16934 Federal Register / Vol. 72, No. 65 / Thursday, April 5, 2007 / Rules and Regulations 

1 17 CFR 200.30–1. 

2 17 CFR 232.101. 

3 17 CFR 232.10 et seq. 

4 17 CFR 240.12g3–2, 240.12g–4 and 240.12h–3. 

5 15 U.S.C. 78a et seq. 

6 17 CFR 240.12h–6. 

7 17 CFR 249.324. 

8See the definition of foreign private issuer at 

Exchange Act Rule 3b–4(c) (17 CFR 240.3b–4(c)). 

9Release No. 34–53020 (December 23, 2005), 70 

FR 77688 (December 30, 2005) (Original Proposing 

Release). 

10This statutory section applies to equity 

securities only. See Exchange Act Section 12(g)(1) 

[15 U.S.C. 78l (g)(1)]. 

11 15 U.S.C. 78o(d). The effectiveness of a 

registration statement under the Securities Act of 

1933 (‘‘Securities Act’’) triggers Section 15(d) 

reporting obligations. That section provides that an 

issuer cannot suspend its reporting obligations 

unless the subject class of securities is held of 

record by less than 300 persons at the beginning of 

a fiscal year other than the year in which the 

Securities Act registration statement became 

effective. Section 15(d) does not permit an issuer to 

terminate, but only to suspend, its reporting 

obligations under that section. 

12Exchange Act Rules 12g–4(a)(2)(i) (17 CFR 

240.12g–4(a)(2)(i)) and 12h–3(b)(2)(i) (17 CFR 

240.12h–3(b)(2)(i)). 

13See Original Proposing Release, 70 FR at 

77689–77690. 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 200, 232, 240 and 249 

[Release No. 34–55540; International Series 

Release No. 1301; File No. S7–12–05] 

RIN 3235–AJ38 

Termination of a Foreign Private 

Issuer’s Registration of a Class of 

Securities Under Section 12(g) and 

Duty To File Reports Under Section 

13(a) or 15(d) of the Securities 

Exchange Act of 1934 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Final rule. 

SUMMARY: We are adopting amendments 

to the rules that govern when a foreign 

private issuer may terminate the 

registration of a class of equity securities 

under section 12(g) of the Securities 

Exchange Act of 1934 (‘‘Exchange Act’’) 

and the corresponding duty to file 

reports required under section 13(a) of 

the Exchange Act, and when it may 

cease its reporting obligations regarding 

a class of equity or debt securities under 

section 15(d) of the Exchange Act. 

Under the current rules, a foreign 

private issuer may find it difficult to 

terminate its Exchange Act registration 

and reporting obligations despite the 

fact that there is relatively little interest 

in the issuer’s U.S.-registered securities 

among United States investors. 

Moreover, currently a foreign private 

issuer can only suspend, and cannot 

terminate, a duty to report arising under 

section 15(d) of the Exchange Act. New 

Exchange Act Rule 12h–6 will permit a 

foreign private issuer of equity 

securities to terminate its reporting 

obligations under either section 13(a) or 

section 15(d) of the Exchange Act by 

meeting a quantitative benchmark 

designed to measure relative U.S. 

market interest for its equity securities 

that does not depend on a head count 

of the issuer’s U.S. security holders. The 

new rule will permit a foreign private 

issuer to compare the average daily 

trading volume of its securities in the 

United States with its worldwide 

average daily trading volume, using a 5 

percent benchmark. The accompanying 

rule amendments will also help provide 

U.S. investors with ready access through 

the Internet on an ongoing basis to 

material information about a foreign 

private issuer of equity securities that is 

required by its home country after it has 

exited the Exchange Act reporting 

system. The new rule will also permit 

a foreign private issuer of debt securities 

to terminate, rather than merely 

suspend, its section 15(d) reporting 

obligations. 

DATES: Effective Date: June 4, 2007. 

FOR FURTHER INFORMATION CONTACT: 

Elliot Staffin, Special Counsel, at (202) 

551–3450, in the Office of International 

Corporate Finance, Division of 

Corporation Finance, U.S. Securities 

and Exchange Commission, 100 F 

Street, NE., Washington, DC 20549– 

3628. 

SUPPLEMENTARY INFORMATION: We are 

adopting amendments to Commission 

Rule 30–1,1 Rule 101 2 of Regulation S– 

T,3 and Rules 12g3–2, 12g–4 and 12h– 

3 4 under the Exchange Act,5 and adding 

new Rule 12h–6 6 and Form 15F 7 under 

the Exchange Act. 

Table of Contents 

I. Executive Summary and Background 

A. Introduction 

B. Principal Comments Regarding the 

Reproposed Rule Amendments 

C. Summary of the Adopted Rule 

Amendments 

II. Discussion 

A. Conditions for Equity Securities Issuers 

1. Quantitative Benchmarks 

a. Trading Volume Benchmark 

i. Calculation of the U.S. Trading Volume 

Benchmark as a Percentage of 

Worldwide Trading Volume Instead of 

Primary Trading Market Trading Volume 

ii. Inclusion of Off-Market Transactions in 

the Trading Volume Calculation 

iii. The 5 Percent Trading Volume Measure 

iv. Definition of Equity Securities 

v. One Year Ineligibility Period After 

Delisting 

vi. One Year Ineligibility Period After 

Termination of Sponsored ADR Facility 

vii. Transition Period 

b. Alternative 300-Holder Condition 

2. Prior Exchange Act Reporting Condition 

3. The One Year Dormancy Condition 

4. Foreign Listing Condition 

B. Debt Securities Provision 

C. Revised Counting Method 

D. Expanded Scope of Rule 12h–6 

1. Application of Rule 12h–6 to Successor 

Issuers 

2. Application of Rule 12h–6 to Prior Form 

15 Filers 

E. Public Notice Requirement 

F. Form 15F 

G. Amended Rules 12g–4 and 12h–3 

H. Amendment Regarding the Rule 12g3– 

2(b) Exemption 

1. Extension of the Rule 12g3–2(b) 

Exemption Under Rule 12g3–2(e) 

2. Electronic Publishing of Home Country 

Documents 

I. Concerns Regarding Securities Act Rule 

701 

III. Paperwork Reduction Act Analysis 

IV. Cost-Benefit Analysis 

V. Consideration of Impact on the Economy, 

Burden on Competition and Promotion 

of Efficiency, Competition and Capital 

Formation Analysis 

VI. Regulatory Flexibility Act Certification 

VII. Statutory Basis and Text of Rule 

Amendments 

I. Executive Summary and Background 

A. Introduction 

In December 2005, the Commission 

issued proposed amendments to its 

current rules governing when a foreign 

private issuer 8 may exit the Exchange 

Act reporting regime.9 Under the 

current rules, the primary determinant 

regarding whether a foreign private 

issuer may terminate its registration of 

a class of securities under section 

12(g) 10 or suspend its reporting 

obligations under section 15(d) 11 is if its 

subject securities are held of record by 

less than 300 residents in the United 

States.12 The Commission proposed to 

amend these rules out of concern that, 

due to the increased globalization of 

securities markets in recent decades as 

well as other trends, it has become 

difficult for a foreign private issuer to 

exit the Exchange Act reporting system 

even when there is relatively little U.S. 

investor interest in its U.S.-registered 

securities.13

We recognize that U.S. investors 

benefit from the investment 

opportunities provided by foreign 

private issuers registering their 

securities with the Commission and 

listing and publicly offering those 

securities in the United States. 

However, because of the burdens and 

uncertainties associated with 

terminating registration and reporting 

under the Exchange Act, the current exit 

process may serve as a disincentive to 

foreign private issuers accessing the 


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Federal Register / Vol. 72, No. 65 / Thursday, April 5, 2007 / Rules and Regulations 16935 

14See Part I.C of the Original Proposing Release 

for a discussion of the concerns raised by foreign 

private issuers regarding the current Exchange Act 

exit regime. 

15For purposes of proposed Rule 12h–6, a ‘‘wellknown seasoned issuer’’ meant a well-known 

seasoned issuer as defined in Securities Act Rule 

405 (17 CFR 230.405), which would have required 

the worldwide market value of an issuer’s 

outstanding voting and non-voting common equity 

held by non-affiliates to be $700 million or more. 

16Under the original rule proposal, a WKSI 

would have been eligible to terminate its Exchange 

Act reporting obligations regarding a class of equity 

securities if the U.S. average daily trading volume 

(‘‘ADTV’’) of the subject class of securities had been 

no greater than 5 percent of the ADTV of that class 

of securities in its primary trading market during a 

recent 12 month period, and U.S. residents held no 

more than 10 percent of the issuer’s worldwide 

public float as of a specified date. A WKSI with 

greater than 5 percent U.S. ADTV or a non-WKSI 

would have been eligible for termination of 

reporting regarding a class of equity securities if, 

regardless of U.S. trading volume, U.S. residents 

held no more than 5 percent of the issuer’s 

worldwide public float as of a specified date. See 

Part II.B.2.d of Release No. 34–53020. 

17Release No. 34–55005 (December 22, 2006), 72 

FR 1384 (January 11, 2007) (Reproposing Release). 

18We reproposed the rule amendments primarily 

because the Commission did not fully address this 

trading volume approach in the Original Proposing 

Release. 

19See Parts II.A.1.a and IV of the Reproposing 

Release. 

20These comment letters, along with the letters 

received at the proposing stage, are available on the 

Commission’s Internet Web site, located at http:// 

www.sec.gov/rules/proposed/s71205.shtml, and in 

the Commission’s Public Reference Room in its 

Washington, DC headquarters. 

21An ADR is a negotiable instrument that 

represents an ownership interest in a specified 

number of securities, which the securities holder 

has deposited with a designated bank depositary. 

Use of an ADR facility makes it easier for a U.S. 

resident to collect dividends in U.S. dollars. 

Moreover, because the clearance and settlement 

process for ADRs generally is the same for securities 

of domestic companies that are traded in U.S. 

markets, a U.S. holder of an ADR is able to hold 

securities of a foreign company that trades, clears 

and settles within automated U.S. systems and 

within U.S. time periods. 

22 17 CFR 240.15d–2. 

23As reproposed, Rule 12h–6 would prohibit an 

equity securities registrant from selling its securities 

in the United States in a registered offering under 

the Securities Act, except for specified registered 

offerings, during the 12 months preceding the filing 

of its Form 15F. 

24As reproposed, Rule 12h–6 would require an 

equity securities issuer to have maintained a listing 

on an exchange in its primary trading market. 

U.S. public capital markets.14 In order to 

remove this disincentive, we proposed 

to amend the current Exchange Act exit 

rules for foreign private issuers. 

As originally proposed, new Exchange 

Act Rule 12h–6 would have permitted a 

foreign private issuer of equity 

securities to terminate its Exchange Act 

registration and reporting obligations if, 

among other conditions, it met one of a 

set of alternative quantitative 

benchmarks that, depending on whether 

the issuer was a well-known seasoned 

issuer (‘‘WKSI’’),15 was based either on 

a combination of U.S. trading volume 

and U.S. public float criteria or just U.S. 

public float data.16 However, numerous 

commenters stated that the originally 

proposed rules would still unduly 

restrict a significant portion of U.S.- 

registered foreign private issuers from 

exiting the Exchange Act reporting 

regime, thus making it unlikely that the 

proposed rules would achieve their 

purpose of attracting more foreign 

companies to U.S. public capital 

markets. 

In light of these criticisms, we 

reconsidered our approach and, in 

December 2006, we reproposed the 

amendments to the Exchange Act exit 

rules for foreign private issuers.17 As an 

alternative to the record holder standard 

for equity securities issuers, we 

proposed a quantitative benchmark 

based solely on a comparison of the 

average daily trading volume of a 

foreign private issuer’s equity securities 

in the United States with that in its 

primary trading market. We reasoned 

that a standard based on trading volume 

may in fact be superior to the originally 

proposed standard, which was based 

primarily on a comparison of an issuer’s 

U.S. public float with its worldwide 

public float, because it is a more direct 

measure of the issuer’s nexus with the 

U.S. market and because trading volume 

data is easier to obtain than public float 

or record holder data.18 We concluded 

that, in applying an exit standard based 

on trading volume data for the U.S. and 

an issuer’s primary trading market, 

issuers would face reduced costs when 

determining whether they can terminate 

their registration and reporting 

obligations under the Exchange Act, 

compared to the originally proposed 

standards that would have required an 

issuer to assess the U.S. residence of its 

security holders.19

B. Principal Comments Regarding the 

Reproposed Rule Amendments 

We received 30 comment letters in 

response to the reproposed rule 

amendments.20 These letters 

represented the views of over 40 distinct 

entities, including business, financial 

and legal associations, foreign 

companies, financial advisory and 

accounting firms, law firms, and one 

foreign government. While the 

commenters generally strongly 

supported the trading volume-based 

approach and other aspects of the 

reproposed rules, many offered 

suggestions designed primarily to finetune those rules. 

We received the most comments 

concerning the reproposed trading 

volume benchmark for equity securities 

issuers. Numerous commenters urged us 

to adopt a quantitative benchmark that 

would require an issuer to measure its 

U.S. ADTV as a percentage of its ADTV 

for the same class of securities on a 

worldwide basis, rather than against its 

ADTV in its primary trading market, as 

reproposed. Many commenters also 

requested that we permit an issuer to 

include off-market transactions when 

calculating its worldwide ADTV for a 

class of equity securities, rather than 

only when calculating its U.S. ADTV, as 

reproposed. Some commenters further 

urged us to permit an issuer to include 

trades conducted through alternative 

trading systems when determining 

whether it meets the proposed trading 

volume benchmark. Still others 

requested that we increase the 

percentage in the trading volume-based 

measure to a percentage greater than 5 

percent, as reproposed, particularly if 

we did not move to a worldwide ADTV 

standard. 

Commenters expressed concern or 

requested guidance regarding a number 

of other issues, including: 

• the appropriateness of the proposed 

provision that would prohibit reliance 

on the trading volume standard if an 

issuer has delisted its securities from a 

U.S. exchange during the preceding 12 

months when its U.S. ADTV exceeded 

the 5 percent threshold; 

• the appropriateness of the proposed 

provision that would prohibit reliance 

on the trading volume standard if an 

issuer has terminated a sponsored 

American Depositary Receipts (ADR) 

facility 21 during the preceding 12 

months, regardless of whether the issuer 

met the trading volume benchmark at 

the time of termination; 

• whether to include convertible debt 

and other equity-linked securities in the 

definition of equity security for 

purposes of the new exit rule; 

• whether a special financial report 

filed pursuant to Exchange Act Rule 

15d–2 22 would constitute an Exchange 

Act annual report for the purpose of the 

reproposed prior reporting condition; 

• the appropriateness of the 

reproposed dormancy condition for 

equity securities registrants,23 including 

whether it would prohibit an issuer 

from conducting a registered offering in 

which an underwriter has agreed to a 

standby purchase commitment but only 

resells the purchased securities outside 

the United States; 

• the appropriateness of the 

reproposed foreign listing condition for 

equity securities registrants,24 including 

whether it should apply to an issuer 

relying on the alternative 300 holder 

provision of Rule 12h–6, and to an 


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16936 Federal Register / Vol. 72, No. 65 / Thursday, April 5, 2007 / Rules and Regulations 

25 17 CFR 240.12g–3(g). 

26Like current Rules 12g–4 and 12h–3, which 

require the filing of Form 15, reproposed Rule 12h–

6 would require the filing of a form—Form 15F—

by which an issuer would certify that it meets the 

conditions for ceasing its Exchange Act reporting 

obligations. 

27Neither the OTC Bulletin Board operated by 

Nasdaq nor the market operated by the Pink Sheets 

LLC are deemed to be automated inter–dealer 

quotation systems. See Release 33–6862 (April 23, 

1999), n.22. 

28See Part II.D.1 of this release for clarification 

regarding the limited role of the predecessor in 

determining a successor issuer’s eligibility to 

terminate its Exchange Act reporting obligations 

under Rule 12h–6. 

issuer that delists from its non-U.S. 

exchange in connection with being 

acquired; 

• the role of a predecessor in 

determining a successor issuer’s 

eligibility to terminate its Exchange Act 

reporting obligations under reproposed 

Rule 12h–6, including whether, under 

Exchange Act Rule 12g–3(g),25 a 

successor issuer would have to file an 

Exchange Act annual report for the 

predecessor’s most recently completed 

fiscal year before it could terminate its 

reporting obligations under Rule 12h–6; 

• whether to permit a foreign 

company that filed a Form 15 

previously to terminate or suspend its 

Exchange Act reporting obligations 

regarding a class of equity securities 

before the effectiveness of new Rule 

12h–6 to terminate its reporting 

obligations under the new exit rule 

without having to recount its holders, as 

long as it meets that rule’s trading 

volume benchmark; 

• whether to increase the threshold 

number of record holders in the debt 

securities provision; and 

• whether an issuer that has filed a 

Form 15F 26 solely to terminate its 

reporting obligations regarding debt 

securities must wait until the 

effectiveness of that termination before 

it can submit an application for the Rule 

12g3–2(b) exemption regarding a class 

of equity securities. 

C. Summary of the Adopted Rule 

Amendments 

We have carefully considered 

commenters’ concerns regarding the 

reproposed rules, and have addressed 

many of them in the rule amendments 

that we are adopting today. As adopted, 

new Exchange Act Rule 12h–6 and the 

accompanying rule amendments will: 

• permit a foreign private issuer, 

regardless of size, to terminate its 

Exchange Act registration and reporting 

obligations regarding a class of equity 

securities, assuming it meets all the 

other conditions of Rule 12h–6, if, for a 

recent 12-month period, the U.S. ADTV 

of the subject class of securities has 

been no greater than 5 percent of its 

worldwide ADTV—rather than 5 

percent of the ADTV in its primary 

trading market, as reproposed; 

• permit an issuer to include offmarket transactions, including 

transactions through alternative trading 

systems, when calculating its 

worldwide ADTV for a class of equity 

securities—as discussed in connection 

with calculating its U.S. ADTV, as 

reproposed—as long as the trading 

volume information regarding the offmarket transactions is reasonably 

reliable and does not duplicate other 

trading volume information regarding 

the subject class of securities; 

• require an issuer to wait 12 months 

before filing its Form 15F in reliance on 

the trading volume standard if the issuer 

has delisted its class of equity securities 

from a national securities exchange or 

automated inter-dealer quotation system 

in the United States,27 or terminated a 

sponsored ADR facility and, at the time 

of delisting or termination, the U.S. 

ADTV of the subject class of securities 

exceeded 5 percent of its worldwide 

ADTV for the preceding 12 months; 

• retain the 300-holder standard as an 

alternative to the trading volume 

standard for an equity securities issuer 

and as the quantitative standard for a 

debt securities issuer, as reproposed; 

• exclude convertible debt and other 

equity-linked securities from the 

definition of equity security for the 

purpose of new Rule 12h–6’s trading 

volume provision; 

• require an equity securities 

registrant to have at least one year of 

Exchange Act reporting, be current in 

reporting obligations for that period, 

and have filed at least one Exchange Act 

annual report, as reproposed; 

• permit an issuer to count a special 

financial report filed pursuant to 

Exchange Act Rule 15d–2 as an 

Exchange Act annual report for the 

purpose of the new rule’s prior 

reporting condition; 

• prohibit an issuer of equity 

securities from selling securities in the 

United States in a registered offering 

under the Securities Act, except as 

specified, during the 12 months 

preceding the filing of its Form 15F (the 

‘‘dormancy condition’’), substantially as 

reproposed; 

• require an issuer of equity securities 

to have maintained a listing of the 

subject class of securities for at least the 

12 months preceding the filing of its 

Form 15F on one or more exchanges in 

a foreign jurisdiction that, either singly 

or together with the trading of the same 

class of the issuer’s securities in another 

foreign jurisdiction, constitutes the 

primary trading market for those 

securities, substantially as reproposed; 

• define primary trading market to 

mean that at least 55 percent of the 

trading in a foreign private issuer’s class 

of securities that is the subject of Form 

15F took place in, on or through the 

facilities of a securities market or 

markets in a single foreign jurisdiction 

or in no more than two foreign 

jurisdictions during a recent 12-month 

period, as long as the trading in at least 

one of the two foreign jurisdictions is 

larger than the trading in the United 

States for the same class of the issuer’s 

securities; 

• permit an equity securities issuer 

relying on the alternative 300-holder 

standard, or a debt securities issuer, to 

use a revised counting method that 

limits the inquiry regarding the amount 

of securities represented by accounts of 

customers resident in the United States 

to brokers, dealers, banks and other 

nominees located in the United States, 

the foreign private issuer’s jurisdiction 

of incorporation, legal organization or 

establishment, and the one or two 

jurisdictions comprising the issuer’s 

primary trading market if different from 

the issuer’s jurisdiction of 

incorporation, legal organization or 

establishment, as reproposed; 

• permit an issuer of equity or debt 

securities to rely on the assistance of an 

independent information services 

provider when determining whether the 

issuer falls below the 300-holder 

standard, as reproposed; 

• permit a successor issuer meeting 

specified conditions to terminate its 

Exchange Act reporting obligations 

under new Rule 12h–6, as reproposed; 28

• permit a foreign private issuer that 

filed a Form 15 and suspended or 

terminated its Exchange Act reporting 

obligations under the current exit rules 

before the effective date of Rule 12h–6 

to terminate its Exchange Act reporting 

obligations under new Exchange Act 

Rule 12h–6, as long as, if regarding a 

class of equity securities, the issuer 

meets Rule 12h–6’s listing condition 

and either the trading volume or 

alternative-300 holder condition or, if 

regarding a class of debt securities, the 

issuer meets the rule’s 300-holder 

condition for debt issuers; 

• extend the Rule 12g3–2(b) 

exemption to a foreign private issuer of 

equity securities, including a successor 

issuer and prior Form 15 filer, 

immediately upon its termination of 

reporting under Rule 12h–6, and require 

the issuer to maintain that exemption by 

publishing in English specified material 

home country documents required by 


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Federal Register / Vol. 72, No. 65 / Thursday, April 5, 2007 / Rules and Regulations 16937 

29See Exchange Act Rule 12g3–2(b)(1)(iii) (17 

CFR 240.12g3–2(b)(1)(iii)). 30See p. 12 and Part II.A.2 of this release. 

31New Exchange Act Rule 12h–6(a)(4)(i) (17 CFR 

240.12h–6(a)(4)(i)). 

32See, for example, the letter, dated February 12, 

2007, from Cleary Gottlieb, Steen & Hamilton LLP 

(Cleary Gottlieb). 

33See the comment letters discussed in Part 

II.A.1.a of the Reproposing Release. 

Rule 12g3–2(b) 29 on its Internet Web 

site or through an electronic information 

delivery system generally available to 

the public in its primary trading market, 

as reproposed; 

• permit a non-reporting company 

that has received or will receive the 

Rule 12g3–2(b) exemption, upon 

application to the Commission and not 

pursuant to Rule 12h–6, to publish its 

‘‘ongoing’’ home country documents 

required under Rule 12g3–2(b) on its 

Internet Web site or through an 

electronic information delivery system 

rather than submit them in paper to the 

Commission; and 

• permit an issuer that has filed a 

Form 15F to terminate its Exchange Act 

reporting obligations regarding a class of 

debt securities to establish the Rule 

12g3–2(b) exemption for a class of 

equity securities upon the effectiveness 

of its termination of reporting under 

Rule 12h–6, by submitting an 

application for the Rule 12g3–2(b) 

exemption after filing its Form 15F. 

We are also adopting, as reproposed, 

procedural conditions that will: 

• require a foreign private issuer to 

file a Form 15F providing information 

with respect to whether the issuer meets 

the requirements for terminating its 

reporting obligations under Rule 12h–6; 

• automatically suspend an issuer’s 

Exchange Act reporting obligations 

upon the filing of its Form 15F and 

trigger a 90-day waiting period at the 

end of which, assuming the Commission 

has no objections, the suspension will 

become a termination of reporting; and 

• require a foreign private issuer to 

publish a notice, such as a press release, 

announcing its intention to terminate its 

Exchange Act reporting obligations 

under Rule 12h–6, before or at the time 

of filing its Form 15F. 

We believe the rules that we are 

adopting today provide meaningful 

protection of U.S. investors by 

permitting the termination of Exchange 

Act registration and reporting only by 

those foreign registrants with relatively 

low U.S. market interest in their U.S.- 

registered securities. Compared to the 

current exit rules, Rule 12h–6 will 

establish a more clearly defined process 

with a more appropriate benchmark by 

which a foreign private issuer can 

terminate its Exchange Act reporting 

obligations. As a result, we believe 

foreign private issuers should be more 

willing initially to register their 

securities with the Commission, which 

will provide more investment choices 

for U.S. investors. 

At the same time, we believe the 

conditions that determine a foreign 

private issuer’s eligibility to terminate 

its Exchange Act registration and 

reporting regarding a class of equity 

securities under new Rule 12h–6 will 

serve to protect U.S. investors. For 

example, the prior reporting 

condition 30 is intended to provide 

investors with at least one complete 

year’s worth of Exchange Act reports, 

including an annual report, upon which 

they can base their investment decisions 

about a particular foreign registrant 

before that registrant exits the Exchange 

Act reporting system. The dormancy 

condition is designed to deter a foreign 

private issuer’s promotion of U.S. 

investor interest through recent 

registered capital-raising shortly before 

exiting our reporting system. The one 

year reporting and dormancy conditions 

are consistent with the statutory 

requirements under section 15(d). 

The foreign listing condition and U.S. 

trading volume benchmark support our 

view that, before a foreign private issuer 

may terminate its Exchange Act 

reporting obligations under Rule 12h–6, 

it must have been subject to an ongoing 

disclosure and financial reporting 

regime, and have a significant market 

following, in its primary trading market. 

We have set the U.S. trading volume 

benchmark at such a level that, although 

there may be some U.S. investor interest 

in the subject securities of an issuer 

meeting the benchmark, that interest 

would appear to be sufficiently 

diminished so that a foreign private 

issuer should not be required to 

continue its Exchange Act reporting if it 

determines that it is no longer desirable 

to continue as a U.S. registrant. 

The condition restricting the ability of 

an issuer to rely on the trading volume 

standard under specified circumstances 

(U.S. delisting and termination of a 

sponsored ADR facility) should deter an 

issuer from excluding U.S. investors, 

particularly retail investors, from 

investing in their securities when U.S. 

market interest is still significant. The 

immediate availability of the exemption 

under Rule 12g3–2(b) will foster access 

by U.S. investors to ongoing home 

country information about an issuer 

after it terminates its Exchange Act 

registration and reporting under Rule 

12h–6. Finally, the conditions relating 

to the filing of Form 15F and the 

publication of a press release or other 

notice will promote transparency in the 

exit process. 

II. Discussion 

A. Conditions for Equity Securities 

Issuers 

1. Quantitative Benchmarks 

a. Trading Volume Benchmark 

As adopted, new Exchange Act Rule 

12h–6 will enable a foreign private 

issuer of equity securities, regardless of 

size, to qualify for termination of its 

Exchange Act reporting by meeting a 

quantitative benchmark provision that 

does not depend on the number of its 

U.S. record holders or the percentage of 

its securities held by those holders. 

Under new Rule 12h–6, an issuer will 

be able to terminate its Exchange Act 

registration and reporting obligations 

regarding a class of equity securities, 

assuming it meets the other conditions 

of Rule 12h–6, if the ADTV of the 

subject class of equity securities in the 

United States has been 5 percent or less 

of the ADTV of that class of securities 

on a worldwide basis during a recent 

12-month period.31 This trading volume 

benchmark is substantially similar to 

the reproposed standard, except that the 

adopted benchmark requires an issuer to 

measure its U.S. ADTV as a percentage 

of its worldwide ADTV rather than the 

ADTV in its primary trading market. 

A threshold matter in this regulatory 

initiative has been what is the most 

appropriate benchmark for equity 

securities that would best serve the 

interests of investors and issuers, and 

most commenters addressed this issue. 

Most of the commenters agreed that a 

benchmark based solely on trading 

volume is superior to one based on a 

combination of U.S. public float and 

trading volume criteria or just U.S. 

public float data, as under the originally 

proposed Rule 12h–6, or one based on 

the number of record holders in the 

United States or on a worldwide basis, 

as under the current exit rules. Most 

commenters stressed that trading 

volume data is easier to obtain and 

confirm than is the data required for a 

U.S. public float or record holder 

determination.32 As commenters have 

noted, it is difficult for a reporting 

foreign private issuer to determine 

accurately the specific country of 

residence of its investors.33 Because a 

public float benchmark would require 

such a determination to varying degrees, 

most commenters agreed with our 

conclusion that the reproposed trading 


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34See, for example, the letter, dated February 12, 

2007, from the European Association for Listed 

Companies and other signatories (EALIC). 

35See, for example, the letter, dated February 12, 

2007, from Sullivan & Cromwell LLP (Sullivan & 

Cromwell) and the letter, dated January 2, 2007, 

from Galileo Global Advisors (Galileo). 

36See, for example, the letter from Cleary 

Gottlieb. 

37See, for example, the letter, dated February 12, 

2007, from the European Commission. 

38See the letter from Cleary Gottlieb. 

39See, most recently, the letter, dated February 

23, 2007, from the American Bar Association, 

Section of Business Law (ABA). 

40For example, a trading volume standard that 

favored WKSIs could discourage smaller foreign 

companies from entering U.S. public capital 

markets, to the detriment of U.S. investors. 

Moreover, commenters at the proposing stage noted 

that the costs of continued Exchange Act reporting 

fall disproprotionately on smaller issuers. See Part 

II.A.1.a of the Reproposing Release. 

41As discussed in Part II.A.4 of this release, we 

define primary trading market to mean that at least 

55 percent of the trading in a foreign private issuer’s 

subject class of securities took place in, on or 

through the facilities of a securities market or 

markets in a single foreign jurisdiction or in no 

more than two foreign jurisdictions during a recent 

12-month period. If an issuer aggregates the trading 

in two foreign jurisdictions, the trading market for 

the issuer’s securities in at least one of the two 

foreign jurisdictions must be larger than the United 

States trading market for the same class of the 

issuer’s securities. We proposed a substantially 

similar definition at the reproposing stage. 

42See, for example, the letter, dated February 8, 

2007, from BusinessEurope, the letters, dated 

February 12, 2007, from Davis Polk & Wardwell 

(Davis Polk), Linklaters, and Makinson Cowell, and 

the letters from Cleary Gottlieb, EALIC, and the EU. 

In contrast, only one commenter opposed using 

worldwide trading volume. See the letter from 

Galileo. 

43See the letters from Cleary Gottlieb and EALIC. 

44See the letter from Linklaters. 

45See Part II.A.4 of this release. 

46Worldwide ADTV includes U.S. ADTV. Some 

commenters favored a trading measure based on the 

dollar value of shares traded rather than on the 

number of shares traded. See the letter, dated 

February 12, 2007, from Ziegler, Ziegler and 

Associates (Ziegler) and the letter from Galileo. We 

decline to adopt a trading value measure because 

we believe that it would add an unnecessary level 

of complexity and cost to the non-record holder 

determination. 

47See the letters from BusinessEurope, Cleary 

Gottlieb, Davis Polk, EALIC, the EU, Makinson 

Cowell, and Sullivan & Cromwell, and the letters, 

dated February 12, 2007, from the International Bar 

Association and Skadden Arps Slate Meagher & 

Flom (Skadden Arps). 

volume-based benchmark should result 

in reduced costs to issuers in 

determining whether they can terminate 

their Exchange Act reporting 

obligations.34

Some commenters supported the 

reproposed trading volume measure 

because it would provide a simple and 

clear measure of the degree of U.S. 

market interest in an issuer’s equity 

securities.35 Some commenters 

expressed the view that basing the new 

exit rule on a trading volume measure 

would help ensure that an issuer’s 

termination of Exchange Act registration 

and reporting would not have a 

significant impact on the primary pricesetting determinants of an issuer’s 

equity securities, which would allow for 

U.S. investors to trade in that issuer’s 

securities following its U.S. 

deregistration.36

Commenters expressed their belief 

that adoption of the reproposed trading 

volume standard would enable 

significantly more foreign private 

issuers to exit the Exchange Act 

reporting regime if they so desire.37

Consequently, as one commenter 

indicated, by removing restrictions 

regarding the ability to exit U.S. 

securities markets, adoption of new 

Rule 12h–6 and the accompanying 

amendments will have a major impact 

on the perception that foreign 

companies have of those markets, 

making the U.S. capital markets ‘‘much 

more attractive and competitive on an 

international scale.’’38

For the above reasons, we are 

adopting a quantitative exit standard for 

equity securities registrants based solely 

on trading volume instead of one based 

on a combination of trading volume and 

public float criteria or just public float 

data. We also are adopting, as 

reproposed, one trading volume 

standard that will apply to all issuers of 

equity securities. Commenters generally 

supported having one benchmark 

applicable to any foreign private issuer, 

regardless of size.39 Although we 

originally proposed a set of quantitative 

benchmarks that depended primarily on 

whether an issuer was a WKSI, we are 

adopting the same trading volume 

standard for a smaller issuer as for a 

larger issuer in order to provide 

increased flexibility and simplification 

to the Exchange Act deregistration 

regime, and for the other reasons 

discussed in the Reproposing Release.40

i. Calculation of the U.S. Trading 

Volume Benchmark as a Percentage of 

Worldwide Trading Volume Instead of 

Primary Trading Market Trading 

Volume 

Numerous commenters requested that 

the Commission calculate U.S. trading 

volume as a percentage of worldwide 

trading volume rather than as a 

percentage of ADTV in the issuer’s 

primary trading market,41 as 

reproposed.42 The primary rationale for 

this request is that, with the increased 

globalization of securities markets, 

many issuers now trade on multiple 

non-U.S. markets. According to these 

commenters, since the goal of the 

reproposed trading volume benchmark 

is to determine the relative importance 

of the U.S. trading market for an issuer’s 

securities, an issuer should be able to 

take into account all non-U.S. trading in 

its securities, and not just the trading 

that has occurred in the one or two 

jurisdictions comprising its primary 

trading market.43

Some commenters maintained that, 

while it is reasonable to base Rule 12h–

6’s foreign listing condition on the 

reproposed primary trading market 

definition, it is not so for the trading 

volume benchmark.44 As discussed 

below, the purpose of the foreign listing 

condition is to help assure that there is 

a non-U.S. jurisdiction that principally 

regulates and oversees the issuance and 

trading of the issuer’s securities and the 

issuer’s disclosure obligations to 

investors.45 Limiting the definition of 

primary trading market in this context 

to no more than two jurisdictions helps 

to further the purpose of the foreign 

listing condition. In contrast, the 

purpose of the trading volume 

benchmark is to measure the relative 

U.S. market interest in a foreign private 

issuer’s equity securities. Accounting 

for as much of the issuer’s trading as is 

reasonably possible would further the 

purpose of this rule. 

We agree that, in light of the number 

of foreign registrants that have listings 

in more than two jurisdictions, and 

given the purpose of the trading volume 

benchmark, measuring an issuer’s U.S. 

ADTV as a percentage of its worldwide 

ADTV would increase the likelihood of 

obtaining a more accurate measure of 

relative U.S. market interest for that 

issuer’s equity securities. Therefore, we 

are adopting a trading volume 

benchmark for new Rule 12h–6 that will 

require an issuer to use as the 

denominator of its trading volume 

calculation its worldwide ADTV for the 

subject class of securities.46

ii. Inclusion of Off-Market Transactions 

in the Trading Volume Calculation 

We reproposed to require an issuer to 

include both transactions occurring on a 

stock exchange and over-the-counter 

trades for the purpose of calculating 

U.S. ADTV for the numerator of the 

trading volume benchmark, but to 

include only on-exchange transactions 

for the purpose of calculating its ADTV 

for the denominator (its primary trading 

market, as reproposed). We did so based 

on our belief that trading volume 

information about over-the-counter 

trades was more readily available in the 

United States than in many foreign 

jurisdictions. 

Numerous commenters 47 urged the 

Commission to permit an issuer to 

include ‘‘off-market’’ transactions when 

determining whether it meets the 5 


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48See, for example, the letter from Cleary 

Gottlieb. 

49 Directive 2004/39/EC, also known as the 

Market in Financial Instruments Directive (MiFID). 

50See the letters from Cleary Gottlieb, the EU, and 

BusinessEurope. 

51See the letters from the EU and Davis Polk. 

52See, for example, the EU letter. 

53See, for example, the letter from Davis Polk. 

54See the letters from BusinessEurope and the 

EU. 

55See the letter from Skadden Arps. 

56Rule 601 of Regulation NMS (17 CFR 242.601) 

requires every national securities exchange to file 

a transaction reporting plan regarding transactions 

in listed equity and Nasdaq securities. 

57See, for example, NASD Manual Rule 6600 et 

seq. for rules regarding recording and reporting 

transactions in OTC Equity Securities. A member 

broker-dealer must report information concerning 

OTC trades not involving a listed security, 

including a Nasdaq security, under the NASD rules 

rather than pursuant to a transaction reporting plan 

since the latter only covers unlisted transactions 

involving listed (and Nasdaq) securities. 

58See, for example, the letters from Cleary 

Gottlieb and EALIC. 

59See Instruction 3.c to Item 4 of Form 15F. 

60See Item 4.F of Form 15F. 

61See the letter, dated February 9, 2007, from 

SGL Carbon, the letter, dated February 12, 2007, 

from Fried Frank Harris Shriver & Jacobson (Fried 

Frank), and the letter from Skadden Arps. Another 

commenter requested an increase to 15 percent. See 

the letter from i-CABLE Communications Ltd. (iCABLE). 

62See the letters from Cleary Gottlieb, EALIC, 

Galileo, Sullivan & Cromwell, and the New York 

State Society of Certified Public Accountants 

(NYSSCPA). 

63See the letters from the ABA, BusinessEurope, 

and Linklaters. 

64See Part III, n. 191 of this release. 

65 17 CFR 240.3a11–1. 

66See the letters from BusinessEurope, the EU, 

EALIC and Cleary Gottlieb. 

percent trading volume standard, rather 

than just transactions occurring on a 

stock exchange, as reproposed. These 

commenters maintained that it was 

inappropriate to require an issuer to 

include both on-exchange and offexchange transactions when calculating 

its U.S. ADTV but not when calculating 

its worldwide trading volume. As noted 

by some of these commenters, members 

of Euronext markets are currently 

required to report off-market 

transactions.48 Moreover, some 

commenters noted that an EU 

Directive,49 scheduled for effectiveness 

in November 2007, will generally 

require the reporting of off-market 

transactions, which will make 

information regarding off-market 

transactions generally available in 

Europe the same way that such 

information is available through a 

transaction reporting plan in the United 

States.50

Some of these commenters urged the 

Commission to permit an issuer to 

include not only off-market transactions 

that currently occur through traditional 

over-the-counter means, but those that 

may occur through alternative trading 

systems.51 According to these 

commenters, MiFID will encourage the 

development of such trading systems.52

These commenters stated that, as long as 

trading information is credible and the 

sources reliable, an issuer should be 

able to include information about 

securities transactions regardless of the 

platform on which they occur.53

Some commenters requested that, if 

the Commission does not permit an 

issuer to include off-market transactions 

when determining its worldwide trading 

volume for the denominator of its 

trading volume calculation, it should 

also prohibit the inclusion of off-market 

transactions when determining its U.S. 

ADTV for the numerator of that 

calculation.54 In contrast, one 

commenter, which favored a worldwide 

trading volume measure, expressly 

requested that the Commission prohibit 

the inclusion of off-market transactions 

for both the numerator and denominator 

because of the difficulty of obtaining 

over-the-counter trading information.55

These comments have persuaded us 

that, for at least some foreign private 

issuers, information regarding offexchange transactions in non-U.S. 

jurisdictions will be readily obtainable. 

Therefore, under adopted Rule 12h–6, 

when making its trading volume 

determination, an issuer must include 

in its calculation of U.S. ADTV both onexchange and off-exchange transactions, 

as reproposed. For both on-exchange 

and off-exchange transactions in the 

United States, we expect an issuer to be 

able to obtain relevant trading volume 

information as reported pursuant to an 

effective transaction reporting plan,56

pursuant to NASD rules,57 or reported 

by a national securities exchange 

otherwise than pursuant to an effective 

transaction reporting plan. In addition, 

an issuer may include in its calculation 

of worldwide ADTV off-market 

transactions, including transactions 

conducted through alternative trading 

systems, in addition to transactions 

occurring on an exchange, as long as an 

issuer has obtained the information 

concerning the off-market transactions 

from publicly available sources or thirdparty information service providers, 

upon which the issuer has reasonably 

relied in good faith, and as long as the 

off-market transaction information does 

not duplicate any other trading volume 

information obtained. 

In response to our request for 

comments on whether issuers should be 

required to obtain trading volume data 

from particular sources, a number of 

commenters advocated that the final 

rules provide issuers with sufficient 

flexibility to use such data sources as 

they deem reliable and 

appropriate.58 The adopted rules do not 

specify any particular data sources that 

issuers must use to determine either its 

U.S. or worldwide trading volume. In 

this respect, when obtaining 

information concerning either onexchange or off-exchange transactions, 

issuers will have the latitude to use 

market data vendors or other 

commercial service providers and 

publicly available sources of market 

information that they reasonably believe 

to be reliable and that do not duplicate 

trading volume information obtained 

from other sources, such as various 

exchanges or markets.59 Issuers will be 

required to disclose their trading 

volume data sources on Form 15F, 

which will inform investors of the data 

sources used.60

iii. The 5 Percent Trading Volume 

Measure 

Commenters expressed a variety of 

views on whether 5 percent U.S. ADTV 

was the appropriate threshold for the 

trading volume benchmark. Although 

some commenters requested that the 

Commission increase the percentage to 

10 percent ADTV,61 many others 

supported the 5 percent threshold.62

Moreover, some of the commenters that 

requested an increase to 10 percent did 

so only if the Commission decided not 

to adopt a world-wide trading based 

benchmark.63

We believe that adoption of the ‘‘5 

percent of worldwide trading volume’’

standard will permit foreign companies 

with relatively little U.S. market interest 

to deregister.64 Moreover, by permitting 

an issuer to include both on-exchange 

and off-exchange transactions when 

calculating its worldwide ADTV, we 

have addressed the concerns of 

commenters who suggested the 5 

percent threshold could be too low to 

achieve the rule’s purpose of reducing 

the disincentive to U.S. registration that 

may be caused by the current exit 

regime. 

iv. Definition of Equity Securities 

We reproposed that, for purposes of 

new Rule 12h–6, an issuer would use 

the definition of equity security 

provided in Exchange Act Rule 3a11–

1.65 That provision includes equitylinked securities, such as convertible 

debt securities and warrants, within the 

definition of equity security. Several 

commenters 66 requested that the 

Commission exclude equity-linked 

securities from the definition of equity 


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67See the letter from Cleary Gottlieb, which cites 

Securities Act Rule 800(b) (17 CFR 230.800(b)). 

68See Part II.A.4 of this release. 

69New Exchange Act Rule 12h–6(f)(3) (17 CFR 

240.12h–6(f)(3)). These are the same categories of 

securities excluded from the definition of equity 

security under Securities Act Rule 800(b). 

70New Exchange Act Rule 12h–6(b)(1) (17 CFR 

240.12h–6(b)(1)). We previously proposed to codify 

this delisting requirement, along with a similar 

requirement concerning termination of a sponsored 

ADR facility, as Notes to paragraph (a)(4) of 

reproposed Rule 12h–6. We have restructured final 

Rule 12h–6 to provide for these requirements in a 

separate paragraph and have changed the paragraph 

numbering of the adopted rule accordingly. As 

adopted, Rule 12h–6(b) does not apply to issuers 

terminating their reporting obligations under either 

Rule 12h–6(d) (the successor issuer provision) or 

Rule 12h–6(i) (the prior Form 15 filer provision). 

71For example, an issuer that failed to meet the 

trading volume standard at the date of delisting 

would have to meet the trading volume standard 

one year later when filing its Form 15F. If, 

notwithstanding its delisting, an active U.S. overthe-counter market in the company’s securities 

continued, the company would not be eligible to 

use Rule 12h–6 and file a Form 15F in reliance on 

the trading volume benchmark. 

72See the letter, dated February 9, 2004, from 

Cleary Gottlieb. 

73See the letters from Galileo, Makinson Cowell 

and SGL Carbon. 

74Some commenters requested that we exempt 

from the delisting condition an issuer that has been 

involuntarily delisted. See, for example, the letter, 

dated February 22, 2007, from Cravath, Swaine & 

Moore (Cravath). We decline to do so since such an 

exemption could encourage an issuer not to comply 

with exchange standards in order to get delisted. 

75When an issuer terminates its ADR facility, the 

holders of ADRs generally have the option to make 

arrangements to hold the underlying securities 

directly. However, if holders are unable or 

unwilling to make these arrangements, or to pay the 

costs associated with these arrangements, the 

holders will have their investment cashed out, that 

is, the underlying securities will generally be sold 

into the home market and the net proceeds (after 

deducting fees and expenses of the selling broker 

and the depositary bank) remitted to the former 

ADR holders. 

security on the grounds that trading 

volume information for equity-linked 

securities is difficult to obtain. One 

commenter suggested using instead the 

definition of equity security provided in 

the Securities Act cross-border rules, 

which explicitly excludes convertible 

debt and other equity-linked 

securities.67

We agree with those commenters that, 

because trading volume information 

concerning convertible debt and other 

equity-linked securities is more difficult 

to obtain than trading volume 

information for the underlying equity 

securities, an issuer should not have to 

include equity-linked securities when 

determining whether it meets the 

trading volume benchmark. The same 

reasoning applies to an issuer’s 

determination concerning the foreign 

listing condition, which requires an 

issuer to meet the definition of primary 

trading market, which is a trading 

volume-based definition.68 Therefore, 

we are adopting a definition of equity 

security that is based on Rule 3a11–1, 

except that, for purposes of the trading 

volume and foreign listing provisions of 

Rule 12h–6, the definition explicitly 

excludes: 

• any debt security that is convertible 

into an equity security, with or without 

consideration; 

• any debt security that includes a 

warrant or right to subscribe to or 

purchase an equity security; 

• any such warrant or right; or 

• any put, call, straddle, or other 

option or privilege that gives the holder 

the option of buying or selling a security 

but does not require the holder to do 

so.69

v. One Year Ineligibility Period After 

Delisting 

We are adopting, substantially as 

proposed, a condition to the use of Rule 

12h–6’s trading volume standard and 

corresponding eligibility to file Form 

15F. This condition provides that if a 

foreign private issuer has had its equity 

securities delisted from a registered 

national securities exchange or 

automated inter-dealer quotation system 

within one year before filing the Form 

15F, it must have satisfied the trading 

volume percentage as of the date of 

delisting, as measured over the 12 

months preceding the date of 

delisting.70 Under this condition: 

• a listed foreign private issuer that 

satisfied the trading volume condition 

will be able to delist from its stock 

exchange and terminate its Exchange 

Act registration and reporting 

obligations concurrently; and 

• a listed foreign private issuer that 

did not satisfy the trading volume 

condition will be able to delist but will 

not be eligible to file a Form 15F and 

terminate its Exchange Act registration 

and reporting obligations until one year 

after the date of delisting, assuming that, 

at that time, it meets the conditions of 

the rule.71

We are adopting this condition in 

order to prevent the new trading 

volume-based rule from creating an 

incentive for a foreign private issuer to 

delist its securities from a U.S. exchange 

for the purpose of decreasing its U.S. 

trading volume. As one commenter 

suggested early on, if we were to adopt 

a standard based solely on trading 

volume, a foreign private issuer that 

delisted its securities from a U.S. 

exchange before its trading volume fell 

below the applicable percentage should 

not be eligible to terminate its 

registration under such a standard.72

A few commenters requested that the 

Commission remove this delisting 

condition on the grounds that it 

imposed a restraint on the use of the 

new exit rule that was not necessary for 

the protection of U.S. investors.73 We 

agree that companies should not be 

unnecessarily restricted in choosing the 

markets on which their securities are 

listed. Thus, we do not believe that 

delisting from a U.S. exchange should 

result in an automatic bar against a 

foreign private issuer from using the 

new exit rule. Nonetheless, we share the 

concern about possible negative impacts 

on U.S. investors stemming from a 

measure based solely on trading 

volume. Moreover, by requiring 

companies to remain registered and 

reporting under the Exchange Act for a 

period of time after delisting when, 

before delisting, the company had a 

relatively active U.S. market for its 

securities, U.S. investors will have 

access to information prepared in 

accordance with the Commission’s 

financial reporting and disclosure 

requirements for a period of time during 

which, most likely, the U.S. market will 

be diminishing. Accordingly, we are 

adopting the delisting condition 

substantially as proposed.74

vi. One Year Ineligibility Period After 

Termination of Sponsored ADR Facility 

As part of the rule reproposal, we 

proposed an additional condition to an 

issuer’s use of Rule 12h–6 and eligibility 

to file Form 15F in reliance on the 

trading volume provision. That 

condition provided that a foreign 

private issuer must not have terminated 

any sponsored ADR facility within the 

12 month period before filing its Form 

15F. We proposed that condition in 

order to encourage foreign private 

issuers to maintain their ADR facilities, 

even after they delist from a U.S. market 

and terminate their Exchange Act 

reporting obligations. 

After a foreign private issuer delists 

and deregisters, investors will benefit if 

its ADRs continue to be traded in the 

over-the-counter market in the United 

States. The termination of ADR facilities 

has a detrimental impact on holders, 

imposing fees and other charges on 

investors and, when investors are 

cashed out, subjecting investors to 

unplanned tax consequences and 

limiting their investment choices.75 In 

addition, the termination of ADR 

facilities will limit the ability of many 

U.S. investors to effect transactions in 


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76See, for example, the letter, dated February 12, 

2007, from the New York State Bar Association 

(N.Y. State Bar), and the letters from the ABA and 

Linklaters. 

77See the letter from the N.Y. State Bar. 

78New Exchange Act Rule 12h–6(b)(2) (17 CFR 

240.12h–6(b)(2)). 

79Note to paragraph (a)(4) of Rule 12h–6. 

Typically the ratio defining the number of common 

or ordinary shares underlying each ADR is included 

as part of the deposit agreement or in an exhibit to 

that agreement. 

80See the letter from the ABA. 

81New Exchange Act Rule 12h–6(a)(4)(ii) (17 CFR 

240.12h–6(a)(4)(ii)). 

82We did not originally propose or repropose a 

similar 500 record holder condition, although one 

exists in the current rules for a small issuer with 

total assets that have not exceeded $10 million for 

its most recent three fiscal years. Based on current 

experience, most foreign private issuers have not 

relied on that provision due to the difficulty in 

meeting the asset test. 

83See the letters from the ABA and the 

Organization for International Investment. 

84See Part II.A.1.b of the Reproposing Release. 

85 In this regard, we note that the Advisory 

Committee on Smaller Public Companies has made 

recommendations relating to Exchange Act 

registration and termination of registration. See the 

Final Report of the Advisory Committee on Smaller 

Public Companies, dated April 23, 2006, which is 

available at http://www.sec.gov/info/smallbus/ 

acspc/acspc-finalreport.pdf. 

86See Part II.C of this release. 

87New Exchange Act Rule 12h–6(a)(1) (17 CFR 

240.12h–6(a)(1)). 

the securities of the subject foreign 

company. 

Some commenters opposed the ADR 

facility termination condition on 

grounds similar to those raised against 

the delisting condition. However, these 

commenters also objected to the fact 

that, unlike the delisting condition, the 

proposed ADR facility condition 

applied regardless of whether, at the 

time of termination of its ADR facility, 

an issuer met the trading volume 

threshold measured for the previous 12 

months.76 One commenter stated that 

adoption of the reproposed condition 

could dissuade issuers from sponsoring 

ADR programs, to the detriment of U.S. 

investors.77

We continue to believe that, due to 

the importance of ADR facilities for U.S. 

investors, a sponsored ADR facility 

termination condition is appropriate. 

However, we agree with commenters 

that the importance of this concern 

significantly diminishes if, at the time of 

its termination of a sponsored ADR 

facility, an issuer’s U.S. ADTV has 

already fallen below the trading volume 

threshold. 

Therefore, we are adopting a 

condition providing that, if an issuer 

has terminated a sponsored ADR 

facility, and at the time of termination 

the average daily trading volume in the 

United States of the ADRs exceeded 5 

percent of the average daily trading 

volume of the underlying class of 

securities on a worldwide basis for the 

preceding 12 months, the issuer must 

wait 12 months before it may file a Form 

15F to terminate its Exchange Act 

reporting obligations in reliance on Rule 

12h–6’s trading volume provision.78 We 

are also clarifying that, for purposes of 

Rule 12h–6’s trading volume provision, 

an issuer must calculate the trading 

volume of its ADRs in terms of the 

number of securities represented by 

those ADRs.79

vii. Transition Period 

In connection with our reproposal of 

Rule 12h–6, we solicited comment on 

whether the proposed delisting and 

ADR termination conditions should 

apply to a foreign private issuer that 

delisted its equity securities from a U.S. 

exchange or terminated a sponsored 

ADR facility before the effective date of 

the new exit rule. One commenter 80

requested that neither provision apply 

to an issuer that delisted or terminated 

a sponsored ADR facility before 

December 13, 2006, which is the date of 

the open meeting at which the 

Commission voted to repropose Rule 

12h–6 and the accompanying rule 

amendments. 

We agree that, in the interests of 

fairness, an issuer should not be 

precluded from relying on Rule 12h–6’s 

trading volume provision because it 

delisted or terminated a sponsored ADR 

facility before the Commission had even 

proposed to make those acts meaningful 

to the application of Rule 12h–6. 

However, we believe that March 21, 

2007 should be the dispositive date 

since, on that date, the Commission 

voted to adopt the delisting and ADR 

termination conditions, thus making 

definite its intent that those conditions 

apply to Rule 12h–6’s trading volume 

provision. 

Therefore, a foreign private issuer 

that, before March 21, 2007, delisted a 

class of equity securities from a national 

securities exchange or inter-dealer 

quotation system in the United States or 

terminated a sponsored ADR facility, 

may file a Form 15F in reliance on Rule 

12h–6’s trading volume provision even 

if, at the time of delisting or 

termination, its U.S. ADTV exceeded 5 

percent of the ADTV of that class of 

securities on a worldwide basis for the 

preceding 12 months. 

b. Alternative 300-Holder Condition 

We are adopting, substantially as 

reproposed, an alternative to the trading 

volume benchmark provision, which 

will permit a foreign private issuer to 

terminate its Exchange Act reporting 

obligations regarding a class of equity 

securities if it has less than 300 record 

holders on a worldwide basis or who are 

U.S. residents as long as the issuer 

meets the rule’s other conditions.81 The 

purpose of this alternative 300-holder 

condition is to enable an issuer to 

terminate its Exchange Act reporting 

obligations if it cannot satisfy the new 

trading volume benchmark but does 

meet the current 300-holder standard. 

Otherwise, an issuer could find itself 

worse off under Rule 12h–6 than under 

the current exit rules.82

The adopted alternative record holder 

condition is substantially the same as 

the proposed and reproposed condition. 

Although at the proposing stage, some 

commenters requested that the 

Commission significantly raise the 300- 

holder threshold in both the Exchange 

Act exit and entrance rules, and a few 

made a similar request at the 

reproposing stage,83 we decline to adopt 

an increase to the 300-holder threshold 

for foreign private issuers either in the 

exit or entrance rules at this time. As we 

previously stated, the limited purpose 

for retaining the 300-holder provision in 

the new exit rule is to preclude 

disadvantaging those companies that 

could terminate their Exchange Act 

reporting obligations under the current 

exit rules but not under the new trading 

volume condition.84 Moreover, since 

domestic registrants are subject to a 

substantially similar record holder 

standard, we believe any change would 

be more appropriately considered as 

part of a comprehensive evaluation of 

the record holder provisions in both the 

Exchange Act entrance and exit rules for 

both domestic and foreign registrants.85

In addition, issuers relying on the 

alternative holder provision will be able 

to use the revised counting method that 

we are adopting today, which should 

make the U.S. holder determination 

easier for those issuers.86

2. Prior Exchange Act Reporting 

Condition 

We are adopting, substantially as 

reproposed, a prior Exchange Act 

reporting condition that a foreign 

private issuer must meet before it can 

terminate its section 12(g) registration or 

its section 15(d) reporting obligations 

regarding a class of equity securities 

under Rule 12h–6.87 This condition will 

require an issuer of equity securities to 

have had reporting obligations under 

section 13(a) or section 15(d) of the 

Exchange Act for at least the 12 months 

preceding the filing of Form 15F, to 

have filed or furnished all reports 

required for this period, and to have 

filed at least one annual report pursuant 


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88Under cover of a Form 6–K (17 CFR 249.306), 

a foreign private issuer is required to furnish in 

English a copy of any document that it publishes 

or is required to publish under the laws of its home 

country or the requirements of its local exchange or 

that it has distributed to shareholders, and which 

is material to an investment decision. 89See Part II.A.2 of the Reproposing Release. 90See the letter from the ABA. 91EDGAR is the Commission’s Electronic Data 

Gathering, Analysis and Retrieval System. 

92See, for example, the letter from Galileo. 

93See the letter from Sullivan & Cromwell. 

94 17 CFR 240.15d–2. This rule requires an issuer 

that filed a Securities Act registration statement, 

which did not contain audited financial statements 

for the last full fiscal year preceding the year in 

which the registration statement became effective, 

to file a special financial report with the 

Commission that includes audited financials for 

that last full fiscal year. 

95 15 U.S.C. 7262. See Release No. 33–8760 

(December 15, 2006), 71 FR 76580 (December 21, 

2006). 

96New Exchange Act Rule 12h–6(a)(2) (17 CFR 

240.12h–6(a)(2)). 

97See the letters from the ABA, Linklaters, the 

N.Y. State Bar, Sullivan & Cromwell, and Skadden 

Arps. 

98See the letters from the ABA, Skadden Arps, 

and Sullivan & Cromwell. 

to section 13(a) of the Exchange Act. 

The purpose of this prior Exchange Act 

reporting condition is to provide 

investors in U.S. securities markets with 

a minimum period of time to make 

investment decisions regarding a foreign 

private issuer’s securities based on the 

information provided in an Exchange 

Act annual report and the interim home 

country materials furnished in English 

under cover of Form 6–K.88

Originally proposed Rule 12h–6 

would have required a foreign private 

issuer to have had Exchange Act 

reporting obligations for the two years 

preceding the filing of its Form 15F and 

to have filed at least two Exchange Act 

annual reports before it could terminate 

its Exchange Act reporting obligations 

regarding a class of equity securities. As 

previously noted, several commenters 

objected to this two year reporting 

condition primarily on the grounds that 

it would impose a stricter reporting 

requirement than is the case under the 

current exit rules.89 In response to those 

commenters, when reproposing Rule 

12h–6, we reduced the required prior 

reporting period to at least 12 months 

and proposed to require only one 

Exchange Act annual report. 

We received only a few comments on 

the reproposed prior reporting condition 

for equity security issuers. One 

commenter supported the revisions 

made to the proposed prior reporting 

condition but urged the Commission to 

permit an issuer to terminate its 

Exchange Act reporting obligations 

regarding a class of equity securities 

even if it has not submitted all required 

Form 6–Ks.90 That commenter pointed 

to the difficulties that a foreign private 

issuer may experience when 

determining whether a Form 6–K 

submission is required under foreign 

reporting and U.S. materiality 

requirements. 

As adopted, Rule 12h–6 will require 

a foreign private issuer to have 

submitted all Form 6–Ks required 

during the 12 months preceding the 

filing of its Form 15F in order to be 

eligible to terminate its reporting 

obligations regarding a class of equity 

securities. This requirement will help 

ensure that a U.S. investor is able to 

access through EDGAR91 and in English 

all material interim information about a 

foreign private issuer as required by its 

home country. We continue to believe 

that our rules should provide 

appropriate incentives for companies to 

stay current with their Exchange Act 

reporting obligations. 

From a practical point of view, the 12- 

month prior reporting requirement 

should not be problematic since, based 

on current experience, most foreign 

companies that register securities with 

the Commission, including solely under 

Exchange Act section 12(g), stay in the 

U.S. market for at least a year and file 

at least one Exchange Act annual 

report.92 Moreover, the prior reporting 

condition will require that a foreign 

private issuer must be current in its 

reporting obligations, not that it must 

have timely filed all reports required 

during the 12 month period. In the 

event that an issuer determines that it 

should have filed a Form 6–K during 

this period, it can do so before it files 

its Form 15F. 

Another commenter 93 requested that 

we permit an issuer to satisfy the prior 

Exchange Act annual report requirement 

by filing a special financial report 

required under Exchange Act Rule 15d–

2.94 We agree that it would be 

appropriate to have the special financial 

report satisfy the annual report filing 

requirement under new Rule 12h–

6(a)(1). In this situation, an issuer will 

have recently sold securities under an 

effective Securities Act registration 

statement with non-financial 

information as current as the date of the 

prospectus, and the information in the 

special financial report will provide 

financial statements and other 

information as of and for the most 

recent fiscal year end, thus serving the 

same purpose as an Exchange Act 

annual report. 

In addition, this approach is 

consistent with our recent 

implementation rules for the internal 

control over financial reporting 

requirements mandated by Section 404 

of the Sarbanes-Oxley Act of 2002.95

Accordingly, we are clarifying that a 

special financial report, filed with the 

Commission pursuant to Rule 15d–2, 

constitutes an Exchange Act annual 

report for the purpose of complying 

with Rule 12h–6’s prior reporting 

condition. 

3. One Year Dormancy Condition 

We are adopting, as reproposed, a one 

year dormancy condition with which a 

foreign private issuer must comply 

before it can terminate its Exchange Act 

registration and reporting obligations 

regarding a class of equity securities 

under Rule 12h–6.96 New Rule 12h–6 

will prohibit sales of a foreign private 

issuer’s securities in the United States 

in a registered offering under the 

Securities Act during the 12 months 

preceding the filing of its Form 15F 

other than securities issued: 

• to the issuer’s employees; 

• by selling security holders in nonunderwritten offerings; 

• upon the exercise of outstanding 

rights granted by the issuer if the rights 

are granted pro rata to all existing 

security holders of the class of the 

issuer’s securities to which the rights 

attach; 

• pursuant to a dividend or interest 

reinvestment plan; or 

• upon the conversion of outstanding 

convertible securities or upon the 

exercise of outstanding transferable 

warrants issued by the issuer. 

The primary purpose of the dormancy 

condition’s prohibition of registered 

offerings is to preclude a foreign private 

issuer from exiting the Exchange Act 

reporting system shortly after it has 

engaged in U.S. public capital raising. 

We received relatively few comments 

on the reproposed dormancy 

condition.97 Most welcomed the 

revisions made to the originally 

proposed dormancy condition.98 For 

example, the originally proposed rule 

would have prohibited sales of 

unregistered securities, with limited 

exceptions. We removed this 

prohibition when reproposing Rule 

12h–6 after commenters convinced us 

that adoption of the originally proposed 

dormancy condition could well drive 

many private placement financings and 

other unregistered offerings by foreign 

companies offshore, to the detriment of 

U.S. investors and U.S. broker-dealers, 

since many companies might prefer to 

finance outside the United States under 

Regulation S in order to avoid triggering 

the dormancy condition. Consequently, 

as reproposed, the adopted rule will 

permit the unregistered sale of securities 

that are exempted under the Securities 


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99 15 U.S.C. 77d(2). 

100 17 CFR 230.501 et seq. 

101 17 CFR 230.144A. 

102 17 CFR 230.801 and 230.802. 

103 15 U.S.C. 77c and 77c(a)(10). 

104See Part II.A.3 of the Reproposing Release. 

105 Instruction 2 to Item 8 of Form 20–F imposes 

a similar limitation. 

106See the letters from Linklaters and the N.Y. 

State Bar. 

107 17 CFR 239.16b. Form S–8 is the form used 

by an Exchange Act reporting company to register 

securities for issuance to its employees or those of 

its subsidiaries or parent under an employee benefit 

plan. 108New Exchange Act Rule 12h–6(f)(2) (17 CFR 

240.12h–6(f)(2)). 109See General Instruction A.1 to Form S–8. 110New Exchange Act Rule 12h–6(a)(3) (17 CFR 

240.12h–6(a)(3)). 111New Exchange Act Rule 12h–6(f)(5)(i) (17 CFR 

240.12h–6(f)(5)(i)). Rule 12h–6 defines ‘‘recent 12- 

month period’’ to mean a 12-calendar month period 

that ended no more than 60 days before the filing 

date of the Form 15F. New Exchange Act Rule 12h–

6(f)(6) (17 CFR 240.12h–6(f)(6)). 

112New Exchange Act Rule 12h–6(f)(5)(ii) (17 

CFR 240.12h–6(f)(5)(ii)). As proposed and as 

adopted, measurement under this condition is by 

reference to average daily trading volume (ADTV) 

as reported by the relevant market. Although the 

proposing and reproposing releases noted that there 

are differences concerning how various markets 

measure and report trading volume (for example, 

dealer markets versus auction markets), no 

commenter supported a trading volume standard 

that would take such differences into account. 

113See, for example, the letter from Cravath. 

114For the purpose of the primary trading market 

determination, an issuer would measure the ADTV 

of on-exchange transactions in its securities 

aggregated over one or two foreign jurisdictions 

against its worldwide trading volume. The issuer 

could include in this measure off-exchange 

Continued 

Act during the dormancy period. The 

permitted category of securities will 

include sales pursuant to section 4(2),99

Regulation D,100 Rule 144A,101 Rules 

801 and 802,102 and exempt securities 

under section 3, including section 

3(a)(10) of the Securities Act.103

Some of the comments pertained to 

additional proposed exceptions to the 

dormancy condition. As originally 

proposed, Rule 12h–6 would have 

excepted from the dormancy condition’s 

prohibition of sales of an issuer’s 

registered securities in the United States 

only securities sold to an issuer’s 

employees and those sold by selling 

security holders in non-underwritten 

offerings. When reproposing Rule 12h–

6, we proposed three additional 

exceptions to the dormancy condition’s 

prohibition of sales of an issuer’s 

registered securities: the issuance of 

registered securities pursuant to pro rata 

rights offerings, dividend or interest 

reinvestment plans, and the conversion 

of outstanding convertible securities.104

Like the earlier proposed exceptions, 

these transactions often occur for 

reasons unrelated to capital raising or 

for the benefit of the issuer, for example, 

to benefit current security holders or for 

the convenience of investors. 

We also reproposed that these 

additional exceptions would not apply 

to securities issued pursuant to a 

standby underwritten offering or other 

similar arrangement in the United 

States. As we explained, this limitation 

is consistent with the Commission’s 

previous treatment of these types of 

registered offerings.105

Two commenters requested that we 

clarify that an issuer would not trigger 

the dormancy condition if it conducted 

a registered offering involving, for 

example, a rights offering, in the United 

States, with a standby underwriting 

arrangement according to which the 

underwriter only resold the securities 

purchased in the offering outside the 

United States pursuant to Regulation 

S.106 We agree that this type of standby 

underwritten arrangement would not 

trigger the dormancy condition since it 

would not increase an issuer’s 

involvement in public capital raising in 

the United States. 

Also as reproposed, the adopted rule 

includes under the dormancy condition 

sales of an issuer’s securities by its 

selling security holders in an 

underwritten registered offering because 

there is a greater likelihood of issuer 

involvement in a U.S. underwritten 

offering than in a non-underwritten 

offering of selling security holders. 

New Exchange Act Rule 12h–6 will 

use the definition of ‘‘employee’’ under 

Form S–8 107 for the purpose of applying 

the dormancy condition under Rule 

12h–6, as reproposed.108 That definition 

includes any employee, director, general 

partner, certain trustees, certain 

insurance agents, and former employees 

as well as executors, administrators or 

beneficiaries of the estates of deceased 

employees, and a family member of an 

employee who has received shares 

through a gift or domestic relations 

order.109 Otherwise, a narrow 

interpretation of the term ‘‘employee’’

could result in an issuer being 

disqualified from terminating its 

Exchange Act registration and reporting 

obligations under Rule 12h–6 because it 

engaged in a sale of securities during the 

dormancy period to an employee’s 

family member or other relationship 

permitted under Form S–8 but not 

explicitly allowed under the new rule. 

4. Foreign Listing Condition 

We are adopting a foreign listing 

condition under Rule 12h–6, which will 

require that, with respect to equity 

securities, for at least the 12 months 

preceding the filing of its Form 15F, a 

foreign private issuer must have 

maintained a listing of the subject class 

of securities on one or more exchanges 

in a foreign jurisdiction that, either 

singly or together with the trading of the 

same class of the issuer’ s securities in 

another foreign jurisdiction, constitutes 

the primary trading market for the 

issuer’s subject class of securities.110

The new rule defines ‘‘primary trading 

market’’ to mean that at least 55 percent 

of the trading in the foreign private 

issuer’s subject class of securities took 

place in, on or through the facilities of 

a securities market or markets in no 

more than two foreign jurisdictions 

during a recent 12-month period.111

That definition further provides that if 

an issuer aggregates the trading of its 

securities in two foreign jurisdictions 

for the purpose of Rule 12h–6’s foreign 

listing condition, the trading for the 

issuer’s securities in at least one of the 

two foreign jurisdictions must be larger 

than the trading in the United States for 

the same class of the issuer’s 

securities.112

The purpose of this foreign listing 

condition is to help assure that there is 

a non-U.S. jurisdiction that principally 

regulates and oversees the issuance and 

trading of the issuer’s securities and the 

issuer’s disclosure obligations to 

investors. This foreign listing condition 

increases the likelihood that the 

principal pricing determinants for a 

foreign private issuer’s securities are 

located outside the United States, and 

makes more likely the availability of a 

set of non-U.S. securities disclosure 

documents to which a U.S. investor may 

turn for material information when 

making investment decisions about the 

issuer’s securities following the 

termination of its disclosure obligations 

under Rule 12h–6. If the United States 

was the sole or principal market for the 

foreign private issuer’s securities, then 

the Commission would have a greater 

regulatory interest in continuing to 

subject the foreign company to the 

Exchange Act reporting regime. 

The adopted foreign listing condition 

is substantially the same as the 

reproposed condition, except that, at the 

request of commenters, we have 

modified the rule to reflect that an 

issuer may be listed on multiple 

exchanges within a single 

jurisdiction.113 Thus, the new rule 

provides that an issuer may aggregate 

trading in the same class of its equity 

securities on all of its exchanges within 

a single foreign jurisdiction or in no 

more than two foreign jurisdictions for 

the purpose of the foreign listing 

condition, as long as the trading in one 

of the foreign jurisdictions is greater 

than the trading in the United States.114


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transactions in those jurisdictions comprising the 

numerator only if it includes those off-exchange 

transactions when calculating worldwide trading 

volume in the denominator. This denominator 

would be the same as the denominator used for the 

trading volume benchmark. Thus, this denominator 

would consist of U.S. ADTV, which must include 

both on-exchange and off-exchange transactions, 

and non-U.S. ADTV, which must include onexchange transactions, but could also include offexchange transactions. See Part II.A.1.a.ii of this 

release. 

115See the letters from the ABA, BusinessEurope, 

Cravath, Davis Polk, Linklaters, and Skadden Arps. 

116See the letters from the ABA, Linklaters, and 

Skadden Arps. 

117See Part II.A.4 of the Reproposing Release. 

118See the letters from BusinessEurope and Davis 

Polk. 

119For this reason, we decline to adopt a general 

exception from the foreign listing condition for 

equity securities issuers proceeding under the 

alternative 300-holder provision. 

120Exchange Act Rules 12g–4(a)(1)(i) and 12h–

3(b)(1)(i) (17 CFR 240.12g–4(a)(1)(i) and 240.12h–

3(b)(1)(i)). 

121New Exchange Act Rule 12h–6(c) (17 CFR 

240.12h–6(c)). 

122As originally proposed and reproposed, the 

adopted exit rule for debt securities does not 

include a provision comparable to Rule 12h–3’s 500 

record holder provision because most foreign 

private issuers that are debt securities registrants 

would likely exceed the $10 million asset threshold 

that accompanies the 500 record holder standard. 

No commenter has ever requested that we 

incorporate the 500 record holder and $10 million 

asset standard into Rule 12h–6’s debt securities 

provision, either at the proposing or reproposing 

stage. 

123See the letters from Cleary Gottlieb, EALIC, 

Davis Polk, and the EU. 

124 Davis Polk favored an increase to at least 

3,000. 

125We note that foreign private issuers that avail 

themselves of Rule 12h–6 will be able to terminate 

their reporting obligations under section 15(d) 

while U.S. companies will only continue to be able 

to suspend their reporting obligations pursuant to 

Rule 12h–3 and section 15(d). 

126New Exchange Act Rule 12h–6(e) (17 CFR 

240.12h–6(e)). 

127New Exchange Act Rule 12h–6(e)(1) (17 CFR 

240.12h–6(e)(1)). 

128Securities Act Rules 800 et seq. (17 CFR 

230.800 et seq.). 

129 17 CFR 230.405 and 240.3b–4(c). 

We received relatively few comments 

on the reproposed foreign listing 

condition.115 Three commenters 

generally approved of the changes made 

to the originally proposed foreign listing 

condition.116 These changes included 

shortening the proposed foreign listing 

requirement from two years to one year 

and permitting an issuer to aggregate its 

trading on an exchange in one foreign 

jurisdiction with that in a second 

foreign jurisdiction.117 These 

commenters agreed that the reproposed 

foreign listing condition would increase 

the flexibility of the new rule for foreign 

private issuers while serving to protect 

investors. 

New Rule 12h–6’s foreign listing 

condition will apply to any issuer of 

equity securities, whether that issuer is 

relying on the trading volume 

benchmark or the alternative holder 

provision, as reproposed. Some 

commenters requested that the 

Commission not apply the foreign 

listing condition to an issuer that has 

delisted in its primary trading market as 

a result of being acquired. According to 

these commenters, that issuer would not 

be able to terminate its Exchange Act 

reporting obligations under the 300- 

holder provision because it could not 

meet the foreign listing requirement.118

The foreign listing condition is an 

important component of the new exit 

regime because it increases the 

likelihood that U.S. investors will have 

a set of material disclosure documents 

about an issuer to which they may turn 

following that issuer’s exit from the 

Exchange Act reporting system. 

Therefore, we decline to create an 

exception from this condition for any 

issuer at this time.119 We note that, 

under most circumstances, a foreign 

private issuer that has been acquired 

may exit the Exchange Act reporting 

regime under the provisions of the 

current exit rules that permit any issuer, 

whether domestic or foreign, or listed or 

unlisted, to file a Form 15 if its 

securities are held by less than 300 

holders of record.120

B. Debt Securities Provision 

As adopted, Rule 12h–6 will enable a 

foreign private issuer to terminate its 

Exchange Act reporting obligations 

regarding a class of debt securities as 

long as the issuer has filed or furnished 

all reports required under Exchange Act 

section 13(a) or section 15(d), including 

at least one Exchange Act annual report, 

and has its class of debt securities held 

of record by less than 300 holders either 

on a worldwide basis or who are U.S. 

residents.121 This provision reflects the 

minimum reporting requirement and 

current 300 holder standard under 

section 15(d) and Rule 12h–3. Moreover, 

it is the same as the reproposed debt 

securities provision.122

Some commenters requested that we 

revise the 300-holder standard for 

termination of a foreign private issuer’s 

Exchange Act reporting obligations 

under Exchange Act Section 15(d) 

regarding a class of debt securities that 

had been offered and sold pursuant to 

an effective registration statement under 

the Securities Act.123 In the view of 

most of these commenters, an increase 

to at least 1,000 holders would be 

appropriate in light of the changes in 

the global securities markets since the 

300-holder standard was adopted by 

Congress in the 1960s.124

We are not revising the 300-holder 

standard as it applies to debt securities. 

While we agree that there have been 

substantial changes in the global capital 

markets, no commenter has presented 

us with data or other information that 

supports raising the threshold from that 

adopted by Congress. In addition, the 

problems associated with determining 

the ownership of equity securities do 

not appear to apply to debt securities, as 

to which there is generally a single U.S.- 

based transfer agent. Further, the same 

300-holder threshold applies to U.S. 

companies, and unlike the situation for 

equity securities, no commenter has 

addressed why it would be appropriate 

to treat U.S. and foreign registrants 

differently with respect to the 

termination or suspension of reporting 

obligations under section 15(d) as 

applied to debt securities.125

C. Revised Counting Method 

We are adopting, as reproposed, Rule 

12h–6’s revised counting method, 

which will enable an issuer of equity 

securities proceeding under the 

alternative 300-holder provision, or a 

debt securities issuer, to use a modified 

version of the ‘‘look through’’ counting 

method under Rule 12g3–2(a) when 

determining the number of its U.S. 

resident security holders.126 Instead of 

having to look through the accounts of 

brokers, banks and other nominees on a 

worldwide basis to determine the 

number of its U.S. resident holders, as 

is required under the current rules, a 

foreign private issuer could limit its 

inquiry to brokers, banks and other 

nominees located in the United States, 

the issuer’s jurisdiction of 

incorporation, legal organization or 

establishment and, if different, the 

jurisidiction of its primary trading 

market.127 This revised counting 

method is substantially similar to the 

counting method that the Commission 

adopted under the exemptive rules for 

cross-border rights offerings, exchange 

offers and business combinations,128 as 

well as under the definition of foreign 

private issuer.129

Like the reproposed rule, the adopted 

counting method provision requires an 

issuer that aggregates the trading 

volume of its securities in two foreign 

jurisdictions for the purpose of meeting 

Rule 12h–6’s foreign listing condition to 

look through nominee accounts in both 

foreign jurisdictions, which comprise its 

primary trading market, and in the 

United States as well as in its 

jurisdiction of incorporation or 

organization, if different from the two 

jurisdictions that comprise its primary 


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130New Exchange Act Rule 12h–6(e)(1)(ii) (17 

CFR 240.12h–6(e)(1)(ii)). 

131New Exchange Act Rule 12h–6(e)(4) (17 CFR 

240.12h–6(e)(4)). 

132See Securities Act Rule 800(h)(4) (17 CFR 

230.800(h)(4)) and Instruction B to Exchange Act 

Rule 3b–4(c)(1) (17 CFR 240.3b–4(c)(1)). 

133New Exchange Act Rule 12h–6(e)(2) (17 CFR 

240.12h–6(e)(2)). 

134See the letter from Cravath. 

135New Rule 12h–6(e)(3) (17 CFR 240.12h–

6(e)(3)). 

136See, for example, section 212 of the United 

Kingdom Companies Act. 

137 17 CFR 240.12h–6(d). 

138 17 CFR 240.12g–3. 

139 17 CFR 240.15d–5. 

140New Exchange Act Rule 12h–6(d)(1)(i) (17 

CFR 240.12h–6(d)(1)(i)). 

141New Exchange Act Rule 12h–6(d)(1)(ii) (17 

CFR 240.12h–6(d)(1)(ii)). 

142New Exchange Act Rule 12h–6(d)(2) (17 CFR 

240.12h–6(d)(2)). 

trading market.130 Also as reproposed, 

the adopted counting method provision 

permits an issuer to rely on the 

assistance of an independent 

information services provider when 

calculating the number of its U.S. 

security holders.131

We are also adopting a presumption, 

included in both the originally proposed 

and reproposed counting method 

provisions, that we previously adopted 

under the cross-border rules and 

definition of foreign private issuer.132

This presumption is that, if, after 

reasonable inquiry, an issuer is unable 

without unreasonable effort to obtain 

information about the amount of 

securities held by nominees for the 

accounts of customers resident in the 

United States, it may assume that the 

customers are the residents of the 

jurisdiction in which the nominee has 

its principal place of business.133

The reproposed rule provided that an 

issuer must count securities as owned 

by U.S. holders when publicly filed 

reports of beneficial ownership or 

information that is otherwise provided 

to it indicates that the securities are 

held by U.S. residents. One commenter 

requested that we clarify that an issuer 

is not required to take account of U.S. 

ownership information provided to it if 

the issuer determines that it is 

unreliable.134 We have so clarified by 

revising the above provision to state that 

an issuer must count securities as 

owned by U.S. holders when publicly 

filed reports of beneficial ownership or 

other reliable information that is 

provided to it indicates that the 

securities are held by U.S. residents.135

Some foreign jurisdictions have laws 

that provide an established and 

enforceable means for a public company 

to obtain information about its 

shareholders.136 Like the reproposed 

rule, Rule 12h–6 does not provide that 

a foreign private issuer may rely solely 

on specified foreign statutory or code 

provisions when calculating the number 

of its U.S. resident equity or debt 

holders. We received only two 

comments in support of such a 

provision at the proposing stage, and 

none at the reproposing stage. However, 

as we noted in the reproposing release, 

as part of its inquiry regarding whether 

it meets any of the quantitative 

benchmarks under Rule 12h–6, an 

issuer may refer to shareholder 

information obtained pursuant to those 

foreign statutory or code provisions to 

the extent that this shareholder 

information is reasonably reliable and 

accurate and furthers the purpose of the 

inquiry. 

D. Expanded Scope of Rule 12h–6 

We are adopting, substantially as 

reproposed, an expansion of the scope 

of the originally proposed Rule 12h–6 in 

two respects. First, we are adopting a 

rule providing that an issuer that has 

succeeded to the Exchange Act 

reporting obligations of an acquired 

company may terminate those reporting 

obligations under Rule 12h–6 as long as 

it satisfies specified conditions. Second, 

we are extending the application of Rule 

12h–6 to a foreign private issuer that 

previously filed a Form 15 and effected 

its termination of registration or 

suspension of reporting under the 

current exit rules before the effective 

date of Rule 12h–6, subject to 

conditions. 

1. Application of Rule 12h–6 to 

Successor Issuers 

As adopted, Exchange Act Rule 12h–

6(d) 137 provides that, following a 

merger, consolidation, exchange of 

securities, acquisition of assets or 

otherwise, a foreign private issuer that 

has succeeded to the registration of a 

class of securities under Exchange Act 

section 12(g) pursuant to Rule 12g–3,138

or to the reporting obligations of another 

issuer under Exchange Act section 15(d) 

pursuant to Rule 15d–5,139 may file a 

Form 15F to terminate those reporting 

obligations if, regarding a class of equity 

securities, the successor issuer meets 

the conditions under Rule 12h–6(a), 

which applies to equity securities 

issuers.140 Regarding a class of debt 

securities, the successor issuer must 

meet the conditions under Rule 12h–

6(c), including the reporting 

condition.141 New Rule 12h–6(d) then 

provides that, when determining 

whether it meets the prior reporting 

condition under either the equity or 

debt securities provision of the final 

rule, a successor issuer may take into 

account the reporting history of the 

issuer whose reporting obligations it has 

assumed pursuant to Rule 12g–3 or 

15d–5.142

This successor issuer provision will 

enable a non-Exchange Act reporting 

foreign private issuer that acquires a 

reporting foreign private issuer in a 

transaction exempt under the Securities 

Act, for example, under Rule 802 or 

section 3(a)(10), to qualify immediately 

for termination of its Exchange Act 

reporting obligations under Rule 12h–6, 

without having to file an Exchange Act 

annual report, as long as the successor 

issuer meets the rule’s foreign listing, 

dormancy and quantitative benchmark 

conditions, and the acquired company’s 

reporting history fulfills Rule 12h–6’s 

prior reporting condition. Since the 

successor issuer will have assumed the 

acquired company’s Exchange Act 

reporting obligations, we believe it is 

appropriate that the issuer succeed to 

the acquired company’s reporting 

history for the purpose of Rule 12h–6. 

The adopted successor issuer 

provision is substantially similar to the 

reproposed provision, except that the 

adopted rule clarifies that, in order to 

qualify for deregistration under the 

successor issuer provision, an issuer 

must meet all of the conditions 

pertaining to equity securities 

registrants, including the dormancy 

condition. We have made this 

clarification in order to underscore our 

position, stated at the reproposing stage, 

that if a previously non-Exchange Act 

reporting foreign private issuer acquires 

an Exchange Act reporting company by 

consummating an exchange offer, 

merger or other business combination 

registered under the Securities Act, 

most likely on a Form F–4 registration 

statement, the acquiror will have to 

fulfill Rule 12h–6’s prior reporting 

condition without reference to the 

acquired company’s reporting history. 

Since the acquiror will have triggered its 

own section 15(d) reporting obligations 

upon the effectiveness of its Securities 

Act registration statement, it will have 

to meet Rule 12h–6’s full reporting 

condition like any other section 15(d) 

reporting company before it can 

terminate its reporting obligations under 

the new rule. In order to clarify that 

such a Securities Act registrant may not 

proceed under the successor issuer 

provision and immediately terminate its 

section 15(d) reporting obligations upon 

completion of the Form F–4 transaction, 

the adopted rule provides that an issuer 

must meet Rule 12h–6’s equity 


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143Because some commenters stated that the 

dormancy condition should not apply to a foreign 

private issuer that filed a Securities Act registration 

statement solely to effect an acquisition or business 

combination (see, for example, the letter from 

Sullivan & Cromwell), we believe it is necessary to 

state explicitly in Rule 12h–6 that the dormancy 

condition applies to a successor issuer. 144See, for example, the letters from Cleary 

Gottlieb and PricewaterhouseCoopers. 145See the letter from Latham & Watkins. 146 17 CFR 240.12g–3(g). This provision requires 

a successor issuer to file an Exchange Act annual 

report for the last full fiscal year of the predecessor 

before the issuer’s succession if the predecessor has 

not done so. 147 17 CFR 240.12h–6(g). 

148New Exchange Act Rule 12h–6(i)(1) (17 CFR 

240.12h–6(i)(1)). A former section 15(d) reporting 

company would benefit from proceeding under 

Rule 12h–6 by obtaining termination, rather than 

mere suspension, of its reporting obligations with 

respect to a class of equity or debt securities. As 

discussed below, a former section 12(g) company 

also would benefit from proceeding under Rule 

12h–6 by being able to claim the Rule 12g3–2(b) 

exemption immediately upon the effectiveness of 

its Rule 12h–6 termination. 149Rule 12h–6(i)(2)(i) (17 CFR 240.12h–6(i)(2)(i)). 150Rule 12h–6(i)(2)(ii) (17 CFR 240.12h–

6(i)(2)(ii)). 151See Part II.D.2 of the Reproposing Release. 152See the letters from the ABA, BusinessEurope, 

Cleary Gottlieb, EALIC, the EU, the N.Y. State Bar, 

and Sullivan & Cromwell. 

153See, for example, the letters from EALIC and 

Sullivan & Cromwell. 154New Exchange Act Rule 12h–6(h) (17 CFR 

240.12h–6(h)). 155See the letter from Skadden Arps. 

securities conditions, which includes 

the dormancy condition.143

Most of the parties that commented 

on the reproposed successor issuer 

provision supported it.144 However, one 

commenter sought clarification 

regarding the intended role that the 

predecessor company would play in 

satisfying Rule 12h–6’s requirements.145

More particularly, this commenter was 

concerned that Rule 12h–6 could be 

construed to require an issuer to take 

into account the listing and trading 

history of an acquired company. Such 

an interpretation could preclude an 

acquiror from terminating its Exchange 

Act reporting obligations immediately 

after succession if the acquired 

company was unlisted or had an active 

U.S. trading market. 

Therefore, we are clarifying that Rule 

12h–6(d) permits a successor issuer to 

consider an acquired company’s history 

only when determining whether the 

successor meets Rule 12h–6’s prior 

reporting condition. Following an 

acquisition, a successor issuer must look 

only to its own foreign listing history, 

and consider its own U.S. and 

worldwide trading volume, when 

determining whether it satisfies Rule 

12h–6’s foreign listing and trading 

volume conditions. 

This commenter also sought 

clarification regarding whether, as a 

condition to deregistration under Rule 

12h–6, a successor issuer would have an 

obligation under Exchange Act Rule 

12g–3(g)146 to file an Exchange Act 

annual report for the predecessor’s last 

full fiscal year prior to succession. As 

with the filing of a Form 15 under the 

current exit rules, under Rule 12h–

6(g),147 the suspension of a foreign 

private issuer’s duty to file reports 

under section 13(a) or 15(d) occurs 

immediately upon filing a Form 15F. 

This suspension extends to an annual 

report that would be required under 

Rule 12g–3(g). A successor issuer would 

only have to file an annual report on 

behalf of its predecessor under Rule 

12g–3(g) if, at the time of filing its Form 

15F, that annual report was past due. 

This is consistent with the current 

practice involving Form 15. 

2. Application of Rule 12h–6 to Prior 

Form 15 Filers 

As adopted, Rule 12h–6(i) will extend 

termination of Exchange Act reporting 

under the new exit rule to a foreign 

private issuer that, before the effective 

date of Rule 12h–6, already effected the 

suspension or termination of its 

Exchange Act reporting obligations after 

filing a Form 15.148 A prior Form 15 

filer will have to meet the following 

conditions in order to obtain the 

benefits of Rule 12h–6 with respect to 

a class of equity securities: 

• the issuer must satisfy Rule 12h–6’s 

foreign listing condition regarding the 

class of equity securities that was the 

subject of its Form 15; 

• the issuer must satisfy either Rule 

12h–6’s trading volume or alternative 

holder provision; and 

• the issuer must file a Form 15F.149

An equity securities issuer will not 

have to satisfy Rule 12h–6’s prior 

reporting or dormancy provisions since 

it will already be a non-reporting entity. 

A prior Form 15 filer will have to 

meet the following conditions in order 

to obtain the benefits of Rule 12h–6 

with respect to a class of debt securities: 

• the issuer must meet Rule 12h–6’s 

record holder provision for debt 

securities; and 

• the issuer must file a Form 15F.150

As reproposed, the prior Form 15 filer 

provision was substantially similar to 

the adopted rule, except that we 

proposed to establish, as a condition of 

eligibility, that an issuer not be required 

to register a class of securities under 

section 12(g) or be required to file 

reports under section 15(d).151 While 

the parties that commented on the 

reproposed provision supported 

extending the benefits of Rule 12h–6 to 

a prior Form 15 filer, most also opposed 

requiring that filer to determine that it 

had not assumed or resumed Exchange 

Act reporting obligations.152 Those 

commenters noted that, since under the 

reproposed rule, a former equity 

securities registrant could not have 

relied on the trading volume condition, 

that registrant would have had once 

more to undertake the costly task of 

counting its U.S. resident holders. 

We agree that, as suggested by some 

of those commenters, a more equitable 

approach would be to place former 

equity securities registrants in as good a 

position as current registrants by 

permitting them to meet the trading 

volume benchmark as an alternative to 

the record holder standard.153 The 

adopted rule takes this approach. 

E. Public Notice Requirement 

We are adopting, as reproposed, a 

public notice requirement as a condition 

to termination of reporting under Rule 

12h–6, except for prior Form 15 

filers.154 Pursuant to this requirement, 

an issuer of equity or debt securities, 

including a successor issuer, will have 

to publish, either before or on the date 

that it files its Form 15F, a notice in the 

United States that discloses its intent to 

terminate its section 13(a) or 15(d) 

reporting obligations. The issuer must 

publish the notice, such as a press 

release, through a means reasonably 

designed to provide broad 

dissemination of the information to the 

public in the United States. The issuer 

also must submit a copy of the notice, 

either under cover of a Form 6–K before 

or at the time of filing of the Form 15F, 

or as an exhibit to the Form 15F. The 

primary purpose of this notice provision 

is to alert U.S. investors who have 

purchased the issuer’s securities about 

the issuer’s intended exit from the 

Exchange Act registration and reporting 

system. 

The notice requirement will not apply 

to a prior Form 15 filer that files a Form 

15F to terminate its registration and 

reporting obligations under Rule 12h–

6(i). Since a prior Form 15 filer will 

already have ceased its Exchange Act 

reporting obligations, investors would 

gain little from the publishing of such 

a notice. 

One commenter requested that we 

clarify that an issuer may satisfy this 

notice provision by having the press 

release disseminated in the United 

States by one of the international wire 

services, such as those operated by U.S. 

and international financial 

publications.155 We have so clarified by 

revising Form 15F to request that the 

issuer identify the means, such as 

publication in a particular newspaper or 

transmission by a particular wire 


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156See Item 7.B of Form 15F. 

157New Exchange Act Rule 12h–6(a). 

158 17 CFR 249.324. 

159Form 15F General Instruction B. 

160New Exchange Act Rule 12h–6(g) (17 CFR 

240.12h–6(g)). 

161Form 15F Item 11. 

162See the letter from Cleary Gottlieb. 

163See Exchange Act Rules 12g–4(a)(2) and 12h–

3(b)(2) (17 CFR 240.12g–4(a)(2) and 12h–3(b)(2)). 

164New Exchange Act Rule 12g3–2(e)(1) (17 CFR 

240.12g3–2(e)(1)). 

165Currently, foreign private issuers that 

registered a class of securities under section 12 

must wait at least 18 months following their 

termination of reporting before they would be 

eligible to apply for the Rule 12g3–2(b) exemption. 

In addition, foreign private issuers with an active 

or suspended reporting obligation under section 

15(d) have thus far not been eligible to claim the 

Rule 12g3–2(b) exemption. See Rule 12g3–2(d)(1) 

(17 CFR 240.12g3–2(d)(1)), which currently excepts 

from the 18 month requirement only issuers that 

have filed Securities Act registration statements 

using the Multijurisdictional Disclosure Act (MJDS) 

forms. 

166New Exchange Act Rule 12g3–2(e)(2) (17 CFR 

240.12g3 –2(e)(2)). 

167Any post-termination trading of a foreign 

private issuer’s securities in the United States 

Continued 

service, used to disseminate the notice 

in the United States.156

F. Form 15F 

Like our current exit rules, adopted 

Rule 12h–6 will require a foreign private 

issuer to file electronically on EDGAR a 

form certifying that it meets the 

requirements for ceasing its Exchange 

Act reporting obligations.157 By signing 

and filing new Form 15F,158 a foreign 

private issuer will be certifying that: 

• it meets all of the conditions for 

termination of Exchange Act reporting 

specified in Rule 12h–6; and 

• there are no classes of securities 

other than those that are the subject of 

the Form 15F regarding which the issuer 

has Exchange Act reporting 

obligations.159

Unlike current Form 15, new Form 

15F will require a foreign private issuer 

to provide disclosure regarding several 

items in order to provide investors with 

information regarding an issuer’s 

decision to terminate its Exchange Act 

reporting obligations. The information 

will also assist Commission staff in 

assessing the use of Rule 12h–6. The 

Form 15F filing requirement and the 

specified items of information are 

substantially the same as those under 

reproposed Rule 12h–6, except that we 

have modified some items to conform to 

the changes we have made to the 

reproposed rule. 

As with Form 15, and as originally 

proposed and reproposed, filing of new 

Form 15F will immediately suspend an 

issuer’s Exchange Act reporting 

obligations regarding the subject class of 

securities and commence a 90-day 

waiting period. If, at the end of this 90- 

day period, the Commission has not 

objected to the filing, the suspension 

will automatically become a termination 

of registration and reporting. If the 

Commission denies the Form 15F or the 

issuer withdraws it, within 60 days of 

the date of the denial or withdrawal, the 

issuer will be required to file or submit 

all reports that would have been 

required had it not filed the Form 

15F.160

After filing Form 15F, an issuer will 

have no continuing obligation to make 

inquiries or perform other work 

concerning the information contained in 

the Form 15F, including its assessment 

of trading volume or ownership of its 

securities. However, Form 15F will 

require an issuer to undertake to 

withdraw its Form 15F before the date 

of effectiveness if it has actual 

knowledge of information that causes it 

reasonably to believe that, at the date of 

filing the Form 15F: 

• the average daily trading volume of 

its subject class of securities in the 

United States exceeded 5 percent of the 

average daily trading volume of that 

class of securities on a worldwide basis 

for the same recent 12-month period 

that the issuer used for purposes of Rule 

12h–6(a)(4)(i); 

• its subject class of securities was 

held of record by 300 or more United 

States residents or 300 or more persons 

worldwide, if proceeding under Rule 

12h–6(a)(4)(ii) or Rule 12h–6(c); or 

• it otherwise did not qualify for 

termination of its Exchange Act 

reporting obligations under Rule 12h–

6.161

This undertaking is substantially the 

same as that required under the 

reproposed rule and form, except that, 

in the first prong of the reproposed 

rule’s undertaking, we referred to 

trading volume ‘‘during a recent 12- 

month period.’’ At the request of a 

commenter,162 we have clarified that the 

undertaking applies to an issuer relying 

on the trading volume provision only 

when it learns that its trading volume 

exceeded the 5 percent threshold for the 

same recent 12-month period that the 

issuer used for purposes of Rule 12h–6’s 

trading volume provision. 

G. Amended Rules 12g–4 and 12h–3 

Although similar to the current 300 

record holder standard, Rule 12h–6’s 

alternative record holder condition for 

equity securities and its debt securities 

provision will offer advantages 

compared to the current exit rules. As 

adopted, Rule 12h–6’s revised counting 

method will limit the jurisdictions in 

which a foreign private issuer must 

search for records of its U.S. resident 

holders. Moreover, Rule 12h–6 will 

enable a foreign private issuer to 

terminate, rather than merely suspend, 

its section 15(d) reporting obligations 

regarding a class of equity or debt 

securities. In addition, under Rule 12h–

6, a foreign private issuer will be able 

to claim the benefits of the Rule 12g3–

2(b) exemption immediately upon the 

effectiveness of its termination of 

reporting regarding a class of equity 

securities under section 12(g) or 15(d). 

In each instance, once its termination of 

reporting becomes effective under Rule 

12h–6, an issuer will no longer have to 

concern itself with whether the number 

of its U.S. resident or worldwide 

holders of the class of subject securities 

has risen above the statutory or 

regulatory threshold. 

Given these advantages, we continue 

to believe that, following the adoption 

of Rule 12h–6, few, if any, foreign 

private issuers will elect to proceed 

under the provisions of Rule 12g–4 or 

Rule 12h–3 that allow a foreign private 

issuer to terminate its registration of a 

class of securities under section 12(g) or 

suspend the duty to file reports under 

section 15(d) if the class of securities is 

held by less than 300 U.S. residents or 

by 500 U.S. residents and the issuer has 

had total assets not exceeding $10 

million on the last day of each of its 

most recent three fiscal years.163

Accordingly, we are adopting the 

amendments to eliminate these 

provisions in Rules 12g–4 and 12h–3, as 

reproposed. 

H. Amendment Regarding the Rule 

12g3–2(b) Exemption 

We are adopting, substantially as 

reproposed, an amendment to Exchange 

Act Rule 12g3–2 164 that will apply the 

exemption under Exchange Act Rule 

12g3–2(b) immediately to an issuer of 

equity securities upon the effectiveness 

of its termination of reporting under 

Rule 12h–6.165 As a condition to the 

immediate application of the Rule 12g3–

2(b) exemption upon its termination of 

reporting under Rule 12h–6, an issuer 

must publish subsequently in English 

material home country documents 

required under Rule 12g3–2(b)(1)(iii) on 

its Web site or through an electronic 

information delivery system generally 

available to the public in its primary 

trading market.166

The purpose of this condition is to 

provide U.S. investors with access to 

material information about an issuer of 

equity securities following its 

termination of reporting pursuant to 

Rule 12h–6.167 In addition, an issuer 


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would have to occur through over-the-counter 

markets such as that maintained by the Pink Sheets, 

LLC since, as of April, 1998, the NASD and the 

Commission have required a foreign private issuer 

to register a class of securities under Exchange Act 

section 12 before its securities could be traded 

through the electronic over-the-counter bulletin 

board administered by Nasdaq. See, for example, 

NASD Notice to Members (January 1998). 

168 In order to establish an ADR facility, an issuer 

must register the ADRs on Form F–6 (17 CFR 

239.36) under the Securities Act. The eligibility 

criteria for the use of Form F–6 include the 

requirement that the issuer have a reporting 

obligation under Exchange Act section 13(a) or have 

established the exemption under Rule 12g3–2(b). 

See General Instruction I.A.3 of Form F–6. 

169See Securities Act Rule 144A(d)(4) (17 CFR 

230.144A(d)(4)). 

170Brokers currently are exempt from complying 

with certain information obligations under 

Exchange Act Rule 15c2–11 (17 CFR 240.15c2–11) 

when a foreign company has established and 

maintains the Rule 12g3–2(b) exemption. See 

Release No. 34–41110 (February 25,1999), 64 FR 

11124 (March 8, 1999). 

171See New Exchange Act Rule 12g3–2(e)(3) (17 

CFR 240.12g3–2(e)(3)). 

172Most parties that commented on reproposed 

Rule 12g3–2(e) favored the extension of the Rule 

12g3–2(b) exemption to the above categories of 

issuers. See, for example, the letter from the ABA. 

173 17 CFR 240.12g3–2(d)(2). 

174New Exchange Act Rule 12g3–2(e)(4) (17 CFR 

240.12g3–2(e)(4)). 

175See the letter from MTR Corporation. 

176See General Instruction I.A.3 of Form F–6. 

177Commission staff will work with issuers to 

coordinate the establishment of the Rule 12g3–2(b) 

exemption on the same day as their termination of 

Exchange Act reporting. 

will be able to maintain a sponsored 

ADR facility with respect to its 

securities.168 This condition also will 

facilitate resales of that issuer’s 

securities to qualified institutional 

buyers under Rule 144A.169 Moreover, 

having a foreign private issuer’s key 

home country documents posted in 

English on its web site will assist U.S. 

investors who are interested in trading 

the issuer’s securities in its primary 

securities market.170

The adopted extension of Rule 12g3–

2(b) will apply both to a class of equity 

securities formerly registered under 

section 12(g) and one that formerly gave 

rise to section 15(d) reporting 

obligations, as reproposed. The Rule 

12g3–2(b) exemption received under 

new Rule 12g3–2(e) will remain in effect 

for as long as the foreign private issuer 

satisfies the rule’s electronic publication 

conditions or until the issuer registers a 

new class of securities under section 12 

or incurs section 15(d) reporting 

obligations by filing a new Securities 

Act registration statement, which has 

become effective.171

1. Extension of the Rule 12g3–2(b) 

Exemption Under Rule 12g3–2(e) 

As adopted, because Rule 12g3–2(e) 

applies to any issuer that has terminated 

its reporting under Rule 12h–6, the rule 

amendment will effectively extend the 

Rule 12g3–2(b) exemption to: 

• a foreign private issuer immediately 

upon its termination of reporting 

regarding a class of equity securities 

pursuant to Rule 12h–6(a); 

• a successor issuer immediately 

upon its termination of reporting 

regarding a class of equity securities 

pursuant to Rule 12h–6(d); and 

• a prior Form 15 filer immediately 

upon its termination of reporting 

regarding a class of equity securities 

pursuant to Rule 12h–6(i).172

Currently Rule 12g3–2(d)(2) precludes 

extending the Rule 12g3–2(b) exemption 

to a foreign private issuer, other than a 

Canadian issuer using the MJDS forms, 

that has issued securities in a merger or 

other similar transaction to acquire a 

company that has registered a class of 

securities under section 12 or has a 

reporting obligation under section 

15(d).173 As amended, and as 

reproposed, Rule 12g3–2(d)(2) will 

effectively extend the Rule 12g3–2(b) 

exemption to a successor issuer that has 

terminated its Exchange Act reporting 

obligations under Rule 12h–6(d). Since 

we are permitting a successor issuer to 

rely on its predecessor’s reporting 

history for the purpose of Rule 12h–6, 

we believe the issuer should also benefit 

from claiming the Rule 12g3–2(b) 

exemption immediately upon the 

effectiveness of its Form 15F. 

Also as reproposed, we are extending 

the Rule 12g3–2(b) amendment 

immediately upon the termination of 

reporting pursuant to Rule 12h–6(i) to a 

foreign private issuer that, before the 

effective date of Rule 12h–6, terminated 

its registration or suspended its 

reporting obligations regarding a class of 

equity securities after filing a Form 15. 

This is consistent with our expansion of 

the scope of Rule 12h–6 to encompass 

prior Form 15 filers. Without this 

change, a prior Form 15 filer would find 

itself subject to the 18 month waiting 

period that currently exists under Rule 

12g3–2(d), although the issuer qualified 

for termination of reporting under Rule 

12h–6(i). 

We further are permitting a foreign 

private issuer that filed a Form 15F 

solely to terminate its reporting 

obligations regarding a class of debt 

securities to establish the Rule 12g3–

2(b) exemption for a class of equity 

securities upon the effectiveness of its 

termination of reporting regarding the 

class of debt securities.174 Since we are 

abolishing the 18 month ‘‘waiting 

period’’ for equity securities issuers that 

have terminated their Exchange Act 

reporting obligations pursuant to Rule 

12h–6, it would serve no useful purpose 

to impose this waiting period on a debt 

securities issuer that determines that it 

will need the Rule 12g3–2(b) exemption 

for a class of equity securities following 

its termination of reporting under Rule 

12h–6. 

The reproposed version of Rule 12g3–

2(e)(4) provided that a debt securities 

issuer could apply for the Rule 12g3–

2(b) exemption at any time following 

the effectiveness of its termination of 

reporting regarding the class of debt 

securities. One commenter pointed out 

that this version, if adopted, would 

jeopardize the legality of a sponsored 

ADR facility maintained by a registered 

debt securities issuer regarding a class 

of equity securities.175 A foreign private 

issuer that has registered only debt 

securities under the Securities Act may 

establish an ADR facility for its equity 

securities by filing and having become 

effective a Form F–6 registration 

statement because it is an Exchange Act 

reporting company.176 Such an issuer 

would lose the legal basis for its ADR 

facility if, before it could apply for the 

Rule 12g3–2(b) exemption, it had to 

wait until after the completion of the 90- 

day waiting period, when the 

termination of its Exchange Act 

reporting obligations under Rule 12h–6 

would become effective. 

As we have previously stated, we 

value the formation of ADR facilities, 

because they are beneficial to U.S. 

investors, and we encourage foreign 

issuers to continue to maintain their 

ADR facilities after terminating their 

Exchange Act reporting obligations. 

Therefore, we are clarifying that, under 

adopted Rule 12g3–2(e)(4), while a debt 

securities issuer may establish the Rule 

12g3–2(b) exemption only upon the 

effectiveness of its termination of 

reporting regarding its class of debt 

securities under Rule 12h–6, it may 

apply for the Rule 12g3–2(b) exemption 

after it has filed its Form 15F and 

commenced the 90–day waiting 

period.177 The issuer must include in 

that application the date that it filed its 

Form 15F as well as the address of its 

Internet Web site or that of the 

electronic information delivery system 

on which it will publish the material 

home country information required 

under Rule 12g3–2(b). 

2. Electronic Publishing of Home 

Country Documents 

Currently foreign companies claim the 

Rule 12g3–2(b) exemption by submitting 

to the Commission on an ongoing basis 

the material required by the rule. This 

material may only be submitted in paper 


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178A foreign private issuer that has successfully 

filed an application for the Rule 12g3–2(b) 

exemption must currently furnish its home country 

documents in paper because the application is 

analogous to one submitted for an exemption under 

Exchange Act section 12(h). See Regulation S–T 

Rule 101(c)(16)(17 CFR 232.101(c)(16)). Although 

the Commission’s EDGAR database contains an 

entry signifying the receipt of paper documents, 

materials received in paper are not accessible 

through the EDGAR system. 

179Note 1 to Rule 12g3–2(e). Rule 12g3–2(b) 

requires an exempt issuer to submit substantially 

the same categories of home country documents as 

a reporting issuer must furnish to the Commission 

under cover of Form 6–K. Moreover, both Rule 

12g3–2(b) and Form 6–K state that only material 

information need be furnished under the rule and 

form. See Rule 12g3–2(b)(3) (17 CFR 240.12g3–

2(b)(3)) and General Instruction B to Form 6–K. 

180Note 3 to Rule 12g3–2(e). An issuer will not 

have to update the Form 15F to reflect a change in 

that address. 

181New Exchange Act Rule 12g3–2(f) (17 CFR 

240.12g3–2(f)). Parties that commented on the 

reproposed extension of Rule 12g3–2(b) supported 

this electronic publishing provision for issuers 

claiming the Rule 12g3–2(b) other than through 

Rule 12h–6. See, for example, the letters from the 

ABA and Skadden Arps. 

182 17 CFR 240.12g3–2(b)(1)(i) and (ii). 

183As under current practice, the applicant 

should send these initial materials to the 

Commission’s Office of International Corporate 

Finance in the Division of Corporation Finance. 

184See Part II.H.2 of the Reproposing Release and, 

more recently, the letter from Sullivan & Cromwell. 

185 17 CFR 230.701. Rule 701 provides a 

Securities Act exemption for the offer and sale of 

securities to employees and others pursuant to 

certain compensatory benefit plans and contracts 

relating to compensation. 

186See the Original Proposing Release at n. 45. 

format.178 Because paper submissions 

are more difficult to access, we are 

adopting Rule 12g3–2(e), which relies 

on electronic access to a foreign 

company’s home country securities 

documents, although not through the 

Commission’s electronic database. 

As part of the condition requiring an 

issuer to publish its home country 

documents required under Rule 12g3–

2(b)(1)(iii) on its Internet Web site or 

through an electronic information 

delivery system generally available to 

the public in its primary trading market, 

Rule 12g3–2(e) will require an issuer to 

publish English translations of the 

following documents: 

• its annual report, including or 

accompanied by annual financial 

statements; 

• interim reports that include 

financial statements; 

• press releases; and 

• all other communications and 

documents distributed directly to 

security holders of each class of 

securities to which the exemption 

relates.179

Rule 12g3–2(e) will further require a 

foreign private issuer of equity 

securities to disclose in the Form 15F 

the address of its Internet Web site or 

that of the electronic information 

delivery system in its primary trading 

market on which it will publish the 

information required under Rule 12g3–

2(b)(1)(iii).180 The purpose of this 

requirement is to alert investors and the 

Commission regarding where investors 

and others may find the company’s 

home country documents should a 

problem arise concerning the Internet 

location of those documents. 

Currently non-reporting issuers that 

seek the Rule 12g3–2(b) exemption must 

submit their letter application for the 

exemption and their home country 

documents to the Commission in paper. 

The same primary reason for requiring 

an issuer to publish its home country 

documents electronically after it 

terminates its reporting obligations 

under Rule 12h–6 applies equally to 

current Rule 12g3–2(b) exempt 

companies and the non-reporting 

companies that eventually will apply for 

the exemption. In each case, the 

electronic posting of an issuer’s home 

country documents will increase an 

investor’s ability to access those 

documents. 

Therefore, we are adopting, as 

proposed, an amendment to Rule 12g3–

2 to permit a foreign private issuer that, 

upon application to the Commission 

and not after filing Form 15F, has 

obtained or will obtain the Rule 12g3–

2(b) exemption to publish its home 

country documents that it is required to 

furnish on a continuous basis under 

Rule 12g3–2(b)(1)(iii) on its Internet 

Web site or through an electronic 

information delivery system generally 

available to the public in its primary 

trading market.181 As a condition to this 

electronic posting, an issuer that wishes 

to use this procedure will have to 

comply with the English translation 

requirements of reproposed Rule 12g3–

2(e). It also will have to provide the 

Commission with the address of its 

Internet Web site or that of the 

electronic information delivery system 

in its primary trading market in its 

application for the Rule 12g3–2(b) 

exemption or in an amendment to that 

application. 

Currently the Commission does not 

have an established means for a nonreporting company to submit 

electronically to the Commission its 

initial documents under Rule 12g3–

2(b)(1)(i) and (ii).182 Therefore, an 

applicant will have to continue to 

submit its letter application and the 

home country documents submitted in 

support of its initial application to the 

Commission in paper.183

At both the proposing and 

reproposing stages, some commenters 

suggested that the Commission impose 

a specific time limit, for example three 

years, governing how long an issuer 

must keep its home country documents 

on its Internet Web site.184 We decline 

to adopt a specific time limit primarily 

because different types of home country 

documents may require different 

periods of electronic posting. While an 

issuer will be required to post 

electronically a home country document 

for a reasonable period of time, what 

constitutes a reasonable period will 

depend on the nature and purpose of 

the home country document. At a 

minimum, we suggest companies 

provide Web site access to their home 

country reports for at least a 12 month 

period. 

We also suggest that, if an issuer 

publishes its home country documents 

required under Rule 12g3–2(b) on an 

electronic information delivery system 

or an Internet Web site that is not in 

English, the issuer provide a prominent 

link on its Internet Web site directing 

investors to those home country 

documents in English. 

I. Concerns Regarding Securities Act 

Rule 701 

Some commenters asked that we 

clarify the availability of Securities Act 

Rule 701 185 for a foreign private issuer 

that terminates its registration and 

reporting obligations under Rule 12h–6. 

By its terms, Rule 701 is available to any 

issuer that is not subject to the reporting 

requirements of Exchange Act section 

13 or 15(d). Therefore, upon the 

effectiveness of termination of 

registration and reporting requirements 

under Rule 12h–6, a foreign private 

issuer would appear to satisfy this 

condition of Rule 701. 

As we noted when originally 

proposing Rule 12h–6, before the filing 

of a Form 15F, a foreign private issuer 

would have to file a post-effective 

amendment to terminate the registration 

of its remaining unsold securities under 

any of its Securities Act registration 

statements.186 This would include a 

Form S–8 registration statement relating 

to securities issuable under certain 

compensatory benefit plans. After the 

effectiveness of the Form 15F, a foreign 

private issuer would be able to rely on 

Rule 701 with respect to unsold 

securities that had previously been 

covered by the Form S–8 registration 

statement. 

III. Paperwork Reduction Act Analysis 

The final rule amendments contain 

‘‘collection of information’’

requirements within the meaning of the 

Paperwork Reduction Act of 1995 


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16950 Federal Register / Vol. 72, No. 65 / Thursday, April 5, 2007 / Rules and Regulations 

187 44 U.S.C. 3501 et seq. 

188A limited number of foreign private issuers 

file annual reports on Form 10–K. In voluntarily 

electing to file periodic reports using domestic 

issuer forms, these issuers seem to have closely 

aligned themselves with the U.S. market. 

Accordingly, for the purpose of the Paperwork 

Reduction Act Analysis, these issuers do not appear 

likely to terminate their Exchange Act registration 

under new Rule 12h–6, and we have assumed that 

none of these companies will seek to use Rule 12h–

6. Foreign private issuers that file periodic reports 

using domestic issuer forms will be eligible, 

nonetheless, to use Rule 12h–6. 

(‘‘PRA’’).187 The titles of the affected 

collection of informations are Form 20–

F (OMB Control No. 3235–0288), Form 

40–F (OMB Control No. 3235–0381), 

Form 6–K (OMB Control No. 3235–

0116), new Form 15F, and submissions 

under Exchange Act Rule 12g3–2 (OMB 

Control No. 3235–0119).188 An agency 

may not conduct or sponsor, and a 

person is not required to respond to, a 

collection of information such as Form 

20–F or new Form 15F unless it 

displays a currently valid OMB control 

number. Compliance with the 

disclosure requirements of new Form 

15F and new Rule 12h–6, which will 

affect the above collections of 

information, is mandatory. 

Form 20–F sets forth the disclosure 

requirements for a foreign private 

issuer’s annual report and registration 

statement under the Exchange Act as 

well as many of the disclosure 

requirements for a foreign private 

issuer’s registration statements under 

the Securities Act. We adopted Form 

20–F pursuant to the Exchange Act and 

the Securities Act in order to provide 

investors with information about foreign 

private issuers that have registered 

securities with the Commission. 

Form 40–F sets forth the disclosure 

requirements regarding the annual 

report and registration statement under 

the Exchange Act for a Canadian issuer 

that is qualified to use the 

Multijurisdictional Disclosure System 

(‘‘MJDS’’). We adopted Form 40–F 

pursuant to the Exchange Act in order 

to permit qualified Canadian issuers to 

prepare their Exchange Act annual 

reports and registration statements 

based primarily in accordance with 

Canadian requirements. 

Form 6–K is used by a foreign private 

issuer to report material information 

that it: 

• makes or is required to make 

public under the laws of the jurisdiction 

of its incorporation, domicile or 

organization (its ‘‘home country’’); 

• files or is required to file with its 

home country stock exchange that is 

made public by that exchange; or 

• distributes or is required to 

distribute to its security holders. 

A foreign private issuer may attach 

annual reports to security holders, 

statutory reports, press releases and 

other documents as exhibits or 

attachments to the Form 6–K. We 

adopted Form 6–K under the Exchange 

Act in order to keep investors informed 

on an ongoing basis about foreign 

private issuers that have registered 

securities with the Commission. 

New Form 15F is the form that a 

foreign private issuer must file when 

terminating its Exchange Act reporting 

obligations under new Exchange Act 

Rule 12h–6. Form 15F requires a filer to 

disclose information that will help 

investors understand the foreign private 

issuer’s decision to terminate its 

Exchange Act reporting obligations and 

assist Commission staff in assessing 

whether the Form 15F filer is eligible to 

terminate its Exchange Act reporting 

obligations pursuant to Rule 12h–6. 

Exchange Act Rule 12g3–2 is an 

exemptive rule that, under paragraph (b) 

of that rule, provides an exemption from 

Exchange Act section 12(g) registration 

for a foreign private issuer that, in 

addition to satisfying other 

requirements, submits copies of its 

material home country documents to the 

Commission on an ongoing basis. We 

adopted paragraph (b) of Rule 12g3–2 in 

order to provide information for U.S. 

investors concerning foreign private 

issuers with limited securities trading in 

U.S. capital markets. 

The hours and costs associated with 

preparing, filing and sending Forms 20–

F, 40–F, 6–K and 15F, and making 

submissions under Exchange Act Rule 

12g3–2(b) constitute reporting and cost 

burdens imposed by those collections of 

information. We based our estimates of 

the effects that the final rule 

amendments will have on those 

collections of information primarily on 

our review of the most recently 

completed PRA submissions for Forms 

20–F, 40–F, and 6–K, and for 

submissions under Rule 12g3–2(b), on 

the particular requirements for those 

forms and submissions, and on relevant 

information, for example, concerning 

comparative trading volume for 

numerous filers of those forms. 

Final Rule 12h–6 will permit a foreign 

private issuer to terminate permanently 

its Exchange Act reporting obligations, 

including the obligation to file an 

annual report on Form 20–F or 40–F 

and the obligation to submit Form 6–K 

reports, after filing a Form 15F. Final 

Rule 12h–6 and the accompanying rule 

amendments will also enable a foreign 

private issuer to claim the Rule 12g3–

2(b) exemption immediately upon the 

effectiveness of its termination of 

reporting pursuant to the new exit rule, 

and to publish copies of its home 

country documents required by Rule 

12g3–2(b) on its Internet Web site 

instead of submitting them in paper to 

the Commission. We have based the 

annual burden and cost estimates of the 

adopted rule amendments on Forms 20–

F, 40–F, 6–K and 15F, and on the home 

country submissions required under 

Rule 12g3–2(b), 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 or 

40–F report or Form 15F; 

• outside firms, including legal 

counsel, accountants and other advisors, 

incur or will incur 75% of the burden 

required to produce each Form 20–F or 

40–F report or Form 15F at an average 

cost of $400 per hour; 

• a foreign private issuer incurs or 

will incur 75% of the annual burden 

required to produce each Form 6–K 

report and Rule 12g3–2(b) submission, 

not including English translation work, 

and 25% of the annual burden required 

to perform the English translation work 

for Form 6–K reports and Rule 12g3–

2(b) submissions; and 

• outside firms, including legal 

counsel, accountants and other advisors, 

incur or will incur 25% of the burden 

required to produce each Form 6–K 

report and Rule 12g3–2(b) submission, 

not including English translation work, 

at an average cost of $400 per hour, and 

75% of the annual burden resulting 

from the English translation work for 

Form 6–K reports and Rule 12g3–2(b) 

submissions, at an average cost of $125 

per hour. 

As was the case with the originally 

proposed and reproposed rule 

amendments, the estimated effects of 

the adopted rule amendments reflect the 

initial phase-in period of the Exchange 

Act termination process under new Rule 

12h–6 and Form 15F during the first 

year of availability. We expect that most 

of these estimated effects will occur on 

a one-time, rather than a recurring, 

basis. While we expect that some issuers 

will terminate their Exchange Act 

reporting under Rule 12h–6 and file 

Form 15F in subsequent years, we do 

not expect the resulting burdens and 

costs to be of the same magnitude as the 

burdens and costs currently expected 

during the first year. Moreover, we 

expect that over time, the number of 

foreign private issuers that are 

encouraged to enter the Exchange Act 

reporting system as a result of the rule 

amendments will increase so that, on an 

annual basis, the number of foreign 

companies entering the Exchange Act 

reporting regime will exceed the 

number exiting that regime. 


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Federal Register / Vol. 72, No. 65 / Thursday, April 5, 2007 / Rules and Regulations 16951 

189 44 U.S.C. 3507(d) and 5 CFR 1320.11. 

190See Part III of the Reproposing Release. 

191 191 As noted at the reproposing stage, a 

review by the Commission’s Office of Economic 

Analysis of trading volume data on a sample of 

foreign Exchange Act reporting companies that filed 

Form 20–F during 2004 suggested that 

approximately 30% of filers would meet the U.S. 

trading volume threshold of the reproposed rule. 

See Part III, n. 137 of the Reproposing Release. A 

more recent review of the Office of Economic 

Analysis of trading volume data on foreign 

Exchange Act reporting companies with common 

equity trading during 2005 indicates that an 

estimated 29% of filers would meet the U.S. trading 

volume threshold of the adopted rule. That 

percentage may vary by region. 

192 1,100 Form 20–Fs filed annually (prior to this 

rulemaking) × .20 = 220; 1,100—220 = 880 Form 

20–Fs filed annually. 

193As in the Reproposing Release, we estimate 

that a foreign private issuer requires on average 

2,630 hours to produce each Form 20–F. 

194 880 Form 20–Fs filed annually × 2,630 hours 

per Form 20–F = 2,314,400 hours. 

195 880 Form 20–Fs × 2,630 hours per Form 20–

F × .25 = 578,600 hours. Thus, we estimate that, 

during the first year of effectiveness of Rule 12h–

6, foreign private issuers could incur a reduction of 

144,650 hours in the number of burden hours 

required to produce Form 20–F. 220 Form 20–Fs × 

2,630 hrs. × .25 = 144,650 hours. Using an estimated 

hourly rate of $175 for in-house work, foreign 

private issuers could incur Form 20–F cost savings 

of $25,313,750 during Rule 12h–6’s first year of 

effectiveness. 144,650 hrs. × $175/hr. = 

$25,313,750. 

196We estimate cost savings of $173,580,000 

regarding outside firms’ production of Form 20–Fs 

during Rule 12h–6’s first year of effectiveness. 220 

Form 20–Fs × 2,630 hrs. × .75 × $400/hr. = 

$173,580,000. Thus, during the first year of its 

effectiveness, Rule 12h–6 could result in total 

estimated Form 20–F cost savings of $198,893,750. 

$25,313,750 + $173,580,000 = $198,893,750. 

197 880 Form 20–Fs × 2,630 hours × .75 × $400/ 

hour = $694,320,000. The $108,487,500 increase 

reflects the increase in the estimated outside firm 

hourly rate from $300 to $400. 

198We do not expect the expanded scope of 

reproposed Rule 12h–6 to have as great an effect on 

MJDS filers as other foreign reporting companies 

since, typically, the U.S. trading volume relating to 

those shares is significant. Moreover, because of 

their close proximity to U.S. capital markets, we 

believe MJDS filers are less likely to seek to 

terminate their Exchange Act reporting obligations 

than other foreign private issuers. Accordingly, 

based on current experience, we expect no more 

than 10% of Form 40–F filers will terminate their 

Exchange Act reporting obligations under Rule 

12h–6. 

199This is the same percentage previously 

estimated under the originally proposed rule 

amendments. 

200 134 Form 40–Fs filed annually (prior to this 

rulemaking) × .07 = 9; 134¥9 = 125 Form 40–Fs 

filed annually. 

201As in the Reproposing Release, we estimate 

that it takes 427 hours on average to produce a 

Form 40–F report. 

202 125 Form 40–Fs filed annually × 427 hours per 

Form 40–F = 53,375 hours. 

203 125 Form 40–Fs filed annually × 427 hours per 

Form 40–F × .25 = 13,344 hours. Thus, we estimate 

that, during the first year of effectiveness of Rule 

12h–6, foreign private issuers could incur a 

reduction of 961 hours in the number of burden 

hours required to produce Form 40–F. 9 Form 40–

Fs × 427 hrs. × .25 = 961 hrs. This could result in 

estimated Form 40–F cost savings for foreign 

private issuers of $168,175. 961 hrs. × $175/hr. = 

$168,175. 

204 125 Form 40–Fs filed annually × 427 hours per 

Form 40–F × .75 × $400/hour = $16,012,500. This 

estimate corresponds to estimated cost savings of 

$1,152,900 in connection with outside firms’

production of Form 40–F during reproposed Rule 

12h–6’s first year of effectiveness. 9 × 427 hrs. × .75 

× $400/hr. = $1,152,900. Thus, during the first year 

of its effectiveness, Rule 12h–6 could result in 

estimated total Form 40–F cost savings of $168,175 

+ $1,152,900 = $1,321,075. 

205This estimate is based on the estimated 

number of Form 20–F and Form 40–F filers that are 

expected to terminate their Exchange Act reporting 

obligations under 2h–6. 1,100 Form 20–Fs × .25 = 

275; 134 Form 40–Fs × .10 = 13; 288 = .23 × 1,234. 

206This estimate is based on the estimated 

number of foreign private issuers that are expected 

to enter the Exchange Act reporting regime and file 

Form 20–Fs or Form 40–Fs as a result of this 

rulemaking during the first year of effectiveness. 

1,100 Form 20–Fs × .05 = 55; 134 Form 40–Fs × .03 

= 4; 59 = .05 × 1,234. 

We published a notice requesting 

comment on the collection of 

information requirements in the 

Original Proposing Release and 

submitted these requirements to the 

Office of Management and Budget 

(‘‘OMB’’) for review in accordance with 

the PRA.189 OMB subsequently 

approved the proposed requirements 

without change. We received several 

comment letters regarding the proposed 

rule amendments, although none 

addressed their estimated effects on the 

collection of information requirements. 

We revised and reproposed Rule 12h–6 

and the accompanying rule amendments 

in response to these comments. We also 

revised the estimated reporting and cost 

burdens for the reproposed rules.190

Because we are adopting Rule 12h–6 

and the accompanying rule amendments 

substantially as reproposed, the 

estimated reporting and cost burdens for 

the adopted rules remain the same as 

the estimated reporting and cost 

burdens for the reproposed rules, as 

discussed below. 

A. Form 20–F 

During the first year of effectiveness 

of reproposed Rule 12h–6, we estimate 

that as many as 25% of Form 20–F filers 

could terminate their Exchange Act 

reporting obligations under the new 

rule.191 However, we continue to 

believe that Rule 12h–6 will encourage 

some foreign companies to enter the 

Exchange Act registration and reporting 

regime for the first time. Consequently, 

during the first effective year of Rule 

12h–6, the number of Form 20–F annual 

reports filed could increase by 5%, 

leading to a net decrease of 20% for 

Form 20–Fs filed over this same period. 

This net decrease would cause: 

• the number of Form 20–Fs filed to 

decrease to 880; 192

• the total number of burden hours 

required to produce Form 20–F 193 to 

decrease to 2,314,400 total hours; 194

• the total number of burden hours 

required by foreign private issuers to 

produce Form 20–F to decrease to 

578,600 total hours; 195 and 

• the cost incurred by outside 

firms 196 to produce Form 20–F to total 

$694,320,000.197

B. Form 40–F 

During the first year of effectiveness 

of Rule 12h–6, we estimate that as many 

as 10% of Form 40–F filers could 

terminate their Exchange Act reporting 

obligations under the new rule.198

However, the reproposed rule could 

encourage some foreign companies to 

enter the Exchange Act registration and 

reporting regime for the first time, 

including some that would be eligible to 

use the MJDS forms, including the Form 

40–F annual report. Consequently, over 

this same period, the number of Form 

40–F annual reports filed could increase 

by approximately 3%, resulting in a net 

decrease of 7% for Form 40–Fs filed 

over this same period.199 This net 

decrease would cause: 

• the number of Form 40–Fs filed to 

total 125; 200

• the number of burden hours 

required to produce Form 40–F 201 to 

total 53,375 total hours; 202

• the number of burden hours 

required by foreign private issuers to 

produce Form 40–F to total 13,344 

hours; 203 and 

• the cost incurred by outside firms to 

produce Form 40–F to total 

$16,012,500.204

C. Form 6–K 

During the first year of effectiveness 

of Rule 12h–6, we estimate that as many 

as 23% of foreign private issuers that 

furnish Form 6–K reports could 

terminate their Exchange Act reporting 

obligations under the new rule.205

However, the adopted rule could 

encourage some foreign companies to 

enter the Exchange Act registration and 

reporting regime for the first time, 

including those that will furnish Form 

6–K reports. Consequently, over this 

same period, the number of Form 6–K 

reports furnished could increase by as 

much as 5%,206 resulting in a net 

decrease of 18% for Form 6–Ks 

furnished over this same period. This 

net decrease would cause: 


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16952 Federal Register / Vol. 72, No. 65 / Thursday, April 5, 2007 / Rules and Regulations 

207 14,661 Form 6–K reports × .18 = 2,639; 

14,661 – 2,639 = 12,022 Form 6–K reports. 

208 In the Original and Reproposing Releases, we 

estimated that, prior to this rulemaking, it took a 

total of 127,197 annual burden hours to produce the 

14,661 Form 6–Ks, or approximately 8.7 hours per 

Form 6–K (for work performed by foreign private 

issuers and outside firms). We continue to use this 

8.7 hour estimate for the final rule amendments. 

209 12,022 Form 6–K reports × 8.7 hours = 104,591 

hours. 

210We estimate that, during the first year of 

effectiveness of Rule 12h–6, foreign private issuers 

could incur a reduction of 14,349 hours in the 

number of burden hours required to produce Form 

6–K. 2,639 Form 6–Ks × 8.7 hours = 22,959 hours; 

22,959 hours × .25 = 5,740 hours of English 

translation work; 5,740 hours × .25 = 1,435 hours 

of English translation work for foreign private 

issuers; 22,959 × .75 = 17,219 hours of non-English 

translation work; 17,219 × .75 = 12,914 hours of 

non-English translation work for foreign private 

issuers; 1,435 + 12,914 = 14,349 hours. This could 

result in estimated Form 6–K cost savings of 

$2,511,075 for foreign private issuers during the 

first year of Rule 12h–6’s effectiveness. 14,349 hrs. 

× $175/hr. = $2,511,075. 

211 104,591 hours × .25 = 26,148 hours for English 

translation work; 104,591 hours—26,148 hours = 

78,443 hours for non-English translation work; 

78,443 hours × .75 = 58,832 hours for non-English 

translation work performed by foreign private 

issuers; 26,148 hours × .25 = 6,537 hours of English 

translation work performed by foreign private 

issuers; 58,832 hours + 6,537 hours = 65,369 total 

hours for Form 6–K work performed by foreign 

private issuers, or 5.4 hours for foreign private 

issuer work per Form 6–K. 

212We estimate cost savings of $2,260,025 in 

connection with outside firms’ production of Form 

6–K during Rule 12h–6’s first year of effectiveness. 

5,740 hrs. × .75 × $125/hour = $538,125 for English 

translation work; 17,219 × .25 × $400/hour = 

$1,721,900 for non-English translation work. 

$538,125 + $1,721,900 = $2,260,025 in Form 6–K 

cost savings for outside firms. Thus, Rule 12h–6 

could result in total estimated Form 6–K cost 

savings of $4,771,100. $2,511,075 + $2,260,025 = 

$4,771,100. 

213 78,443 hours × .25 = 19,611 hours × $400/hour 

= $7,844,400 for non-translation work; 26,148 hours 

× .75 = 19,611 hours × $125/hour = $2,451,375 for 

English translation work; $7,844,400 + $2,451,375 

= $10,295,775 for total work performed by outside 

firms. The $2,078,475 increase reflects the increase 

in the estimated outside firm hourly rate from $300 

to $400 and the increase in the estimated outside 

firm rate for English translation work from $75 to 

$125/hour based on current information provided 

by financial printer representatives. 

214We derived this estimate from the number of 

Form 20–F filers (275) and Form 40–F filers (13) 

estimated to elect to terminate their Exchange Act 

reporting obligations under Rule 12h–6 during the 

first year of the rule’s effectiveness. We then added 

to this sum (288) the number of prior Form 15 filers 

(63) estimated to file a Form 15F during the first 

year of Rule 12h–6’s effectiveness in order to make 

their Form 15 termination or suspension of 

reporting obligations permanent. The latter number 

is based on the approximate number of foreign 

private issuers that filed a Form 15 from 2003 

through the present. 

215 In the Original and Reproposing Releases, we 

estimated that the production of each Form 15F 

would require 30 hours. We continue to use this 

estimate for the final rule amendments. 

216 351 Form 15Fs × 30 = 10,530 hours. 

217 10,530 hours × .25 = 2,633 hours. This could 

result in estimated Form 15F costs for foreign 

private issuers of $460,775 during Rule 12h–6’s first 

year of effectiveness. 2,633 hrs. × $175 = $460,775. 

218 10,530 hours × .75 = 7,898 hours; 7,898 hours 

× $400/hour = $3,159,200. The $3,159,200 increase 

reflects the increase in the number of estimated 

Form 15F filers and the increase in the estimated 

outside firm hourly rate from $300 to $400. 

219Thus, Rule 12h–6 could result in total 

estimated Form 15F costs of $3,619,975 during its 

first year of effectiveness. $460,775 + $3,159,200 = 

$3,619,975. 

220This estimate is based on Commission staff’s 

most recent annual review of the number of current 

Rule 12g3–2(b) exempt companies, which will be 

available soon on our Internet Web site at http:// 

www.sec.gov/divisions/corpfin.shtml. 

221These estimates are the same as the estimates 

presented in the Reproposing Release. As we stated 

in that release, the estimates represent an 

adjustment of 31,080 hours from the 1,800 total 

hours previously reported for Rule 12g3–2(b) 

submissions. They reflect a re-evaluation of the 

number of foreign private issuers that currently 

claim the Rule 12g3–2(b) exemption, the number of 

Rule 12g3–2(b) submissions made by them, and the 

number of burden hours required for their 

production, in addition to assessing the effects on 

Rule 12g3–2(b) submissions expected to result from 

adoption of the final rule amendments. We believe 

these estimates more accurately reflect the current 

burden hours required for the collections of 

information submitted under Rule 12g3–2(b). 

222This amount includes the estimated 288 Form 

20–F and 40–F filers expected to terminate their 

Exchange Act reporting obligations under Rule 

12h–6 as well as the estimated 63 prior Form 15 

filers expected to file a Form 15F to make their 

prior termination or suspension of reporting under 

Rule 12h–6. 

223Because the home country document 

submission requirement under Rule 12g3–2(b) is 

similar to the home country document submission 

requirement under Form 6–K, we have used the 

same assumptions regarding the English and nonEnglish translation work required under Rule 12g3–

2(b) that we adopted for Form 6–K submissions. 

Accordingly: 49,728 hours × .25 = 12,432 total 

annual burden hours for English translation work; 

49,728¥12,432 = 37,296 total annual burden hours 

required for non-English translation work; 37,296 

hours × .75 = 27,972 total annual burden hours 

incurred by foreign private issuers for non-English 

translation work; 12,432 hours × .25 = 3,108 total 

annual hours incurred by foreign private issuers for 

English translation work; 27,972 + 3,108 = 31,080 

total annual burden hours incurred by foreign 

private issuers for Rule 12g3–2(b) submissions, or 

2.5 annual burden hours per submission. Of the 

31,080 hours, 10,530 hours would result from 

adoption of the new rules and 20,550 hours 

represents an adjustment from the previous PRA 

estimates for Rule 12g3–2 submissions. 

224 49,728 hours × .25 = 12,432 hours for English 

translation work; 12,432 hours × .75 = 9,324 hours; 

9,324 hours × $125 = $1,165,500 for English 

translation work; 49,728 hours¥12,432 hours = 

37,296 hours for non-English translation work; 

37,296 hours × .25 = 9,324 hours; 9,324 hours × 

$400 = $3,729,600 for non-English translation work; 

$1,165,500 + $3,729,600 = $4,895,100 for total work 

performed by outside firms. Of that total amount, 

$1,658,475 would result from adoption of the new 

rules and $3,236,625 constitutes an adjustment 

from the previous PRA estimates for Rule 12g3–2 

submissions. 

225We further estimate that new Rule 12h–6 and 

the accompanying rule amendments could result in 

total estimated Rule 12g3–2(b) costs of $3,501,225 

during the first year of their effectiveness. 351 

issuers × 12 submissions/issuer × 2.5 hrs./ 

submission = 10,530 hours; 10,530 hours × $175/ 

hr. = $1,842,750 in Rule 12g3–2(b) submission costs 

for foreign private issuers. For outside firm costs: 

351 issuers × 12 submissions/issuer × 4 hrs./ 

submission = 16,848 hours; 16,848 × .25 = 4,212 

• the number of Form 6–K reports 

furnished to decrease to 12,022; 207

• the total number of burden hours 

required to produce the Form 6–Ks 208

to decrease to 104,591 total hours; 209

• the total number of burden hours 

required by foreign private issuers 210 to 

produce Form 6–K to decrease to 65,369 

hours; 211 and 

• the cost incurred by outside 

firms 212 to produce Form 6–K to total 

$10,295,775.213

D. Form 15F 

During the first year of effectiveness 

of Rule 12h–6, we estimate that as many 

as 351 foreign private issuers 214 could 

file a Form 15F to terminate their 

Exchange Act reporting obligations, 

which would cause: 

• the number of burden hours 

required to produce Form 15F 215 to 

total 10,530 hours; 216

• foreign private issuers to incur a 

total of 2,633 hours to produce Form 

15F; 217 and 

• outside firms to incur a total cost of 

$3,159,200 218 to produce Form 15F.219

E. Rule 12g3–2(b) Submissions 

We estimate that 685 foreign private 

issuers currently have obtained the Rule 

12g3–2(b) exemption.220 In addition, we 

estimate that each Rule 12g3–2(b) 

exempt issuer currently makes 12 Rule 

12g3–2(b) submissions per year for a 

total of 8,220 Rule 12g3–2(b) 

submissions. We further estimate that it 

takes a total of 32,880 annual burden 

hours, or 4 annual burden hours per 

submission (for work performed by 

foreign private issuers and outside 

firms), to produce the 8,220 Rule 12g3–

2(b) submissions.221

During the first year of effectiveness 

of reproposed Rule 12h–6, we estimate 

that as many as 351 foreign private 

issuers could claim the Rule 12g3–2(b) 

exemption immediately upon the 

effectiveness of their termination of 

reporting under new Rule 12h–6.222

This increase in the number of Rule 

12g3–2(b) exempt issuers would cause: 

• the number of issuers claiming the 

Rule 12g3–2(b) exemption to total 1,036; 

• the number of Rule 12g3–2(b) 

submissions made annually to total 

12,432; 

• the number of annual burden hours 

required to produce these Rule 12g3–

2(b) submissions to total 49,728 hours; 

• foreign private issuers to incur a 

total of 31,080 annual burden hours to 

produce these Rule 12g3–2(b) 

submissions, or 2.5 annual burden 

hours per submission; 223 and 

• outside firms to incur a total cost of 

$4,909,275 224 to produce the Rule 

12g3–2(b) submissions.225


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hours of English translation work; 4,212 × .75 × 

$125 = $394,875 of English translation costs for 

outside firms. 16,848 hours × .75 = 12,636 hours of 

non-English translation work; 12,636 × .25 × $400 

= $1,263,600 of non-English translation costs for 

outside firms. $394,875 + $1,263,600 = $1,658,475 

in total Rule 12g3–2(b) submission costs for outside 

firms. $1,842,750 + $1,658,475 = $3,501,225 in total 

estimated Rule 12g3–2(b) costs. 

226We recognize that, as a result of terminating 

their Exchange Act reporting obligations under Rule 

12h–6, foreign firms may accrue other cost savings 

that are not specifically quantified in this section. 

One such example is an investment in an internal 

control system in order to comply with the 

Sarbanes-Oxley Act. 

227As discussed in Part III of this release, for the 

first year of Rule 12h–6’s effectiveness, estimated 

cost savings in connection with Forms 20–F, 40–F 

and 6–K could amount to, respectively, 

$198,893,750, $1,321,075, and $4,771,100, for a 

total of $204,985,925. These cost savings could be 

less to the extent that more foreign private issuers 

register with the Commission over time as a result 

of the adoption of Rule 12h–6. 

228Conversely, in countries that have similar 

regulatory regimes and levels of investor protection, 

the impact of U.S. deregistration may be mitigated. 

229As discussed in Part III of this release, based 

on estimates and assumptions adopted for the 

purpose of the Paperwork Reduction Act, these 

costs could total $3,619,975 during the first year of 

the new form’s use. 

230As discussed in Part III of this release, based 

on estimates and assumptions adopted for the 

Paperwork Reduction Act, these resulting Rule 

12g3–2(b) costs could amount to $3,501,225. 

IV. Cost-Benefit Analysis 

A. Expected Benefits 

New Exchange Act Rule 12h–6 and 

the accompanying rule amendments 

will benefit U.S. investors to the extent 

that they remove a possible disincentive 

for foreign companies that are not 

currently Exchange Act reporting 

companies to register their equity and 

debt securities with the Commission. In 

response to foreign companies’ concerns 

about Exchange Act reporting and other 

obligations, these rules will expand the 

criteria by which a foreign company 

may terminate those obligations. In so 

doing, the adopted rule amendments 

should over time remove an 

impediment to foreign company access 

and participation in U.S. public capital 

markets while still providing U.S. 

investors with the protections afforded 

by our Exchange Act reporting regime. 

The adopted rule amendments should 

remove a disincentive for foreign firms 

to enter our Exchange Act reporting 

regime by lowering the cost of exiting 

from that regime. Investors are expected 

to benefit from the amendments by 

being able to purchase shares in foreign 

firms that have been registered with the 

Commission and that, therefore, provide 

a high level of investor protection. In 

addition, U.S. investors may incur lower 

transaction costs when trading a foreign 

company’s shares on a U.S. exchange 

relative to a foreign exchange. 

To remove a disincentive for foreign 

companies to enter U.S. public capital 

markets, the adopted rule amendments 

will benefit U.S. investors by enabling a 

foreign Exchange Act reporting 

company to lower its costs of 

compliance in connection with 

Exchange Act deregistration. This 

reduction in the cost of compliance will 

directly benefit both foreign companies 

and their investors, including those 

resident in the United States. 

The final rule amendments will result 

in foreign private issuers incurring 

lower costs of Exchange Act compliance 

in four possible ways. First, rather than 

require a foreign private issuer to 

determine the number of its 

U.S.holders, as is the case under the 

current exit rules, new Rule 12h–6 will 

enable a foreign private issuer to rely 

solely on trading volume data regarding 

its securities in the United States and on 

a worldwide basis when determining 

whether it may terminate its Exchange 

Act reporting obligations. Because 

trading volume data is more easily 

obtainable than information regarding 

its U.S. shareholders, the new rule 

should lower the costs of Exchange Act 

termination for foreign private issuers. 

Second, new Rule 12h–6 will allow a 

foreign firm to terminate its Exchange 

Act reporting obligations regarding a 

class of equity securities and 

immediately obtain the Rule 12g3–2(b) 

exemption. Accordingly, such a 

terminating foreign private issuer would 

be able to avoid the costs associated 

with continued annual verification that 

its number of holders of record remains 

below 300. 

Third, new Rule 12h–6 will permit an 

issuer to rely on the assistance of an 

independent information services 

provider when determining whether it 

falls below the 300-holder standard. The 

option to hire an independent 

information services provider may be a 

more efficient and cost-effective 

mechanism to make that determination. 

Moreover, a foreign company may save 

costs when assessing its eligibility to 

terminate its registration and reporting 

under the 300-holder provision of Rule 

12h–6, since the rule will limit the 

number of jurisdictions in which a 

foreign private issuer must search for 

the amount of securities represented by 

accounts of customers resident in the 

United States held by brokers, dealers, 

banks and other nominees. The current 

rules require a foreign private issuer to 

conduct a worldwide search for such 

U.S. customer accounts. 

Fourth, once having terminated its 

reporting obligations under new Rule 

12h–6, a foreign company will no longer 

be required to incur costs associated 

with producing an Exchange Act annual 

report or interim Form 6–K reports.226

Based on estimates and assumptions 

used for the purpose of the Paperwork 

Reduction Act, these estimated cost 

savings could total approximately 

$200,000,000 for the first year of Rule 

12h–6’s effectiveness.227

B. Expected Costs 

Investors could incur costs from the 

adopted rule amendments to the extent 

that currently registered foreign 

companies respond to the rule changes 

by terminating their Exchange Act 

registration and reporting obligations 

with respect to their equity and debt 

securities. If Exchange Act disclosure 

requirements provide more information 

or protection to U.S. or other investors 

than is provided in an issuer’s primary 

trading market, then all investors, both 

U.S. and foreign, may suffer the costs of 

losing that information and protection 

upon Exchange Act termination.228 If 

this is the case, the announcement that 

a foreign firm is terminating its 

Exchange Act reporting may result in a 

loss of share value and the incurrence 

by investors of higher costs from trading 

in the firm’s equity and debt securities. 

There are costs associated with the 

filing of new Form 15F, which is a 

requirement for a foreign private issuer 

that terminates its Exchange Act 

registration and reporting under Rule 

12h–6.229 A foreign private issuer will 

also incur costs in connection with 

having to post on its Internet Web site 

in English its material home country 

documents required to maintain the 

Rule 12g3–2(b) exemption that it will 

have received upon the effectiveness of 

its termination of reporting under new 

Rule 12h–6.230

We expect that new Rule 12h–6 will 

enable some foreign registrants to avoid 

other recent U.S. regulation, such as the 

Sarbanes-Oxley Act. Investors will lose 

the benefits afforded by the SarbanesOxley Act to the extent a current foreign 

registrant is not fully subject to that Act. 

Some U.S. investors might seek to 

trade in the equity securities of a foreign 

company following its termination of 

Exchange Act reporting under Rule 

12h–6. U.S. investors seeking to trade 

the former reporting company’s 

securities in the U.S. may be forced to 

trade in over-the-counter markets such 

as the one administered by Pink Sheets, 

LLC, which could result in higher 

transaction costs than if the foreign 

company had continued to have a class 

of securities registered with the 

Commission. 


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16954 Federal Register / Vol. 72, No. 65 / Thursday, April 5, 2007 / Rules and Regulations 

231A foreign company may terminate its ADR 

facility whether or not it is an Exchange Act 

registrant, and adopted Rule 12h–6 does not require 

the termination of ADR facilities. In fact, by 

granting foreign private issuers the Rule 12g3–2(b) 

exemption immediately upon their termination of 

reporting with regard to a class of equity securities, 

Rule 12h–6 will enable foreign private issuers to 

retain their ADR facilities as unlisted facilities 

following their termination of reporting under Rule 

12h–6. As adopted, Rule 12h–6 will require an 

issuer that has terminated a sponsored ADR facility 

to wait a year before it may file a Form 15F in 

reliance on the trading volume provision of Rule 

12h–6 if, on the date of termination, the issuer does 

not meet the trading volume benchmark. 

232 15 U.S.C. 78w(a)(2). 233 15 U.S.C. 78c(f). 

234Similarly, by expanding the scope of the 

originally proposed Rule 12h–6 to permit prior 

Form 15 filers to terminate their Exchange Act 

reporting obligations under the new exit rule and 

claim the Rule 12g3–2(b) exemption immediately 

upon such termination, the adopted rules will help 

promote the availability of material home country 

information in English about those issuers for U.S. 

investors. 

235 5 U.S.C. 605(b). 

236 15 U.S.C. 77f, 77g, 77j, and 77s. 

237 15 U.S.C. 78c, 78l, 78m, 78w, and 78mm. 

U.S. investors seeking to trade the 

former reporting company’s securities in 

its primary trading market also could 

incur additional costs. For example, 

U.S. investors who held the securities in 

the form of ADRs could incur costs 

associated with the depositary’s 

conversion of the ADRs into ordinary 

shares.231 Moreover, some U.S. 

investors could incur costs associated 

with finding and contracting with a new 

broker-dealer who is able to trade in the 

foreign reporting company’s primary 

trading market. U.S. investors may face 

additional costs due to the cost of 

currency conversion and higher 

transaction costs trading the securities 

in a foreign market. 

Some investors who wish to make 

investment decisions regarding former 

Exchange Act reporting foreign 

companies also may incur costs to the 

extent that the information provided by 

such companies pursuant to any home 

country regulations is different from 

that which currently is required under 

the Exchange Act. Such investors could 

incur costs associated with hiring an 

attorney or investment adviser, to the 

extent that they have not already done 

so, to explain the material differences, if 

any, between a foreign company’s home 

country reporting requirements, as 

reflected in its home country annual 

report posted on its Internet Web site, 

and Exchange Act reporting 

requirements. 

V. Consideration of Impact on the 

Economy, Burden on Competition and 

Promotion of Efficiency, Competition 

and Capital Formation Analysis 

When adopting rules under the 

Exchange Act, Section 23(a)(2) of the 

Exchange Act 232 requires us to consider 

the impact that any new rule will have 

on competition. Section 23(a)(2) also 

prohibits us from adopting any rule that 

will impose a burden on competition 

not necessary or appropriate in 

furtherance of the purposes of the 

Exchange Act. Furthermore, when 

engaging in rulemaking that requires us 

to consider or determine whether an 

action is necessary or appropriate in the 

public interest, Section 3(f) of the 

Exchange Act 233 requires the 

Commission to consider whether the 

action will promote efficiency, 

competition and capital formation. 

In the Reproposing Release, we 

considered reproposed Rule 12h–6 and 

the accompanying reproposed rule 

amendments in light of the standards set 

forth in the above statutory sections. We 

solicited comment on whether, if 

adopted, reproposed Rule 12h–6 and the 

other reproposed rule amendments 

would result in any anti-competitive 

effects or promote efficiency, 

competition and capital formation. We 

further encouraged commenters to 

provide empirical data or other facts to 

support their views on any anticompetitive effects or any burdens on 

efficiency, competition or capital 

formation that might result from 

adoption of reproposed Rule 12h–6 and 

the other reproposed rule amendments. 

We did not receive any comments or 

any empirical data in this regard 

concerning reproposed Rule 12h–6 and 

the accompanying rule amendments. 

Accordingly, since the adopted rules are 

substantially similar to the reproposed 

rules, we continue to believe the new 

rules will provide a foreign reporting 

company with a more efficient option of 

exiting the Exchange Act reporting 

system when U.S. investor interest has 

become relatively scarce. In so doing, 

new Rule 12h–6 and the other rule 

amendments should encourage foreign 

private issuers to register their equity 

and debt securities with the 

Commission by reassuring foreign 

private issuers that, should interest in 

the U.S. market for their securities 

decline sufficiently, they may exit the 

Exchange Act reporting system with 

little difficulty. 

By providing increased flexibility for 

foreign private issuers regarding our 

Exchange Act reporting system, the 

adopted rules should encourage foreign 

companies to participate in U.S. capital 

markets as Exchange Act reporting 

companies to the benefit of investors. In 

so doing, the adopted rules should 

foster increased competition between 

domestic and foreign firms for investors 

in U.S. capital markets. 

Moreover, by requiring a foreign 

private issuer that has terminated its 

Exchange Act reporting under Rule 

12h–6 to publish its home country 

documents required under Exchange 

Act Rule 12g3–2(b) in English on its 

Internet Web site or through an 

electronic information delivery system 

that is generally available to the public 

in its primary trading market, the 

adopted rules will help ensure that U.S. 

investors continue to have ready access 

to material information in English about 

the foreign private issuer.234 Thus, new 

Rule 12h–6 and the accompanying rule 

amendments should foster increased 

efficiency in the trading of the issuer’s 

securities for U.S. investors following 

the issuer’s termination of Exchange Act 

reporting. 

VI. Regulatory Flexibility Act 

Certification 

Under Section 605(b) of the 

Regulatory Flexibility Act,235 we 

certified that, when adopted, 

reproposed Rule 12h–6 and the 

accompanying reproposed rule 

amendments would not have a 

significant economic impact on a 

substantial number of small entities. We 

included this certification in Part VI of 

the Reproposing Release. While we 

encouraged written comments regarding 

this certification, no commenters 

responded to this request. 

VII. Statutory Basis and Text of Rule 

Amendments 

We are adopting the amendments to 

Rule 30–1 of Part 200, Rule 101 of 

Regulation S–T, and Exchange Act 

Rules 12g3–2, 12g–4 and 12h–3, new 

Exchange Act Rule 12h–6 and new 

Exchange Act Form 15F under the 

authority in sections 6, 7, 10 and 19 of 

the Securities Act 236 and sections 3(b), 

12, 13, 23 and 36 of the Exchange 

Act.237

List of Subjects 

17 CFR Part 200 

Administrative practice and 

procedure, Authority delegations 

(Government agencies). 

17 CFR Parts 232, 240 and 249 

Reporting and recordkeeping 

requirements, Securities. 

Text of Rule Amendments 

■ For the reasons set out in the 

preamble, we are amending Title 17, 

Chapter II of the Code of Federal 

Regulations as follows. 


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Federal Register / Vol. 72, No. 65 / Thursday, April 5, 2007 / Rules and Regulations 16955 

PART 200—ORGANIZATION; 

CONDUCT AND ETHICS; AND 

INFORMATION AND REQUESTS 

■ 1. The general authority citation for 

Part 200 is revised to read as follows: 

Authority: 15 U.S.C. 77o, 77s, 77sss, 78d, 

78d–1, 78d–2, 78w, 78ll(d), 78mm, 80a–37, 

80b–11, and 7202, unless otherwise noted. 

* * * * * 

■ 2. Amend § 200.30–1 by adding 

paragraph (e)(17) to read as follows: 

§ 200.30–1 Delegation of authority to 

Director of Division of Corporation Finance. 

* * * * * 

(e) * * * 

(17) At the request of a foreign private 

issuer, pursuant to Rule 12h–6 

(§ 240.12h–6 of this chapter), to 

accelerate the termination of the 

registration of a class of securities under 

section 12(g) of the Act (15 U.S.C. 78l(g)) 

or the duty to file reports under section 

13(a) of the Act (15 U.S.C. 78m(a)) or 

section 15(d) of the Act (15 U.S.C. 

78o(d)). 

* * * * * 

PART 232—REGULATION S–T—

GENERAL RULES AND REGULATIONS 

FOR ELECTRONIC FILINGS 

■ 3. The authority citation for Part 232 

continues to read in part as follows: 

Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 

77s(a), 77sss(a), 78c(b), 78l, 78m, 78n, 78o(d), 

78w(a), 78ll(d), 80a–8, 80a–29, 80a–30, 80a–

37, and 7201 et seq.; and 18 U.S.C. 1350. 

* * * * * 

■ 4. Amend § 232.101 by: 

■ a. Removing the word ‘‘and’’ at the 

end of paragraph (a)(1)(x); 

■ b. Removing the period and adding ‘‘; 

and’’ at the end of paragraph (a)(1)(xi); 

and 

■ c. Adding paragraph (a)(1)(xii). 

The addition reads as follows: 

§ 232.101 Mandated electronic 

submissions and exceptions. 

(a) * * * 

(1) * * * 

(xii) Forms 15 and 15F (§ 249.323 and 

§ 249.324 of this chapter). 

* * * * * 

PART 240—GENERAL RULES AND 

REGULATIONS, SECURITIES 

EXCHANGE ACT OF 1934 

■ 5. The general 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. 

* * * * * 

■ 6. Amend § 240.12g3–2 by revising 

paragraphs (d)(1) and (d)(2) and adding 

paragraphs (e) and (f) to read as follows: 

§ 240.12g3–2 Exemptions for American 

depositary receipts and certain foreign 

securities. 

* * * * * 

(d) * * * 

(1) Securities of a foreign private 

issuer that has or has had during the 

prior eighteen months any securities 

registered under section 12 of the Act or 

a reporting obligation (suspended or 

active) under section 15(d) of the Act 

(other than arising solely by virtue of 

the use of Form F–7, F–8, F–9, F–10 or 

F–80), except as provided by paragraph 

(e) of this section; 

(2) Securities of a foreign private 

issuer issued in a transaction (other than 

a transaction registered on Form F–8, F–

9, F–10 or F–80) to acquire by merger, 

consolidation, exchange of securities or 

acquisition of assets, another issuer that 

had securities registered under section 

12 of the Act or a reporting obligation 

(suspended or active) under section 

15(d) of the Act, except as provided by 

paragraph (e) of this section; and 

* * * * * 

(e)(1) A foreign private issuer that has 

filed a Form 15F (§ 249.324 of this 

chapter) pursuant to § 240.12h–6 shall 

receive the exemption provided by 

paragraph (b) of this section for a class 

of equity securities immediately upon 

the effectiveness of the termination of 

registration of that class of securities 

under section 12(g) of the Act (15 U.S.C. 

78l(g)) or the termination of the duty to 

file reports regarding that class of 

securities under section 15(d) of the Act 

(15 U.S.C. 78o(d)), or both. 

(2) Notwithstanding any provision of 

§ 240.12g3–2(b), in order to satisfy the 

conditions of the § 240.12g3–2(b) 

exemption received under this 

paragraph (e), the issuer shall publish in 

English the information required under 

paragraph (b)(1)(iii) of this section on its 

Internet Web site or through an 

electronic information delivery system 

generally available to the public in its 

primary trading market, rather than 

furnish that information to the 

Commission. 

(3) The § 240.12g3–2(b) exemption 

received under this paragraph (e) will 

remain in effect for as long as the 

foreign private issuer satisfies the 

electronic publication condition of 

paragraph (e)(2) of this section or until 

the issuer registers a class of securities 

under section 12 of the Act or incurs 

reporting obligations under section 

15(d) of the Act. 

(4) Notwithstanding the time period 

specified in § 240.12g3–2(d)(1), a foreign 

private issuer that filed a Form 15F 

solely with respect to a class of debt 

securities under section 15(d) of the Act 

(15 U.S.C. 78o(d)) may establish the 

exemption provided by paragraph (b) of 

this section for a class of equity 

securities upon the effectiveness of its 

termination of reporting regarding the 

class of debt securities. 

Notes to Paragraph (e): 1. In order to 

maintain the § 240.12g3–2(b) exemption 

obtained under this paragraph, at a 

minimum, a foreign private issuer shall 

electronically publish English translations of 

the following documents required to be 

furnished under paragraph (b)(1)(iii) of this 

section if in a foreign language: 

a. Its annual report, including or 

accompanied by annual financial statements; 

b. Interim reports that include financial 

statements; 

c. Press releases; and 

d. All other communications and 

documents distributed directly to security 

holders of each class of securities to which 

the exemption relates. 

2. As used in paragraph (e)(2) of this 

section, primary trading market has the same 

meaning as under § 240.12h–6(f). 

3. A foreign private issuer that files a Form 

15F regarding a class of equity securities 

shall disclose in the Form 15F the address of 

its Internet Web site or that of the electronic 

information delivery system in its primary 

trading market on which it will publish the 

information required under paragraph 

(b)(1)(iii) of this section. An issuer need not 

update the Form 15F to reflect a change in 

that address. 

4. A foreign private issuer that has filed a 

Form 15F solely with respect to a class of 

debt securities may establish the exemption 

under § 240.12g3–2(b) regarding a class of 

equity securities by submitting an 

application to the Commission after filing its 

Form 15F. The issuer must provide in that 

application the date that it filed its Form 15F 

as well as the address of its Internet Web site 

or that of the electronic information delivery 

system in its primary trading market on 

which it will publish the information 

required under paragraph (b)(1)(iii) of this 

section. 

(f)(1) A foreign private issuer that, 

upon application to the Commission 

and not after filing a Form 15F, has 

obtained or will obtain the exemption 

under § 240.12g3–2(b), may publish the 

information required under paragraph 

(b)(1)(iii) of this section on its Internet 

Web site or through an electronic 

information delivery system generally 

available to the public in its primary 

trading market, rather than furnish that 

information to the Commission, as long 

as it complies with the English 

translation requirements provided in 

paragraph (e) of this section. 


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16956 Federal Register / Vol. 72, No. 65 / Thursday, April 5, 2007 / Rules and Regulations 

(2) Before a foreign private issuer may 

publish information electronically 

pursuant to this paragraph, it must 

provide the Commission with the 

address of its Internet Web site or that 

of the electronic information delivery 

system in its primary trading market in 

its application for the exemption under 

§ 240.12g3–2(b) or in an amendment to 

that application. 

■ 7. Amend § 240.12g–4 by: 

■ a. Removing the authority citations 

following the section; and 

■ b. Revising paragraph (a) to read as 

follows: 

§ 240.12g–4 Certifications of termination 

of registration under section 12(g). 

(a) Termination of registration of a 

class of securities under section 12(g) of 

the Act (15 U.S.C. 78l(g)) shall take 

effect 90 days, or such shorter period as 

the Commission may determine, after 

the issuer certifies to the Commission 

on Form 15 (17 CFR 249.323) that the 

class of securities is held of record by: 

(1) Less than 300 persons; or 

(2) Less than 500 persons, where the 

total assets of the issuer have not 

exceeded $10 million on the last day of 

each of the issuer’s most recent three 

fiscal years. 

* * * * * 

■ 8. Amend § 240.12h–3 by: 

■ a. Removing the authority citations 

following the section; 

■ b. Adding the word ‘‘and’’ at the end 

of paragraph (b)(1)(ii); 

■ c. Removing paragraph (b)(2), 

including the undesignated paragraph; 

■ d. Redesignating paragraph (b)(3) as 

(b)(2); 

■ e. Revising the cite ‘‘paragraphs 

(b)(1)(ii) and (2)(ii)’’ to read ‘‘paragraph 

(b)(1)(ii)’’ in paragraph (c); and 

■ f. Revising the phrase ‘‘criteria (i) and 

(ii) in either paragraph (b)(1) or (2)’’ to 

read ‘‘either criteria (i) or (ii) of 

paragraph (b)(1)’’ in paragraph (d). 

■ 9. Add § 240.12h–6 to read as follows: 

§ 240.12h–6 Certification by a foreign 

private issuer regarding the termination of 

registration of a class of securities under 

section 12(g) or the duty to file reports 

under section 13(a) or section 15(d). 

(a) A foreign private issuer may 

terminate the registration of a class of 

securities under section 12(g) of the Act 

(15 U.S.C. 78l(g)), or terminate the 

obligation under section 15(d) of the Act 

(15 U.S.C. 78o(d)) to file or furnish 

reports required by section 13(a) of the 

Act (15 U.S.C. 78m(a)) with respect to 

a class of equity securities, or both, after 

certifying to the Commission on Form 

15F (17 CFR 249.324) that: 

(1) The foreign private issuer has had 

reporting obligations under section 13(a) 

or section 15(d) of the Act for at least 

the 12 months preceding the filing of 

the Form 15F, has filed or furnished all 

reports required for this period, and has 

filed at least one annual report pursuant 

to section 13(a) of the Act; 

(2) The foreign private issuer’s 

securities have not been sold in the 

United States in a registered offering 

under the Securities Act of 1933 (15 

U.S.C. 77a et seq.) during the 12 months 

preceding the filing of the Form 15F, 

other than securities issued: 

(i) To the issuer’s employees; 

(ii) By selling security holders in nonunderwritten offerings; 

(iii) Upon the exercise of outstanding 

rights granted by the issuer if the rights 

are granted pro rata to all existing 

security holders of the class of the 

issuer’s securities to which the rights 

attach; 

(iv) Pursuant to a dividend or interest 

reinvestment plan; or 

(v) Upon the conversion of 

outstanding convertible securities or 

upon the exercise of outstanding 

transferable warrants issued by the 

issuer; 

Note to Paragraph (a)(2): The exceptions in 

paragraphs (a)(2)(iii) through (v) do not apply 

to securities issued pursuant to a standby 

underwritten offering or other similar 

arrangement in the United States. 

(3) The foreign private issuer has 

maintained a listing of the subject class 

of securities for at least the 12 months 

preceding the filing of the Form 15F on 

one or more exchanges in a foreign 

jurisdiction that, either singly or 

together with the trading of the same 

class of the issuer’ s securities in 

another foreign jurisdiction, constitutes 

the primary trading market for those 

securities; and 

(4)(i) The average daily trading 

volume of the subject class of securities 

in the United States for a recent 12- 

month period has been no greater than 

5 percent of the average daily trading 

volume of that class of securities on a 

worldwide basis for the same period; or 

(ii) On a date within 120 days before 

the filing date of the Form 15F, a foreign 

private issuer’s subject class of equity 

securities is either held of record by: 

(A) Less than 300 persons on a 

worldwide basis; or 

(B) Less than 300 persons resident in 

the United States. 

Note to Paragraph (a)(4): If an issuer’s 

equity securities trade in the form of 

American Depositary Receipts in the United 

States, for purposes of paragraph (a)(4)(i), it 

must calculate the trading volume of its 

American Depositary Receipts in terms of the 

number of securities represented by those 

American Depositary Receipts. 

(b) A foreign private issuer must wait 

at least 12 months before it may file a 

Form 15F to terminate its section 13(a) 

or 15(d) reporting obligations in reliance 

on paragraph (a)(4)(i) of this section if: 

(1) The issuer has delisted a class of 

equity securities from a national 

securities exchange or inter-dealer 

quotation system in the United States, 

and at the time of delisting, the average 

daily trading volume of that class of 

securities in the United States exceeded 

5 percent of the average daily trading 

volume of that class of securities on a 

worldwide basis for the preceding 12 

months; or 

(2) The issuer has terminated a 

sponsored American Depositary 

Receipts facility, and at the time of 

termination the average daily trading 

volume in the United States of the 

American Depositary Receipts exceeded 

5 percent of the average daily trading 

volume of the underlying class of 

securities on a worldwide basis for the 

preceding 12 months. 

(c) A foreign private issuer may 

terminate its duty to file or furnish 

reports pursuant to section 13(a) or 

section 15(d) of the Act with respect to 

a class of debt securities after certifying 

to the Commission on Form 15F that: 

(1) The foreign private issuer has filed 

or furnished all reports required by 

section 13(a) or section 15(d) of the Act, 

including at least one annual report 

pursuant to section 13(a) of the Act; and 

(2) On a date within 120 days before 

the filing date of the Form 15F, the class 

of debt securities is either held of record 

by: 

(i) Less than 300 persons on a 

worldwide basis; or 

(ii) Less than 300 persons resident in 

the United States. 

(d)(1) Following a merger, 

consolidation, exchange of securities, 

acquisition of assets or otherwise, a 

foreign private issuer that has succeeded 

to the registration of a class of securities 

under section 12(g) of the Act of another 

issuer pursuant to § 240.12g–3, or to the 

reporting obligations of another issuer 

under section 15(d) of the Act pursuant 

to § 240.15d–5, may file a Form 15F to 

terminate that registration or those 

reporting obligations if: 

(i) Regarding a class of equity 

securities, the successor issuer meets 

the conditions under paragraph (a) of 

this section; or 

(ii) Regarding a class of debt 

securities, the successor issuer meets 

the conditions under paragraph (c) of 

this section. 

(2) When determining whether it 

meets the prior reporting requirement 

under paragraph (a)(1) or paragraph 

(c)(1) of this section, a successor issuer 


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may take into account the reporting 

history of the issuer whose reporting 

obligations it has assumed pursuant to 

§ 240.12g–3 or § 240.15d–5. 

(e) Counting method. When 

determining under this section the 

number of United States residents 

holding a foreign private issuer’s equity 

or debt securities: 

(1)(i) Use the method for calculating 

record ownership § 240.12g3–2(a), 

except that you may limit your inquiry 

regarding the amount of securities 

represented by accounts of customers 

resident in the United States to brokers, 

dealers, banks and other nominees 

located in: 

(A) The United States; 

(B) The foreign private issuer’s 

jurisdiction of incorporation, legal 

organization or establishment; and 

(C) The foreign private issuer’s 

primary trading market, if different from 

the issuer’s jurisdiction of 

incorporation, legal organization or 

establishment. 

(ii) If you aggregate the trading 

volume of the issuer’s securities in two 

foreign jurisdictions for the purpose of 

complying with paragraph (a)(3) of this 

section, you must include both of those 

foreign jurisdictions when conducting 

your inquiry under paragraph (e)(1)(i) of 

this section. 

(2) If, after reasonable inquiry, you are 

unable without unreasonable effort to 

obtain information about the amount of 

securities represented by accounts of 

customers resident in the United States, 

for purposes of this section, you may 

assume that the customers are the 

residents of the jurisdiction in which 

the nominee has its principal place of 

business. 

(3) You must count securities as 

owned by United States holders when 

publicly filed reports of beneficial 

ownership or other reliable information 

that is provided to you indicates that the 

securities are held by United States 

residents. 

(4) When calculating under this 

section the number of your United 

States resident security holders, you 

may rely in good faith on the assistance 

of an independent information services 

provider that in the regular course of its 

business assists issuers in determining 

the number of, and collecting other 

information concerning, their security 

holders. 

(f) Definitions. For the purpose of this 

section: 

(1) Debt security means any security 

other than an equity security as defined 

under § 240.3a11–1, including: 

(i) Non-participatory preferred stock, 

which is defined as non-convertible 

capital stock, the holders of which are 

entitled to a preference in payment of 

dividends and in distribution of assets 

on liquidation, dissolution, or winding 

up of the issuer, but are not entitled to 

participate in residual earnings or assets 

of the issuer; and 

(ii) Notwithstanding § 240.3a11–1, 

any debt security described in 

paragraph (f)(3)(i) and (ii) of this 

section; 

(2) Employee has the same meaning as 

the definition of employee provided in 

Form S–8 (§ 239.16b of this chapter). 

(3) Equity security means the same as 

under § 240.3a11–1, but, for purposes of 

paragraphs (a)(3) and (a)(4)(i) of this 

section, does not include: 

(i) Any debt security that is 

convertible into an equity security, with 

or without consideration; 

(ii) Any debt security that includes a 

warrant or right to subscribe to or 

purchase an equity security; 

(iii) Any such warrant or right; or 

(iv) Any put, call, straddle, or other 

option or privilege that gives the holder 

the option of buying or selling a security 

but does not require the holder to do so. 

(4) Foreign private issuer has the same 

meaning as under § 240.3b–4. 

(5) Primary trading market means 

that: 

(i) At least 55 percent of the trading 

in a foreign private issuer’s class of 

securities that is the subject of Form 15F 

took place in, on or through the 

facilities of a securities market or 

markets in a single foreign jurisdiction 

or in no more than two foreign 

jurisdictions during a recent 12-month 

period; and 

(ii) If a foreign private issuer 

aggregates the trading of its subject class 

of securities in two foreign jurisdictions 

for the purpose of paragraph (a)(3) of 

this section, the trading for the issuer’s 

securities in at least one of the two 

foreign jurisdictions must be larger than 

the trading in the United States for the 

same class of the issuer’s securities. 

(6) Recent 12-month period means a 

12-calendar-month period that ended no 

more than 60 days before the filing date 

of the Form 15F. 

(g)(1) Suspension of a foreign private 

issuer’s duty to file reports under 

section 13(a) or section 15(d) of the Act 

shall occur immediately upon filing the 

Form 15F with the Commission if filing 

pursuant to paragraph (a), (c) or (d) of 

this section. If there are no objections 

from the Commission, 90 days, or such 

shorter period as the Commission may 

determine, after the issuer has filed its 

Form 15F, the effectiveness of any of the 

following shall occur: 

(i) The termination of registration of a 

class of securities under section 12(g); 

and 

(ii) The termination of a foreign 

private issuer’s duty to file reports 

under section 13(a) or section 15(d) of 

the Act. 

(2) If the Form 15F is subsequently 

withdrawn or denied, the issuer shall, 

within 60 days after the date of the 

withdrawal or denial, file with or 

submit to the Commission all reports 

that would have been required had the 

issuer not filed the Form 15F. 

(h) As a condition to termination of 

registration or reporting under 

paragraph (a), (c) or (d) of this section, 

a foreign private issuer must, either 

before or on the date that it files its 

Form 15F, publish a notice in the 

United States that discloses its intent to 

terminate its registration of a class of 

securities under section 12(g) of the Act, 

or its reporting obligations under 

section 13(a) or section 15(d) of the Act, 

or both. The issuer must publish the 

notice through a means reasonably 

designed to provide broad 

dissemination of the information to the 

public in the United States. The issuer 

must also submit a copy of the notice to 

the Commission, either under cover of 

a Form 6–K (17 CFR 249.306) before or 

at the time of filing of the Form 15F, or 

as an exhibit to the Form 15F. 

(i)(1) A foreign private issuer that, 

before the effective date of this section, 

terminated the registration of a class of 

securities under section 12(g) of the Act 

or suspended its reporting obligations 

regarding a class of equity or debt 

securities under section 15(d) of the Act 

may file a Form 15F in order to: 

(i) Terminate under this section the 

registration of a class of equity securities 

that was the subject of a Form 15 

(§ 249.323 of this chapter) filed by the 

issuer pursuant to § 240.12g–4; or 

(ii) Terminate its reporting obligations 

under section 15(d) of the Act, which 

had been suspended by the terms of that 

section or by the issuer’s filing of a 

Form 15 pursuant to § 240.12h–3, 

regarding a class of equity or debt 

securities. 

(2) In order to be eligible to file a 

Form 15F under this paragraph: 

(i) If a foreign private issuer 

terminated the registration of a class of 

securities pursuant to § 240.12g–4 or 

suspended its reporting obligations 

pursuant to § 240.12h–3 or section 15(d) 

of the Act regarding a class of equity 

securities, the issuer must meet the 

requirements under paragraph (a)(3) and 

paragraph (a)(4)(i) or (a)(4)(ii) of this 

section; or 

(ii) If a foreign private issuer 

suspended its reporting obligations 

pursuant to § 240.12h–3 or section 15(d) 

of the Act regarding a class of debt 

securities, the issuer must meet the 


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16958 Federal Register / Vol. 72, No. 65 / Thursday, April 5, 2007 / Rules and Regulations 

requirements under paragraph (c)(2) of 

this section. 

(3)(i) If the Commission does not 

object, 90 days after the filing of a Form 

15F under this paragraph, or such 

shorter period as the Commission may 

determine, the effectiveness of any of 

the following shall occur: 

(A) The termination under this 

section of the registration of a class of 

equity securities, which was the subject 

of a Form 15 filed pursuant to 

§ 240.12g–4, and the duty to file reports 

required by section 13(a) of the Act 

regarding that class of securities; or 

(B) The termination of a foreign 

private issuer’s reporting obligations 

under section 15(d) of the Act, which 

had previously been suspended by the 

terms of that section or by the issuer’s 

filing of a Form 15 pursuant to 

§ 240.12h–3, regarding a class of equity 

or debt securities. 

(ii) If the Form 15F is subsequently 

withdrawn or denied, the foreign 

private issuer shall, within 60 days after 

the date of the withdrawal or denial, file 

with or submit to the Commission all 

reports that would have been required 

had the issuer not filed the Form 15F. 

PART 249—FORMS, SECURITIES 

EXCHANGE ACT OF 1934 

■ 10. The authority citation for Part 249 

continues to read in part as follows: 

Authority: 15 U.S.C. 78a et seq. and 7201 

et seq.; and 18 U.S.C. 1350, unless otherwise 

noted. 

* * * * * 

■ 11. Add § 249.324 to read as follows: 

§ 249.324 Form 15F, certification by a 

foreign private issuer regarding the 

termination of registration of a class of 

securities under section 12(g) or the duty to 

file reports under section 13(a) or section 

15(d). 

This form shall be filed by a foreign 

private issuer to disclose and certify the 

information on the basis of which it 

meets the requirements specified in 

Rule 12h–6 (§ 240.12h–6 of this chapter) 

to terminate the registration of a class of 

securities under section 12(g) of the Act 

(15 U.S.C. 78l(g)) or the duty to file 

reports under section 13(a) of the Act 

(15 U.S.C. 78m(a)) or section 15(d) of 

the Act (15 U.S.C. 78(o)(d)). In each 

instance, unless the Commission 

objects, termination occurs 90 days, or 

such shorter time as the Commission 

may direct, after the filing of Form 15F. 

■ 12. Add Form 15F (referenced in 

§ 249.324) to read as follows: 

(Note: The text of Form 15F will not appear 

in the Code of Federal Regulations.) 

OMB APPROVAL 

OMB Number: 3235–0621 

Expires: 

Estimated average burden hours per 

response—30.0 

United States Securities and Exchange 

Commission 

Washington, DC 20549 

Form 15F—Certification of a Foreign 

Private Issuer’s Termination of 

Registration of a Class of Securities 

Under Section 12(g) of the Securities 

Exchange Act of 1934 or its 

Termination of the Duty to File Reports 

Under Section 13(a) or Section 15(d) of 

the Securities Exchange Act of 1934 

Commission File Number llllllll

lllllllllllllllllllll

(Exact name of registrant as specified in its 

charter) 

lllllllllllllllllllll

(Address, including zip code, and telephone 

number, including area code, of registrant’s 

principal executive offices) 

lllllllllllllllllllll

(Title of each class of securities covered by 

this Form) 

Place an X in the appropriate box(es) to 

indicate the provision(s) relied upon to 

terminate the duty to file reports under the 

Securities Exchange Act of 1934: 

Rule 12h–6(a) b 

(for equity securities) 

Rule 12h–6(c) b 

(for debt securities) 

Rule 12h–6(d) b 

(for successor registrants) 

Rule 12h–6(i) b 

(for prior Form 15 filers) 

General Instructions 

A. Who May Use Form 15F and When 

1. A foreign private issuer may file Form 

15F, pursuant to Rule 12h–6(a) (17 CFR 

240.12h–6(a)) under the Securities Exchange 

Act of 1934 (‘‘Exchange Act’’), when seeking 

to terminate: 

• The registration of a class of securities 

under section 12(g) of the Exchange Act and 

the corresponding duty to file or furnish 

reports required by section 13(a) of the 

Exchange Act; or 

• The obligation under section 15(d) of the 

Exchange Act to file or furnish reports 

required by section 13(a) of the Act regarding 

a class of equity securities; or 

• Both. 

2. A foreign private issuer may file Form 

15F, pursuant to Rule 12h–6(c) (17 CFR 

240.12h–6(c)), when seeking to terminate its 

reporting obligations under section 13(a) or 

section 15(d) of the Exchange Act regarding 

a class of debt securities. 

3. A foreign private issuer may file Form 

15F, pursuant to Rule 12h–6(d) (17 CFR 

240.12h–6(d)), when seeking to terminate the 

registration of a class of securities under 

section 12(g), or reporting obligations under 

section 13(a) or section 15(d) of the Exchange 

Act, to which it has succeeded pursuant to 

Rule 12g–3 (17 CFR 240.12g–3) or Rule 15d–

5 (17 CFR 240.15d–5). 

4. A foreign private issuer may file Form 

15F, pursuant to Rule 12h–6(i) (17 CFR 

240.12h–6(i)), if, before the effective date of 

Rule 12h–6, it terminated the registration of 

a class of securities under section 12(g) of the 

Act, or suspended its reporting obligations 

regarding a class of equity or debt securities 

under section 15(d) of the Act, in order to: 

• Terminate under Rule 12h–6 the 

registration of a class of equity securities that 

was the subject of a Form 15 (§ 249.323 of 

this chapter) filed by the issuer pursuant to 

§ 240.12g–4; or 

• Terminate its reporting obligations under 

section 15(d) of the Act, which had been 

suspended by the terms of that section or by 

the issuer’s filing of a Form 15 pursuant to 

§ 240.12h–3, regarding a class of equity or 

debt securities. 

B. Certification Effected by Filing Form 15F 

By completing and signing this Form, the 

issuer certifies that: 

• It meets all of the conditions for 

termination of Exchange Act reporting 

specified in Rule 12h–6 (17 CFR 240.12h–6); 

and 

• There are no classes of securities other 

than those that are the subject of this Form 

15F regarding which the issuer has Exchange 

Act reporting obligations. 

C. Effective Date 

For an issuer filing Form 15F under Rule 

12h–6(a), (c) or (d), the duty to file any 

reports required under section 13(a) or 15(d) 

of the Exchange Act will be suspended 

immediately upon filing the Form 15F. If 

there are no objections from the Commission, 

90 days, or within a shorter period as the 

Commission may determine, after the issuer 

has filed its Form 15F, there shall take effect: 

• the termination of registration of a class 

of securities under section 12(g) of the Act; 

• the termination of the issuer’s duty to 

file or submit reports under section 13(a) or 

section 15(d) of the Act; or 

• both. 

For an issuer that has already terminated 

its registration of a class of equity securities 

pursuant to Rule 12g–4 or suspended its 

reporting obligations under section 15(d) or 

Rule 12h–3, the effectiveness of its 

termination of section 12(g) registration 

under Rule 12h–6 and the corresponding 

duty to file reports required by section 13(a) 

of the Act, or the termination of its 

previously suspended reporting obligations 

under section 15(d) of the Act, shall also 

occur 90 days after the issuer has filed its 

Form 15F under Rule 12h–6(i), or within a 

shorter period as the Commission may 

determine, if there are no objections from the 

Commission. 

D. Other Filing Requirements 

You must file Form 15F and related 

materials, including correspondence, in 

electronic format via our Electronic Data 

Gathering, Analysis, and Retrieval (EDGAR) 

system in accordance with the EDGAR rules 

set forth in Regulation S–T (17 CFR Part 232). 

The Form 15F and related materials must be 

in the English language as required by 

Regulation S–T Rule 306 (17 CFR 232.306). 

You must provide the signature required for 

Form 15F in accordance with Regulation S–


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T Rule 302 (17 CFR 232.302). If you have 

technical questions about EDGAR, call the 

EDGAR Filer Support Office at (202) 551–

8900. If you have questions about the EDGAR 

rules, call the Office of EDGAR and 

Information Analysis at (202) 551–3610. 

If the Form 15F is subsequently withdrawn 

or denied, you must, within 60 days after the 

date of the withdrawal or denial, file with or 

submit to the Commission all reports that 

would have been required had you not filed 

the Form 15F. See Rule 12h–6(g)(2) (17 CFR 

240.12h–6(g)(2)) and Rule 12h–6(i)(3)(ii) (17 

CFR 240.12h–6(i)(3)(ii)). 

E. Rule 12g3–2(b) Exemption 

Regardless of the particular Rule 12h–6 

provision under which it is proceeding, a 

foreign private issuer that has filed a Form 

15F regarding a class of equity securities 

shall receive the exemption under Rule 

12g3–2(b) (17 CFR 240.12g3–2(b)) for the 

subject class of equity securities immediately 

upon the effective date of its termination of 

registration and reporting under Rule 12h–6. 

Refer to Rule 12g3–2(e) (17 CFR 240.12g3–

2(e)) for the conditions that a foreign private 

issuer must meet in order to maintain the 

Rule 12g3–2(b) exemption following its 

termination of Exchange Act registration and 

reporting. 

Part I 

The purpose of this part is to provide 

information to investors and to assist the 

Commission in assessing whether you meet 

the requirements for terminating your 

Exchange Act reporting under Rule 12h–6. If, 

pursuant to Rule 12h–6, there is an item that 

does not apply to you, mark that item as 

inapplicable. 

Item 1. Exchange Act Reporting History 

A. State when you first incurred the duty 

to file reports under section 13(a) or section 

15(d) of the Exchange Act. 

B. State whether you have filed or 

submitted all reports required under 

Exchange Act section 13(a) or section 15(d) 

and corresponding Commission rules for the 

12 months preceding the filing of this form, 

and whether you have filed at least one 

annual report under section 13(a). 

Instruction to Item 1. 

If you are a successor issuer that has filed 

this Form 15F pursuant to Rule 12h–6(d), 

and are relying on the reporting history of the 

issuer to which you have succeeded under 

Rule 12g–3 (17 CFR 12g–3) or Rule 15d–5 (17 

CFR 240.15d–5), identify that issuer and 

provide the information required by this 

section for that issuer. 

Item 2. Recent United States Market Activity 

State when your securities were last sold 

in the United States in a registered offering 

under the Securities Act of 1933 (15 U.S.C. 

77a et seq.) (‘‘Securities Act’’). 

Instructions to Item 2. 

1. Do not include registered offerings 

involving the issuance of securities: 

a. to your employees, as that term is 

defined in Form S–8 (17 CFR 239.16b); 

b. by selling security holders in nonunderwritten offerings; 

c. upon the exercise of outstanding rights 

granted by the issuer if the rights are granted 

pro rata to all existing security holders of the 

class of the issuer’s securities to which the 

rights attach; 

d. pursuant to a dividend or interest 

reinvestment plan; or 

e. upon the conversion of outstanding 

convertible securities or upon the exercise of 

outstanding transferable warrants issued by 

the issuer. 

However, you must include registered 

offerings described in paragraphs (c) through 

(e) of this instruction if undertaken pursuant 

to a standby underwritten offering or other 

similar arrangement in the United States. 

2. If you have registered equity securities 

on a shelf or other Securities Act registration 

statement under which securities remain 

unsold, disclose the last sale of securities 

under that registration statement. If no sale 

has occurred during the preceding 12 

months, disclose whether you have filed a 

post-effective amendment to terminate the 

registration of unsold securities under that 

registration statement. 

Item 3. Foreign Listing and Primary Trading 

Market 

A. Identify the exchange or exchanges 

outside the United States, and the foreign 

jurisdiction in which the exchange or 

exchanges are located, on which you have 

maintained a listing of the class of securities 

that is the subject of this Form, and which, 

either singly or together with the trading of 

the same class of the issuer’s securities in 

another foreign jurisdiction, constitutes the 

primary trading market for those securities. 

B. Provide the date of initial listing on the 

foreign exchange or exchanges identified in 

response to Item 3.A. In addition, disclose 

whether you have maintained a listing of the 

subject class of securities on one or more of 

those foreign exchanges for at least the 12 

months preceding the filing of this Form. 

C. Disclose the percentage of trading in the 

subject class of securities that occurred in the 

identified jurisdiction or jurisdictions of your 

foreign listing as of a recent 12-month period. 

Instructions to Item 3 

1. When responding to this item, refer to 

the definition of ‘‘primary trading market’’ in 

Rule 12h–6(f) (17 CFR 240.12h–6(f)). In 

accordance with that definition, if your 

primary trading market consists of two 

foreign jurisdictions, provide the information 

required by this section for both foreign 

jurisdictions. In addition, disclose whether 

the trading market for your securities in at 

least one of those two foreign jurisdictions is 

larger than the trading market for your 

securities in the United States as of the same 

recent 12-month period. Disclose the first 

and last days of that recent 12-month period. 

2. For the purpose of the primary trading 

market determination, you must measure the 

average daily trading volume of on-exchange 

transactions in the subject securities 

aggregated over one or two foreign 

jurisdictions against your worldwide trading 

volume. You may include in this measure 

off-exchange transactions in those 

jurisdictions comprising the numerator only 

if you include those off-exchange 

transactions when calculating worldwide 

trading volume in the denominator. This 

denominator should be the same as the 

denominator used for the trading volume 

benchmark under Rule 12h–6(a)(4)(i) (17 CFR 

240.12h–6(a)(4)(i)) and Item 4 of this Form. 

Item 4. Comparative Trading Volume Data 

If relying on Rule 12h–6(a)(4)(i), provide 

the following information: 

A. Identify the first and last days of the 

recent 12-month period used to meet the 

requirements of that rule provision. 

B. For the same recent 12-month period, 

disclose the average daily trading volume of 

the class of securities that is the subject of 

this Form both in the United States and on 

a worldwide basis. 

C. For the same recent 12-month period, 

disclose the average daily trading volume of 

the subject class of securities in the United 

States as a percentage of the average daily 

trading volume for that class of securities on 

a worldwide basis. 

D. Disclose whether you have delisted the 

subject class of securities from a national 

securities exchange or inter-dealer quotation 

system in the United States. If so, provide the 

date of delisting, and, as of that date, disclose 

the average daily trading volume of the 

subject class of securities in the United States 

as a percentage of the average daily trading 

volume for that class of securities on a 

worldwide basis for the preceding 12-month 

period. 

E. Disclose whether you have terminated a 

sponsored American depositary receipt 

(ADR) facility regarding the subject class of 

securities. If so, provide the date of the ADR 

facility termination, and, as of that date, 

disclose the average daily trading volume of 

the subject class of securities in the United 

States as a percentage of the average daily 

trading volume for that class of securities on 

a worldwide basis for the preceding 12- 

month period. 

F. Identify the sources of the trading 

volume information used for determining 

whether you meet the requirements of Rule 

12h–6. If you used more than one source, 

disclose the reasons why you used each 

source. 

Instructions to Item 4 

1. ‘‘Recent 12-month period’’ means a 12- 

calendar-month period that ended no more 

than 60 days before the filing date of this 

form, as defined under Rule 12h–6(f). You 

may disclose the comparative trading volume 

data in response to this item in tabular format 

and attached as an exhibit to this Form. 

2. An issuer is ineligible to rely on 

paragraph (a)(4)(i) of Rule 12h–6 if, as of the 

date of delisting or termination of an ADR 

facility, the average daily trading volume of 

the subject class of securities in the United 

States exceeded 5 percent of the average 

daily trading volume of that class of 

securities on a worldwide basis, as measured 

over the preceding 12 months, and 12 

months has not elapsed from the date of 

delisting or termination of the ADR facility. 

See Rule 12h–6(b) (17 CFR 240.12h–6(b)). 

3. For purposes of paragraph (a)(4)(i) of 

Rule 12h–6: 

a. when determining your U.S. average 

daily trading volume, you must include all 


pwalker on PROD1PC71 with RULES3
16960 Federal Register / Vol. 72, No. 65 / Thursday, April 5, 2007 / Rules and Regulations 

transactions, whether on-exchange or offexchange; 

b. when determining your worldwide 

average daily trading volume, in addition to 

on-exchange transactions, which you must 

include, you may include off-exchange 

transactions; and 

c. the sources of your trading volume 

information may include publicly available 

sources, market data vendors or other 

commercial information service providers 

upon which you have reasonably relied in 

good faith, and as long as the information 

does not duplicate any other trading volume 

information obtained from exchanges or 

other sources. 

Item 5. Alternative Record Holder 

Information 

If relying on Rule 12h–6(a)(4)(ii) (17 CFR 

240.12h–6(a)(4)(ii)): 

Disclose the number of record holders of 

the subject class of equity securities on a 

worldwide basis or who are United States 

residents at a date within 120 days before 

filing this Form. Disclose the date used for 

the purpose of Item 5. 

Item 6. Debt Securities 

If relying on Rule 12h–6(c) (17 CFR 

240.12h–6(c)): 

Disclose the number of record holders of 

your debt securities either on a worldwide 

basis or who are United States residents at a 

date within 120 days before the date of filing 

of this Form. Disclose the date used for the 

purpose of Item 6. 

Instructions to Items 5 and 6 

1. When determining the number of record 

holders of your equity or debt securities who 

are United States residents, refer to Rule 

12h–6(e) (17 CFR 240.12h–6(e)) for the 

appropriate counting method. 

2. If you have relied upon the assistance of 

an independent information services 

provider to determine the number of your 

United States equity or debt securities 

holders, identify this party in your response. 

Item 7. Notice Requirement 

If filing Form 15F pursuant to Rule 12h–

6(a), (c) or (d): 

A. Disclose the date of publication of the 

notice, required by Rule 12h–6(h) (17 CFR 

240.12h–6(h)), disclosing your intent to 

terminate your duty to file reports under 

section 13(a) or 15(d) of the Exchange Act or 

both. 

B. Identify the means, such as publication 

in a particular newspaper or transmission by 

a particular wire service, used to disseminate 

the notice in the United States. 

Instruction to Item 7 

If you have submitted a copy of the notice 

under cover of a Form 6–K (17 CFR 249.306), 

disclose the submission date of the Form 6–

K. If not, attach a copy of the notice as an 

exhibit to this Form. See Rule 12h–6(h). 

Item 8. Prior Form 15 Filers 

If relying on Rule 12h–6(i): 

A. Disclose whether, before the effective 

date of Rule 12h–6, you filed a Form 15 (17 

CFR 249.323) to terminate the registration of 

a class of equity securities pursuant to Rule 

12g–4 (17 CFR 240.12g–4) or to suspend your 

reporting obligations under section 15(d) of 

the Act regarding a class of equity or debt 

securities pursuant to Rule 12h–3 (17 CFR 

240.12h–3). If so, disclose the date that you 

filed the Form 15. If you suspended your 

reporting obligations by the terms of section 

15(d), disclose the effective date of that 

suspension as well as the date that you filed 

a Form 15 to notify the Commission of that 

suspension pursuant to Rule 15d–6 (17 CFR 

240.15d–6). 

B. If you terminated the registration of a 

class of securities pursuant to Rule 12g–4 or 

suspended your reporting obligations 

pursuant to Rule 12h–3 or by the terms of 

section 15(d) of the Act regarding a class of 

equity securities, provide the disclosure 

required by Item 3 of this Form, ‘‘Primary 

Trading Market.’’ Further provide the 

disclosure required by Item 4 of this Form, 

‘‘Comparative Trading Volume Data,’’ or the 

disclosure required by Item 5 of the Form, 

‘‘Alternative Record Holder Information.’’

C. If you suspended your reporting 

obligations pursuant to Rule 12h–3 or by the 

terms of section 15(d) of the Act regarding a 

class of debt securities, provide the 

disclosure required by Item 6 of this Form, 

‘‘Debt Securities.’’

Part II 

Item 9. Rule 12g3–2(b) Exemption 

Disclose the address of your Internet Web 

site or of the electronic information delivery 

system in your primary trading market on 

which you will publish the information 

required under Rule 12g3–2(b)(1)(iii) (17 CFR 

240.12g3–2(b)(1)(iii)). 

Instruction to Item 9 

Refer to Note 1 to Rule 12g3–2(e) for 

instructions regarding providing English 

translations of documents published 

pursuant to Rule 12g3–2(b)(1)(iii) (17 CFR 

240.12g3–2(b)(1)(iii). 

Part III 

Item 10. Exhibits 

List the exhibits attached to this Form. 

Instruction to Item 10 

In addition to exhibits specifically 

mentioned on this Form, you may attach as 

an exhibit any document providing 

information that is material to your eligibility 

to terminate your reporting obligations under 

Exchange Act Rule 12h–6. You should refer 

to any relevant exhibit when responding to 

the items on this Form. 

Item 11. Undertakings 

Furnish the following undertaking: 

The undersigned issuer hereby undertakes 

to withdraw this Form 15F if, at any time 

before the effectiveness of its termination of 

reporting under Rule 12h–6, it has actual 

knowledge of information that causes it 

reasonably to believe that, at the time of 

filing the Form 15F: 

(1) The average daily trading volume of its 

subject class of securities in the United States 

exceeded 5 percent of the average daily 

trading volume of that class of securities on 

a worldwide basis for the same recent 12- 

month period that the issuer used for 

purposes of Rule 12h–6(a)(4)(i); 

(2) Its subject class of securities was held 

of record by 300 or more United States 

residents or 300 or more persons worldwide, 

if proceeding under Rule 12h–6(a)(4)(ii) or 

Rule 12h–6(c); or 

(3) It otherwise did not qualify for 

termination of its Exchange Act reporting 

obligations under Rule 12h–6. 

Instruction to Item 11 

After filing this Form, an issuer has no 

continuing obligation to make inquiries or 

perform other work concerning the 

information contained in this Form, 

including its assessment of trading volume or 

ownership of its securities in the United 

States. 

Signature 

Pursuant to the requirements of the 

Securities Exchange Act of 1934, [name of 

registrant as specified in charter] has duly 

authorized the undersigned person to sign on 

its behalf this certification on Form 15F. In 

so doing, [name of registrant as specified in 

charter] certifies that, as represented on this 

Form, it has complied with all of the 

conditions set forth in Rule 12h–6 for 

terminating its registration under section 

12(g) of the Exchange Act, or its duty to file 

reports under section 13(a) or section 15(d) 

of the Exchange Act, or both. 

Dated: March 27, 2007. 

By the Commission. 

Nancy M. Morris, 

Secretary. 

[FR Doc. E7–5947 Filed 4–4–07; 8:45 am] 

BILLING CODE 8010–01–P 


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