign private issuers regarding possible audit 
opinion shopping and corporate governance practices.
    The proposed amendments to require disclosure about ADR fees and 
payments made by depositaries to the foreign issuers whose securities 
underlie the ADRs will make this information more readily available to 
investors. The placement of this disclosure in annual reports and Form 
20-F registration statements should

[[Page 13421]]

assist investors in determining the fees related to their investments 
in ADRs, including indirect costs that may be imposed on them if the 
depositary bank passes along the cost of its payments to foreign 
issuers to ADR holders. This should better enable investors to 
determine the value of investing in the ADRs of foreign issuers.
    Several of the proposed amendments to Item 17 of Form 20-F may also 
help ensure that all foreign private issuers provide the same level of 
financial information, thereby facilitating a readier comparison across 
all issuers. This could, as a consequence, increase the attractiveness 
of these companies to investors. For example, the proposed amendments 
would eliminate the availability of the limited U.S. GAAP 
reconciliation option in Item 17 of Form 20-F for annual reports, 
registration statements on Form 20-F that do not involve a public 
offering, and Securities Act registration statements for certain non-
capital raising transactions. Currently, most foreign private issuers 
that provide U.S. GAAP reconciliation disclose financial information 
according to Item 18 of Form 20-F. The proposed amendment would ensure 
that all foreign private issuers provide this level of disclosure. 
Another proposed amendment would eliminate the instruction to Item 17 
of Form 20-F that permits certain foreign private issuers to omit 
segment data from their U.S. GAAP financial statements. Although we 
estimate that less than 10 foreign private issuers use this 
instruction, the instruction creates an anomaly whereby an issuer is 
permitted to provide a qualified U.S. GAAP audit report.
    Investors are also expected to benefit from the proposed amendment 
to require foreign private issuers to present information about a 
highly significant, completed acquisition in their annual reports filed 
on Form 20-F. Currently, foreign private issuers are not required to 
provide any information about such transactions in their periodic 
reports. The proposed amendment would enable investors to receive 
historical financial information about the acquired company, 
information they currently receive from domestic registrants, but not 
from foreign issuers that are acquirers. This information may help 
investors to assess the past performance of the acquired entity and its 
possible effect on the valuation of the acquiring company.
B. Expected Costs
    Foreign private issuers could incur costs from the proposed 
amendments to Form 20-F, and the related amendments to the Securities 
Act registration statements available to foreign private issuers. In 
order to comply with the proposed accelerated due dates, many foreign 
private issuers would likely have to implement new systems for 
preparing information during the transition period to the new rules. 
They could be required to prepare annual reports on a dual track, one 
for the annual report filed with their home country regulator and the 
Form 20-F annual report. According to our analysis of a sample of Form 
20-F annual reports filed with us, approximately one-fifth of all such 
filers file their Form 20-F annual reports within 90 days of their 
fiscal year-end, and approximately one-third file their Form 20-F 
annual reports within 120 days of their fiscal year-end. The cost of 
preparing filings on an accelerated basis may therefore vary among 
issuers. In addition, because of the Commission's integrated disclosure 
system, in which issuers provide approximately the same disclosures to 
both the primary and secondary markets, the disclosures required in 
Form 20-F are more substantial than the information required for annual 
reports in many foreign jurisdictions. The proposed amendments could 
thus result in increased costs for foreign private issuers.
    The proposed amendments to provide additional disclosures in Form 
20-F may also impose additional costs on foreign private issuers. With 
respect to the proposed disclosure regarding ADR fees and payments made 
by depositaries, we note that the information about ADR fees is 
provided in the deposit agreement and form of receipt that are attached 
as exhibits to the Form F-6 used to register the ADRs under the 
Securities Act, as well as in the Securities Act registration statement 
related to the offering of the securities underlying the ADRs. Because 
the information is already required by the Commission, albeit in 
filings that most retail investors are not familiar with, we do not 
believe that the requirement to include this information in the foreign 
private issuer's annual report on Form 20-F would involve significant 
compliance costs.
    In addition, the information about the payments made by 
depositaries to foreign private issuers would provide important new 
information to investors about incentives used by depositaries that may 
encourage foreign private issuers to sell their securities in ADR form 
and with a particular depositary bank. If foreign issuers are reluctant 
to disclose this information, they could be discouraged from entering 
the U.S. markets, or, if they already have established ADR facilities 
in the United States, from maintaining their ADR facilities. This would 
reduce the opportunities for investors to invest in foreign securities 
in the United States.
    Foreign private issuers could incur some costs related to the 
proposal to include information about differences in corporate 
governance practices for listed foreign private issuers. However, the 
U.S. exchanges already require that this information be prepared. For 
foreign private issuers that are listed on U.S. exchanges, the proposed 
amendment would not involve the collection of new information or 
preparation of new disclosure, but would simply require that the 
information also be made available in the annual report, where many 
investors may expect to see it. As a result, we believe the compliance 
costs of this proposed amendment would be relatively small. Under the 
proposed amendments, corporate governance information would not be 
required for issuers that are not listed on a U.S. exchange.
    The proposed amendments to eliminate the availability of the 
limited U.S. GAAP reconciliation contained in Item 17 of Form 20-F, and 
to require segment data in U.S. GAAP financial statements could result 
in costs for the affected foreign private issuers because they would 
now need to collect this information and to prepare additional 
disclosure in their Form 20-F annual reports. However, based on our 
review of Form 20-F annual report filings made with us for fiscal year 
2006, we estimate that most foreign private issuers already provide 
financial information according to Item 18 of Form 20-F, and that less 
than 10 foreign private issuers would be affected by the requirement to 
provide segment data.
    Foreign private issuers would also incur costs in connection with 
the proposal to require disclosure about any changes in and 
disagreements with the registrant's certifying accountant in Form 20-F 
annual reports and in Securities Act registration statements filed by 
first-time registrants. In addition to the preparation costs of 
including this information in the Form 20-F, the foreign private issuer 
could also incur certain costs associated with the proposed requirement 
to obtain a letter from its former accountant stating whether it agrees 
with the disclosure provided by the issuer in the document filed with 
the Commission.
    Foreign private issuers could also incur compliance costs in 
connection with the proposal to require information about a highly 
significant, completed acquisition in annual reports filed on Form 20-
F. These costs would include,

[[Page 13422]]

for example, costs related to the preparation of this information. In 
some cases, this requirement could deter and potentially discourage 
issuers from effectuating certain transactions because of the 
difficulty of obtaining financial information to comply with this 
requirement.
    Investors may incur costs to the extent that the amendments to Form 
20-F discourage foreign private issuers from registering or maintaining 
their registration with the Commission. If foreign private issuers 
deregister or do not register their securities under the Securities Act 
or the Exchange Act, there may be reduced opportunities for investment 
by U.S. investors in the securities of foreign issuers. Although each 
of the proposed amendments would affect a different number of foreign 
private issuers, for purposes of the Paperwork Reduction Act, we 
estimate that these new disclosures would result in an increased 
paperwork burden of 34 hours for all respondents and $9,516,990 for 
Form 20-F.

3. Exchange Act Rule 13e-3

A. Expected Benefits
    We believe that the proposal to amend Exchange Act Rule 13e-3, 
which pertains to going private transactions by reporting issuers or 
their affiliates, to reflect the recently adopted rules pertaining to 
the ability of foreign private issuers to terminate their Exchange Act 
registration and reporting obligations would benefit investors. The 
proposed amendment would help ensure that Rule 13e-3 covered the types 
of transactions that were intended when the Commission first adopted 
the Rule. Investors would benefit because more foreign private issuers 
are expected to be able to terminate their registration and reporting 
obligations under the Exchange Act as a result of these recently 
adopted amendments. If more foreign private issuers decide to conduct 
going private transactions to terminate their registration or reporting 
obligations, the proposed amendment to Rule 13e-3 would require more 
foreign private issuers to comply with that Rule and to file a Schedule 
13E-3, as required by that Rule. Investors would benefit from the 
additional disclosures that would be provided.
B. Expected Costs
    Foreign private issuers may incur additional costs in connection 
with the proposed amendment to Rule 13e-3(a)(3)(ii)(A) if Rule 13e-3 is 
more easily triggered because of the reference to the new termination 
of registration and reporting requirements that apply to foreign 
private issuers. These costs would include, for example, the cost of 
preparing, filing and disseminating a Schedule 13E-3, as well as any 
required amendments to that Schedule, with the Commission.
Comments Solicited
    We solicit comment on the costs and benefits to U.S. and other 
investors, foreign private issuers and others who may be affected by 
the proposed amendments. We request your views on the costs and 
benefits described above, as well as on any other costs and benefits 
that could result from adoption of the proposed amendments. We also 
request data to quantify the costs and value of the benefits 
identified. In particular, we solicit comment on:
     The number of current foreign private issuers that are 
expected to be affected by the proposed amendments;
     The estimated U.S dollar cost to foreign issuers as a 
result of the proposed amendment to accelerate the due date for filing 
Form 20-F annual reports;
     The number of current foreign issuers who do not already 
provide financial information according to Item 18 of Form 20-F; and
     How investors would be affected both directly and 
indirectly from the proposed amendments, as discussed in this section.

VII. Consideration of Impact on the Economy, Burden on Competition, and 
Promotion of Efficiency, Competition, and Capital Formation

    For purposes of the Small Business Regulatory Enforcement Fairness 
Act of 1996 (``SBREFA''),\123\ we solicit data to determine whether the 
proposals constitute a ``major'' rule. Under SBREFA, a rule is 
considered ``major'' where, if adopted, it results or is likely to 
result in: an annual effect on the economy of $100 million or more 
(either in the form of an increase or a decrease); a major increase in 
costs or prices for consumers or individual industries; or significant 
adverse effects on competition, investment or innovation. We request 
comment on the potential impact of the proposals on the economy on an 
annual basis. Commenters are requested to provide empirical data and 
other factual support for their views if possible.
---------------------------------------------------------------------------

    \123\ Pub. L. 104-121, Title II, 110 Stat. 857 (1996) (codified 
in various sections of 5 U.S.C., 15 U.S.C. and as a note to 5 U.S.C. 
601).
---------------------------------------------------------------------------

    Section 2(b) of the Securities Act \124\ and Section 3(f) of the 
Exchange Act \125\ require us, when engaging in rulemaking that 
requires us to consider or determine whether an action is necessary or 
appropriate in the public interest, to consider whether the action will 
promote efficiency, competition, and capital formation. When adopting 
rules under the Exchange Act, Section 23(a)(2) of the Exchange Act 
\126\ requires us to consider the impact that any new rule would have 
on competition. In addition, Section 23(a)(2) prohibits us from 
adopting any rule that would impose a burden on competition not 
necessary or appropriate in furtherance of the purposes of the Exchange 
Act.
---------------------------------------------------------------------------

    \124\ 15 U.S.C. 77b(b).
    \125\ 15 U.S.C. 78c(f).
    \126\ 15 U.S.C. 78w(a)(2).
---------------------------------------------------------------------------

    The purpose of the proposed amendments to Securities Act Rule 405 
and Exchange Act Rule 3b-4, which would permit foreign issuers to 
assess their eligibility to use the special forms and rules available 
to foreign private issuers once a year, are expected to facilitate 
capital formation by foreign issuers in the U.S. capital markets. The 
proposed amendments should reduce regulatory compliance burdens for 
foreign private issuers that rely on the proposed amendments because of 
the reduction in monitoring costs. Reduced compliance burdens are 
expected to lower the cost of raising capital in the Unites States for 
those issuers. In addition, the competitiveness of the U.S. markets may 
be enhanced because the reduced monitoring costs may make the markets 
more attractive to them. The reduction in compliance burdens may also 
promote efficiency because foreign issuers would no longer need to 
continuously test their qualification as foreign private issuers.
    The proposed amendments to Form 20-F would accelerate the reporting 
deadline for annual reports on Form 20-F. The proposed amendments to 
Exchange Act Rules 13a-10 and 15d-10 would conform the due dates for 
transition reports filed on Form 20-F with the proposed due dates for 
annual reports on Form 20-F. Several of the proposed amendments to Form 
20-F would require more disclosure in the annual reports filed by 
foreign private issuers. The disclosures required would include 
information about any changes in and disagreements with the 
registrant's certifying accountant, ADR fees and payments made by 
depositaries to the foreign issuers whose securities underlie the ADR, 
information about corporate governance, and information about highly 
significant, completed acquisitions. In addition, the proposed 
amendments would eliminate the availability of the limited U.S. GAAP 
reconciliation option contained in Item 17 of Form 20-F, and would 
eliminate

[[Page 13423]]

an instruction to Item 17 of that Form, which permits certain foreign 
private issuers to omit segment data from their U.S. GAAP financial 
statements.
    These proposed amendments would create a more level playing field 
between foreign private issuers and U.S. issuers because they would 
require disclosures from foreign private issuers that are currently 
required of domestic issuers. Foreign private issuers that file annual 
reports on Form 20-F would also be required to provide these annual 
reports in a timeframe that is closer to the annual report due dates 
imposed on domestic issuers. As a result, the proposed amendments 
should put foreign private issuers and domestic issuers in a more 
similar position with respect to their compliance obligations under the 
Commission's regulations, although the incremental costs of complying 
with these proposed amendments may also create a disincentive for some 
foreign private issuers to enter the U.S. capital markets.
    The proposed amendments may also facilitate capital formation by 
foreign companies in the U.S. capital markets by enabling investors to 
obtain more information about these companies in a timeframe that would 
make the information useful to them and in a manner that would allow 
for greater comparability to domestic issuers. This could affect the 
allocation of capital between foreign private issuers and domestic 
issuers.
    The proposed amendments to Exchange Act Rule 13e-3, which reflect 
the newly adopted rules pertaining to the termination and 
deregistration of the reporting obligations of foreign private issuers, 
could require more foreign private issuers to comply with that Rule and 
to file a Schedule 13E-3 as a result if more foreign private issuers 
decide to conduct going private transactions to terminate their 
registration and reporting obligations. This additional compliance 
obligation could create a disincentive for foreign private issuers to 
enter the U.S. markets.
    We solicit comment on whether the proposed rules would impose a 
burden on competition or whether they would promote efficiency, 
competition and capital formation. For example, would the proposals 
have an adverse effect on competition that is neither necessary nor 
appropriate in furtherance of the purposes of the Exchange Act? Would 
the proposals create an adverse competitive effect on U.S. issuers or 
on foreign issuers? Commenters are requested to provide empirical data 
and other factual support for their views if possible.

VIII. Regulatory Flexibility Act Certification

    The Commission hereby certifies, pursuant to 5 U.S.C. 605(b), that 
the amendments to Rule 405 of Regulation C, Form F-1, Form F-3, and 
Form F-4 under the Securities Act, and Form 20-F, Rule 3b-4, Rule 13a-
10, Rule 13e-3 and Rule 15d-10 under the Exchange Act contained in this 
release, if adopted, would not have a significant economic impact on a 
substantial number of small entities. The proposed amendments would: 
(1) Amend Rule 405 of Regulation C under the Securities Act to permit 
foreign issuers to test their qualification to use the forms and rules 
available to foreign private issuers on an annual basis, rather than on 
the continuous basis that is currently required; (2) Amend Form 20-F to 
accelerate the filing deadline for annual reports filed by foreign 
private issuers on Form 20-F, subject to a two-year transition period, 
and amend Exchange Act Rules 13a-10 and 15d-10 so that the deadline for 
transition reports filed by foreign private issuers on Form 20-F is the 
same as the deadline for annual reports filed on Form 20-F; (3) Amend 
Form 20-F by eliminating an instruction to Item 17 of that Form, which 
permits certain foreign private issuers to omit segment data from their 
U.S. GAAP financial statements; (4) Amend Rule 13e-3, which pertains to 
going private transactions by reporting issuers or their affiliate, to 
reflect the recently adopted rules pertaining to the ability of foreign 
private issuers to terminate their Exchange Act registration and 
reporting obligations; (5) Amend Form 20-F and Forms F-1, F-3 and F-4 
to require foreign private issuers that are required to provide a U.S. 
GAAP reconciliation to do so pursuant to Item 18 of Form 20-F; (6) 
Amend Form 20-F to require foreign private issuers to disclose 
information about a change in the issuer's certifying accountant, the 
fees and charges paid by ADR holders, the payments made by the 
depositary to the foreign issuer whose securities underlie the ADRs, 
and for listed issuers, the differences in the foreign private issuer's 
corporate governance practices and those applicable to domestic 
companies under the relevant exchange's listing rules; and (7) Amend 
Form 20-F to require foreign private issuers to provide certain 
financial information in their annual reports on Form 20-F about a 
significant, completed acquisition that is significant at the 50% or 
greater level when that acquisition is completed after the issuer's 
first fiscal quarter.
    Based on an analysis of the language and legislative history of the 
Regulatory Flexibility Act, Congress does not appear to have intended 
the Act to apply to foreign issuers. The entities directly affected by 
the proposed amendments will fall outside the scope of the Act. For 
this reason, the proposed amendments should not have a significant 
economic impact on a substantial number of small entities.
    We solicit written comments regarding this certification. We 
request that commenters describe the nature of any impact on small 
entities and provide empirical data to support the extent of the 
impact.

IX. Statutory Authority and Text of the Proposed Amendments

    We are proposing amendments to the rules and forms pursuant to the 
authority set forth in Sections 6, 7, 10 and 19 of the Securities Act, 
as amended, and Sections 3, 12, 13, 15, 23 and 36 of the Exchange Act, 
as amended.

List of Subjects in 17 CFR Parts 230, 239, 240 and 249

    Reporting and recordkeeping requirements, Securities.

Text of the Proposed Amendments

    For the reasons set out in the preamble, the Commission proposes to 
amend Title 17, Chapter II of the Code of Federal Regulations as 
follows:

PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

    1. The authority citation for Part 230 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77b, 77c, 77d, 77f, 77g, 77h, 77j, 77r, 
77s, 77z-3, 77sss, 78c, 78d, 78j, 78l, 78m, 78n, 78o, 78t, 78w, 
78ll(d), 78mm, 80a-8, 80a-24, 80a-28, 80a-29, 80a-30, and 80a-37, 
unless otherwise noted.
* * * * *
    2. Section 230.405 is amended by revising the definition of 
``foreign private issuer'' to read as follows:


Sec.  230.405  Definition of terms.

* * * * *
    Foreign private issuer. (1) The term foreign private issuer means 
any foreign issuer other than a foreign government except an issuer 
meeting the following conditions as of the last business day of its 
most recently completed second fiscal quarter:
    (i) More than 50 percent of the outstanding voting securities of 
such issuer are directly or indirectly owned of record by residents of 
the United States; and
    (ii) Any of the following:

[[Page 13424]]

    (A) The majority of the executive officers or directors are United 
States citizens or residents;
    (B) More than 50 percent of the assets of the issuer are located in 
the United States; or
    (C) The business of the issuer is administered principally in the 
United States.
    (2) In the case of a new registrant with the Commission, the 
determination of whether an issuer is a foreign private issuer shall be 
made as of a date within 30 days prior to the issuer's filing of an 
initial registration statement under either the Act or the Securities 
Exchange Act of 1934.
    (3) Once an issuer qualifies as a foreign private issuer, it will 
immediately be able to use the forms and rules designated for foreign 
private issuers until it fails to qualify for this status at the end of 
its most recently completed second fiscal quarter. An issuer's 
determination that it fails to qualify as a foreign private issuer 
governs its eligibility to use the forms and rules designated for 
foreign private issuers beginning on the first day of the fiscal year 
following the determination date. Once an issuer fails to qualify for 
foreign private issuer status, it will remain unqualified unless it 
meets the requirements for foreign private issuer status as of the last 
business day of its second fiscal quarter.
* * * * *

PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933

    3. The authority citation for part 239 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3, 
77sss, 78c, 78l, 78m, 78n, 78o(d), 78u-5, 78w(a), 78ll, 78mm, 80a-
2(a), 80a-3, 80a-8, 80a-9, 80a-10, 80a-13, 80a-24, 80a-26, 80a-29, 
80a-30, and 80a-37, unless otherwise noted.
* * * * *
    4. Form F-1 (referenced in Sec.  239.31) is amended by revising 
paragraph (c) and Instruction 2 to Item 4 of Part I and removing the 
Instruction to Item 4A of Part I. The revisions read as follows:

    Note: The text of Form F-1 does not, and the amendments thereto 
will not, appear in the Code of Federal Regulations.

Form F-1--Registration Statement Under the Securities Act of 1933

* * * * *

Part I

* * * * *

Item 4. Information With Respect to the Registrant and the Offering

    Furnish the following information with respect to the Registrant.
* * * * *
    (c) Information required by Item 16F of Form 20-F.
* * * * *

Instructions

* * * * *
    2. You do not have to provide the information required by Item 4(c) 
if you are required to file reports under sections 13(a) or 15(d) of 
the Exchange Act.
* * * * *
    5. Form F-3 (referenced in Sec.  239.33) is amended by:
    a. In General Instruction I.B.2., removing the phrase ``may comply 
with Item 17 or 18'' in the last sentence and adding in its place 
``must comply with Item 18'';
    b. In General Instruction I.B.3., removing the phrase ``may comply 
with Item 17 or 18'' in the first sentence and adding in its place 
``must comply with Item 18'';
    c. In General Instruction I.B.4., removing the phrase ``may comply 
with Item 17 or 18'' in the second sentence and adding in its place `` 
must comply with Item 18''; and
    d. Revising the Instruction to Item 5 to read as follows:

    Note: The text of Form F-3 does not, and the amendments thereto 
will not, appear in the Code of Federal Regulations.

Form F-3--Registration Statement Under the Securities Act of 1933

* * * * *

Item 5. Material Changes

* * * * *
    Instruction. Financial statements or information required to be 
furnished by this Item shall be reconciled pursuant to Item 18 of Form 
20-F.
* * * * *
    6. Form F-4 (referenced in Sec.  239.34) is amended by:
    a. Revising Instruction 1 to Item 11;
    b. Revising Item 12(b)(2) introductory text and Item 12(b)(3)(vii);
    c. In Item 12(b)(3)(viii), removing the period and adding in its 
place ``; and'' and adding Item 12(b)(3)(ix);
    d. Adding an Instruction to Item 12;
    e. Revising Instruction 1 to Item 13;
    f. Revising Item 14(h);
    g. In Item 14(i), removing the period and adding in its place ``; 
and'';
    h. Adding Item 14(j);
    i. Adding ``1'' before the existing instruction for Instructions to 
Item 14 and adding an Instruction 2; and
    j. In Item 17(b)(5)(ii), removing the period and adding in its 
place ``; and'' and adding Item 17(b)(6).
    The revisions and additions read as follows:

    Note: The text of Form F-4 does not, and the amendments thereto 
will not, appear in the Code of Federal Regulations.

Form F-4--Registration Statement Under the Securities Act of 1933

* * * * *

Item 11. Incorporation of Certain Information by Reference

* * * * *

Instructions

    1. All annual reports or registration statements incorporated by 
reference pursuant to Item 11 of this Form shall contain financial 
statements that comply with Item 18 of Form 20-F.
* * * * *

Item 12. Information With Respect to F-3 Registrants

* * * * *
    (b) * * *
    (2) Include financial statements and information as required by 
Item 18 of Form 20-F. In addition, provide:
    (3) * * *
    (vii) Financial statements required by Item 18 of Form 20-F, and 
financial information required by Rule 3-05 and Article 11 of 
Regulation S-X with respect to transactions other than that pursuant to 
which the securities being registered are to be issued. (Schedules 
required under Regulation S-X shall be filed as ``Financial Statement 
Schedules'' pursuant to Item 21 of this Form, but need not be provided 
with respect to the company being acquired if information is being 
furnished pursuant to Item 17(a) of this Form);
* * * * *
    (ix) Item 16F of Form 20-F, change in registrant's certifying 
accountant.

Instruction

    You do not have to provide the information required by Item 
12(b)(3)(ix) if you are required to file reports under sections 13(a) 
or 15(d) of the Exchange Act.
* * * * *

Item 13. Incorporation of Certain Information by Reference

* * * * *

Instructions

    1. All annual reports incorporated by reference pursuant to Item 13 
of this Form shall contain financial statements

[[Page 13425]]

that comply with Item 18 of Form 20-F.
* * * * *

Item 14. Information With Respect to Foreign Registrants Other Than F-3 
Registrants

* * * * *
    (a) * * *
    (h) Financial statements required by Item 18 of Form 20-F, as well 
as financial information required by Rule 3-05 and Article 11 of 
Regulation S-X with respect to transactions other than that pursuant to 
which the securities being registered are to be issued. (Schedules 
required by Regulation S-X shall be filed as ``Financial Statement 
Schedules'' pursuant to Item 21 of this Form);
* * * * *
    (j) Item 16F of Form 20-F, change in registrant's certifying 
accountant.

Instructions

    1. * * *
    2. You do not have to provide the information required by Item 
14(j) if you are required to file reports under sections 13(a) or 15(d) 
of the Exchange Act.
* * * * *

Item 17. Information With Respect to Foreign Companies Other Than F-3 
Companies

* * * * *
    (b) * * *
    (6) Item 16F(b) of Form 20-F, change in registrant's certifying 
accountant.
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

    7. The authority citation for Part 240 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 
78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 
80b-11, and 7201 et seq., and 18 U.S.C. 1350, unless otherwise 
noted.
* * * * *
    8. Section 240.3b-4 is amended by revising paragraph (c) and adding 
paragraphs (d) and (e) to read as follows:


Sec.  240.3b-4  Definition of ``foreign government'', ``foreign 
issuer'' and ``foreign private issuer''.

* * * * *
    (c) The term ``foreign private issuer'' means any foreign issuer 
other than a foreign government except for an issuer meeting the 
following conditions as of the last business day of its most recently 
completed second fiscal quarter:
* * * * *
    (d) Notwithstanding paragraph (c) of this part, in the case of a 
new registrant with the Commission, the determination of whether an 
issuer is a foreign private issuer will be made as of a date within 30 
days prior to the issuer's filing of an initial registration statement 
under either the Act or the Securities Act of 1933.
    (e) Once an issuer qualifies as a foreign private issuer, it will 
immediately be able to use the forms and rules designated for foreign 
private issuers until it fails to qualify for this status at the end of 
its most recently completed second fiscal quarter. An issuer's 
determination that it fails to qualify as a foreign private issuer 
governs its eligibility to use the forms and rules designated for 
foreign private issuers beginning on the first day of the fiscal year 
following the determination date. Once an issuer fails to qualify for 
foreign private issuer status, it will remain unqualified unless it 
meets the requirements for foreign private issuer status as of the last 
business day of its second fiscal quarter.
    9. Section 240.13a-10 is amended by revising paragraph (g)(3) to 
read as follows:


Sec.  240.13a-10  Transition reports.

* * * * *
    (g) * * *
    (3) The report for the transition period shall be filed on Form 20-
F responding to all items to which such issuer is required to respond 
when Form 20-F is used as an annual report. The financial statements 
for the transition period filed therewith shall be audited. The 
transition report shall be filed as follows:
    (i) For large accelerated filers and accelerated filers (as defined 
in Sec.  240.12b-2), within 90 days after either the close of the 
transition period or the date on which the issuer made the 
determination to change the fiscal closing date, whichever is later, 
for fiscal years ending on or after December 15, 2010; and
    (ii) For all other issuers, within 120 days after either the close 
of the transition period or the date on which the issuer made the 
determination to change the fiscal closing date, whichever is later, 
for fiscal years ending on or after December 15, 2010.
* * * * *
    10. Section 240.13e-3 is amended by revising paragraph 
(a)(3)(ii)(A) to read as follows:


Sec.  240.13e-3  Going private transactions by certain issuers or their 
affiliates.

    (a) * * *
    (3) * * *
    (ii) * * *
    (A) Causing any class of equity securities of the issuer which is 
subject to section 12(b) or section 15(d) of the Act to become eligible 
for termination of registration under Rule 12g-4 [Sec.  240.12g-4] or 
Rule 12h-6 [Sec.  240.12h-6], or causing the reporting obligations with 
respect to such class to become eligible for termination under Rule 
12h-6 [Sec.  240.12h-6]; or
* * * * *
    11. Section 240.15d-10 is amended by revising paragraph (g)(3) to 
read as follows:


Sec.  240.15d-10  Transition reports.

* * * * *
    (g) * * *
    (3) The report for the transition period shall be filed on Form 20-
F responding to all items to which such issuer is required to respond 
when Form 20-F is used as an annual report. The financial statements 
for the transition period filed therewith shall be audited. The 
transition report shall be filed as follows:
    (i) For large accelerated filers and accelerated filers (as defined 
in Sec.  240.12b-2), within 90 days after either the close of the 
transition period or the date on which the issuer made the 
determination to change the fiscal closing date, whichever is later, 
for fiscal years ending on or after December 15, 2010; and
    (ii) For all other issuers, within 120 days after either the close 
of the transition period or the date on which the issuer made the 
determination to change the fiscal closing date, whichever is later, 
for fiscal years ending on or after December 15, 2010.
* * * * *

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

    12. The authority citation for part 249 continues to read in part 
as follows:

    Authority: 15 U.S.C. 78a et seq., 7202, 7233, 7241, 7262, 7264, 
and 7265; and 18 U.S.C. 1350, unless otherwise noted.
* * * * *
    13. Form 20-F (referenced in Sec.  249.220f) is amended by:
    a. Revising General Instructions A.(b) and E.(c);
    b. Revising Items 12.D and 12.D.3, and Instruction 1 to Item 12;
    c. Adding Item 16F and Instructions to Item 16F;
    d. Adding Item 16G and an Instruction to Item 16G;

[[Page 13426]]

    e. Revising Item 17(a);
    f. Removing Instruction 3 to Item 17, and redesignating 
Instructions 4, 5 and 6 as 3, 4 and 5; and
    g. Revising the Instruction to Item 18.
    The additions and revisions read as follows:

    Note: The text of Form 20-F does not, and the amendments thereto 
will not, appear in the Code of Federal Regulations.

]Form 20-F

* * * * *

General Instructions

A. Who May Use Form 20-F and When It Must Be Filed
* * * * *
    (b) A foreign private issuer must file its annual report on this 
Form within the following period:
    (1) For large accelerated filers and accelerated filers (as defined 
in Sec.  240.12b-2), within 90 days after the end of the fiscal year 
covered by the report for fiscal years ending on or after December 15, 
2010; and
    (2) For all other issuers, within 120 days after the end of the 
fiscal year covered by the report for fiscal years ending on or after 
December 15, 2010.
* * * * *
E. Which Items To Respond to in Registration Statements and Annual 
Reports
    (a) * * *
    (c) Financial Statements. An Exchange Act registration statement or 
annual report filed on this Form must contain the financial statements 
and related information specified in Item 18 of this Form. Note that 
Items 17 and 18 may require you to file the financial statements of 
other entities in certain circumstances. These circumstances are 
described in Regulation S-X.
* * * * *

Item 12. Description of Securities Other Than Equity Securities

* * * * *
    D. American Depositary Shares. If you are registering securities 
represented by American depositary receipts in a sponsored facility, 
provide the following information.
* * * * *
    3. Describe all fees and charges that a holder of American 
depositary receipts may have to pay, either directly or indirectly. 
Indicate the type of service, the amount of the fees or charges and to 
whom the fees or charges are paid. In particular, provide information 
about any fees or charges in connection with (a) depositing or 
substituting the underlying shares; (b) receiving or distributing 
dividends; (c) selling or exercising rights; (d) withdrawing an 
underlying security; (e) transferring, splitting or grouping receipts; 
and (f) general depositary services, particularly those charged on an 
annual basis.
    In addition, describe all fees and other direct and indirect 
payments made by the depositary to the foreign issuer of the deposited 
securities.
    Instructions to Item 12:
    1. Except for Item 12.D.3., you do not need to provide the 
information called for by this item if you are using this form as an 
annual report.
* * * * *

Item 16F. Change in Registrant's Certifying Accountant

    (a)(1) If during the registrant's two most recent fiscal years or 
any subsequent interim period, an independent accountant who was 
previously engaged as the principal accountant to audit the 
registrant's financial statements, or an independent accountant who was 
previously engaged to audit a significant subsidiary and on whom the 
principal accountant expressed reliance in its report, has resigned (or 
indicated it has declined to stand for re-election after the completion 
of the current audit) or was dismissed, then the registrant shall:
    (i) State whether the former accountant resigned, declined to stand 
for re-election or was dismissed and the date thereof.
    (ii) State whether the principal accountant's report on the 
financial statements for either of the past two years contained an 
adverse opinion or a disclaimer of opinion, or was qualified or 
modified as to uncertainty, audit scope, or accounting principles; and 
also describe the nature of each such adverse opinion, disclaimer of 
opinion, modification, or qualification.
    (iii) State whether the decision to change accountants was 
recommended or approved by:
    (A) Any audit or similar committee of the board of directors, if 
the issuer has such a committee; or
    (B) The board of directors, if the issuer has no such committee.
    (iv) State whether during the registrant's two most recent fiscal 
years and any subsequent interim period preceding such resignation, 
declination or dismissal there were any disagreements with the former 
accountant on any matter of accounting principles or practices, 
financial statement disclosure, or auditing scope or procedure, which 
disagreement(s), if not resolved to the satisfaction of the former 
accountant, would have caused it to make reference to the subject 
matter of the disagreement(s) in connection with its report. Also,
    (A) describe each such disagreement;
    (B) state whether any audit or similar committee of the board of 
directors, or the board of directors, discussed the subject matter of 
each of such disagreements with the former accountant; and
    (C) state whether the registrant has authorized the former 
accountant to respond fully to the inquiries of the successor 
accountant concerning the subject matter of each of such disagreements 
and, if not, describe the nature of any limitation thereon and the 
reason therefore.
    The disagreements required to be reported in response to this Item 
include both those resolved to the former accountant's satisfaction and 
those not resolved to the former accountant's satisfaction. 
Disagreements contemplated by this Item are those that occur at the 
decision-making level, i.e., between personnel of the registrant 
responsible for presentation of its financial statements and personnel 
of the accounting firm responsible for rendering its report.
    (v) Provide the information required by paragraph (a)(1)(iv) of 
this Item for each of the kinds of events (even though the registrant 
and the former accountant did not express a difference of opinion 
regarding the event) listed in paragraphs (a)(1)(v)(A) through (D) of 
this section, that occurred within the registrant's two most recent 
fiscal years and any subsequent interim period preceding the former 
accountant's resignation, declination to stand for re-election, or 
dismissal (``reportable events''). If the event led to a disagreement 
or difference of opinion, then the event should be reported as a 
disagreement under paragraph (a)(1)(iv) and need not be repeated under 
this paragraph.
    (A) The accountant's having advised the registrant that the 
internal controls necessary for the registrant to develop reliable 
financial statements do not exist;
    (B) The accountant's having advised the registrant that information 
has come to the accountant's attention that has led it to no longer be 
able to rely on management's representations, or that has made it 
unwilling to be associated with the financial statements prepared by 
management;
    (C)(1) The accountant's having advised the registrant of the need 
to expand significantly the scope of its audit, or that information has 
come to the accountant's attention during the time period covered by 
Item

[[Page 13427]]

16F(a)(1)(iv), that if further investigated may:
    (i) Materially impact the fairness or reliability of either: a 
previously issued audit report or the underlying financial statements; 
or the financial statements issued or to be issued covering the fiscal 
period(s) subsequent to the date of the most recent financial 
statements covered by an audit report (including information that may 
prevent it from rendering an unqualified audit report on those 
financial statements); or
    (ii) Cause it to be unwilling to rely on management's 
representations or be associated with the registrant's financial 
statements; and
    (2) Due to the accountant's resignation (due to audit scope 
limitations or otherwise) or dismissal, or for any other reason, the 
accountant did not so expand the scope of its audit or conduct such 
further investigation; or
    (D)(1) The accountant's having advised the registrant that 
information has come to the accountant's attention that it has 
concluded materially impacts the fairness or reliability of either (i) 
a previously issued audit report or the underlying financial 
statements, or (ii) the financial statements issued or to be issued 
covering the fiscal period(s) subsequent to the date of the most recent 
financial statements covered by an audit report (including information 
that, unless resolved to the accountant's satisfaction, would prevent 
it from rendering an unqualified audit report on those financial 
statements); and
    (2) Due to the accountant's resignation, dismissal or declination 
to stand for re-election, or for any other reason, the issue has not 
been resolved to the accountant's satisfaction prior to its 
resignation, dismissal or declination to stand for re-election.
    (2) If during the registrant's two most recent fiscal years or any 
subsequent interim period, a new independent accountant has been 
engaged as either the principal accountant to audit the registrant's 
financial statements, or as an independent accountant to audit a 
significant subsidiary and on whom the principal accountant is expected 
to express reliance in its report, then the registrant shall identify 
the newly engaged accountant and indicate the date of such accountant's 
engagement. In addition, if during the registrant's two most recent 
fiscal years, and any subsequent interim period prior to engaging that 
accountant, the registrant (or someone on its behalf) consulted the 
newly engaged accountant regarding:
    (i) Either: The application of accounting principles to a specified 
transaction, either completed or proposed; or the type of audit opinion 
that might be rendered on the registrant's financial statements, and 
either a written report was provided to the registrant or oral advice 
was provided that the new accountant concluded was an important factor 
considered by the registrant in reaching a decision as to the 
accounting, auditing or financial reporting issue; or
    (ii) Any matter that was either the subject of a disagreement (as 
defined in Item 16F(a)(1)(iv) and the related instructions to this 
Item) or a reportable event (as described in Item 16F(a)(1)(v), then 
the registrant shall:
    (A) So state and identify the issues that were the subjects of 
those consultations;
    (B) Briefly describe the views of the newly engaged accountant as 
expressed orally or in writing to the registrant on each such issue 
and, if written views were received by the registrant, file them as an 
exhibit to the annual report requiring compliance with this Item 
16F(a);
    (C) State whether the former accountant was consulted by the 
registrant regarding any such issues, and if so, provide a summary of 
the former accountant's views; and
    (D) Request the newly engaged accountant to review the disclosure 
required by this Item 16F(a) before it is filed with the Commission and 
provide the new accountant the opportunity to furnish the registrant 
with a letter addressed to the Commission containing any new 
information, clarification of the registrant's expression of its views, 
or the respects in which it does not agree with the statements made by 
the registrant in response to Item 16F(a). The registrant shall file 
any such letter as an exhibit to the annual report containing the 
disclosure required by this Item.
    (3) The registrant shall provide the former accountant with a copy 
of the disclosures it is making in response to this Item 16F(a). The 
registrant shall request the former accountant to furnish the 
registrant with a letter addressed to the Commission stating whether it 
agrees with the statements made by the registrant in response to this 
Item 16F(a) and, if not, stating the respects in which it does not 
agree. The registrant shall file the former accountant's letter as an 
exhibit to the annual report or registration statement containing this 
disclosure. If the former accountant's letter is unavailable at the 
time that the registration statement is filed, then the registrant 
shall request the former accountant to provide the letter as promptly 
as possible so that the registrant can file the letter with the 
Commission within ten business days after the filing of the 
registration statement. If the change in accountants occurred less than 
30 days prior to the filing of the annual report and the former 
accountant's letter is unavailable at the time that the annual report 
is filed, then the registrant shall request the former accountant to 
provide the letter as promptly as possible so that the registrant can 
file the letter with the Commission within ten business days after the 
filing of the annual report. In either case, the former accountant may 
provide the registrant with an interim letter highlighting specific 
areas of concern and indicating that a more detailed letter will be 
forthcoming. If not filed with the annual report or registration 
statement containing the registrant's disclosure under this Item 
16F(a), then the interim letter, if any, shall be filed by the 
registrant by amendment promptly.
    (b) If: (1) In connection with a change in accountants subject to 
paragraph (a) of this Item 16F, there was any disagreement of the type 
described in paragraph (a)(1)(iv) or any reportable event as described 
in paragraph (a)(1)(v) of this Item;
    (2) During the fiscal year in which the change in accountants took 
place or during the subsequent fiscal year, there have been any 
transactions or events similar to those which involved such 
disagreement or reportable event; and
    (3) Such transactions or events were material and were accounted 
for or disclosed in a manner different from that which the former 
accountants apparently would have concluded was required, the 
registrant shall state the existence and nature of the disagreement or 
reportable event and also state the effect on the financial statements 
if the method had been followed which the former accountants apparently 
would have concluded was required.
    These disclosures need not be made if the method asserted by the 
former accountants ceases to be generally accepted because of 
authoritative standards or interpretations subsequently issued.
    Instructions to Item 16F:
    1. If you are filing Form 20-F as a registration statement under 
the Exchange Act, you do not have to provide the information required 
by Item 16F if you are already required to file reports under sections 
13(a) or 15(d) of the Exchange Act. Item 16F applies to all annual 
reports filed on Form 20-F.
    2. The disclosure called for by paragraph (a) of this Item need not 
be provided if it has been previously reported, as that term is defined 
in Rule

[[Page 13428]]

12b-2 under the Exchange Act (Sec.  240.12b-2 of this chapter). The 
disclosure called for by paragraph (b) of this Item must be furnished, 
where required, notwithstanding any prior disclosure about accountant 
changes or disagreements.
    3. The information required by paragraph (a) of this Item need not 
be provided for a company being acquired by the registrant in a 
transaction being registered on Form F-4 that is not subject to the 
filing requirements of either section 13(a) or 15(d) of the Exchange 
Act.
    4. The term ``disagreements'' as used in this Item shall be 
interpreted broadly to include any difference of opinion concerning any 
matter of accounting principles or practices, financial statement 
disclosure, or auditing scope or procedure which (if not resolved to 
the satisfaction of the former accountant) would have caused it to make 
reference to the subject matter of the disagreement in connection with 
its report. It is not necessary for there to have been an argument to 
have had a disagreement, merely a difference of opinion. For purposes 
of this Item, however, the term ``disagreements'' does not include 
initial differences of opinion based on incomplete facts or preliminary 
information that were later resolved to the former accountant's 
satisfaction by, and providing the registrant and the accountant do not 
continue to have a difference of opinion upon, obtaining additional 
relevant facts or information.
    5. In determining whether any disagreement or reportable event has 
occurred, an oral communication from the engagement partner or another 
person responsible for rendering the accounting firm's opinion (or his/
her designee) will generally suffice as the accountant advising the 
registrant of a reportable event or as a statement of a disagreement at 
the ``decision-making level'' within the accounting firm and require 
disclosure under this Item.
    6. The term ``board of directors'' as used in this Item 16F has the 
meaning set forth in Sec.  240.10A-3(e)(2).

Item 16G. Corporate Governance

    If the registrant's securities are listed on a national securities 
exchange, provide a concise summary of any significant ways in which 
its corporate governance practices differ from those followed by 
domestic companies under the corporate governance standards of that 
exchange.
    Instruction to Item 16G:
    Item 16G only applies to annual reports, and not to registration 
statements on Form 20-F. Registrants should provide a brief and general 
discussion, rather than a detailed, item-by-item analysis.
* * * * *

Item 17. Financial Statements

    (a) The registrant shall furnish financial statements for the same 
fiscal years and accountants' certificates that would be required to be 
furnished if the registration statement were on Form 10 or the annual 
report on Form 10-K. In addition, in an annual report the registrant 
shall furnish the information required by Rule 3-05, for the periods 
required by Rule 3-05(b)(2)(iv), and Article 11 of Regulation S-X 
(Sec.  210.3-05 and Sec.  210.11 et seq. of this chapter) for any 
acquisition completed during the most recent fiscal year covered by the 
Form 20-F that is significant under the definition in Rule 1-02(w) of 
Regulation S-X (Sec.  210.1-02(w) of this chapter), substituting 50 
percent for 10 percent. However, the information required by Rule 3-05 
and Article 11 of Regulation S-X is not required in an annual report 
filed on Form 20-F if the information has already been provided 
previously in a registration statement. In an annual report, the 
registrant does not need to provide Rule 3-05 and Article 11 of 
Regulation S-X information for probable acquisitions, and does not need 
to provide Rule 3-05 and Article 11 of Regulation S-X information for 
the aggregation of individually insignificant acquisitions. Schedules 
designated by Sec. Sec.  210.12-04, 210.12-09, 210.12-15, 210.12-16, 
210.12-17, 210.12-18, 210.12-28, and 210.12-29 of this chapter shall 
also be furnished if applicable to the registrant.
* * * * *

Item 18. Financial Statements

* * * * *
    Instruction to Item 18:
    All of the instructions to Item 17 also apply to this Item.
* * * * *

    Dated: February 29, 2008.

    By the Commission.
Nancy M. Morris,
Secretary.
 [FR Doc. E8-4366 Filed 3-11-08; 8:45 am]
BILLING CODE 8011-01-P