On June 4, 2025, the US Securities and Exchange Commission (“SEC”) published a concept release seeking public comment on whether the definition of “foreign private issuer” (“FPI”) should be amended (the “Concept Release”).

Key Takeaways

• Recognizing the unique challenges that FPIs face in accessing the US capital markets, the SEC has over the years adopted a regulatory framework governing FPIs that provides flexible accommodations.
• These accommodations are based on the assumption that FPIs are subject to home jurisdiction oversight and disclosure requirements, and that their securities are traded in foreign markets.
• Recent studies by the SEC, however, have uncovered trends that indicate more than half of FPIs that report in the US now trade predominantly or exclusively on US markets, with the majority of those FPIs incorporated in countries that do not correspond to their headquarters or base of operations.
• As such, the SEC is now considering revising the definition of FPIs, last revised in 1999, to re-align with its goals of facilitating US investors’ access to securities of foreign companies while maintaining investor protections.
• The SEC identifies six categories of changes that could be implemented in the future, individually or as a group, adjusting the universe of companies qualifying as FPIs to better reflect the companies that the SEC intended to benefit from FPI accommodations.

Based on the feedback received through the public comment process, open for 90 days following the issuance of the Concept Release, the SEC may seek to propose amendments to its FPI rules.

Background

The SEC first provided accommodations for certain foreign issuers in 1935, and adopted the current definition of “foreign private issuer” in 1983, which it last amended substantively in 1999. Under the SEC’s current rules, a “foreign issuer” is any issuer which is a foreign government, a national of any foreign country, or a corporation or other organization incorporated or organized under the laws of any foreign country.

A foreign issuer that is not a foreign government can qualify as a “foreign private issuer” (FPI) under the SEC’s current rules in one of two ways:

1. Shareholder Test: A foreign issuer would qualify as an FPI if it has 50 percent or less of its outstanding voting securities held of record directly or indirectly by US residents.
2. Business Contacts Test: A foreign issuer with more than 50 percent of its outstanding voting securities held by US residents would qualify for FPI status if it has none of the following contacts with the United States:
   1. a majority of its executive officers or directors are US citizens or residents;
   2. more than 50 percent of its assets are located in the US; or
   3. its business is administered principally in the US.

A foreign issuer filing an initial registration statement under the Securities Act of 1933 (“Securities Act”) or the Securities Exchange Act of 1934 (“Exchange Act”) must determine its FPI status as of a date within 30 days prior to filing. Thereafter, an FPI must test its FPI status annually as of the end of its second fiscal quarter. Entities qualifying as FPIs benefit from a number of accommodations under SEC and listing exchange rules, including a number of key exemptions that permit them to defer to home country law in lieu of US law, including the following:

• FPIs are currently exempt from the insider reporting requirements of Section 16 of the Exchange Act.[1]
• FPIs are permitted to follow home country shareholder meeting and voting rules in lieu of SEC proxy rules and exchange regulations, subject to certain exceptions.
• FPIs may file annual reports on Form 20-F, which provide baseline content requirements, but more flexibility in presentation and format to accommodate FPIs that may be subject to disclosure requirements under multiple regimes. Canadian issuers eligible to file under the Multijurisdictional Disclosure System (“MJDS”) may file annual reports on Form 40-F, which relies almost entirely on Canadian disclosure documents and regulations.
• FPIs are not required to file quarterly reports on Form 10-Q or current reports on Form 8-K; instead, any such report required by their home country or primary listing must be furnished with the SEC under cover of Form 6-K.
• FPIs are permitted to prepare audited financial statements under either the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board or US Generally Accepted Accounting Principles (“US GAAP”), whereas US domestic issuers may only report under US GAAP.
• Under the Securities Act, FPIs may also file under the F-series of registration statements instead of the S-series employed by domestic issuers. Similar to Form 20-F and Form 40-F, the F-series forms offer certain accommodations in content and presentation.

Proposed Changes

The SEC includes a wide range of data regarding shifting patterns in the population of FPIs over the past 20 years in the Concept Release. In particular, the SEC highlights a number of changes in the dominant jurisdictions of incorporation and headquarters of FPIs. Notably, over half of Form 20-F filers had a US exchange as the primary trading market for their listed equity, with little to no trading outside the US in 2023. These trends raised the question of whether such FPIs are still subject to robust disclosure requirements and regulatory oversight in their home countries, which is a cornerstone principle of SEC accommodations for FPIs.

In light of these developments, the SEC seeks public comment as to whether the accommodations available to FPIs as currently defined should continue or whether the definition of FPIs should be amended to reflect recent changes to the FPI population. The SEC posits a number of approaches to consider, individually or in the aggregate, in future rulemaking:

• Updating existing FPI eligibility criteria. In the Concept Release, the SEC is seeking comment on potential changes to the definition of FPI, which could include:
  • adding criteria of the shareholder and business contacts tests to ensure that an issuer is not an “essentially US issuer”;
  • lowering the existing 50% threshold under the shareholder test; or
  • changing the US assets limit under the business contacts test.
• Adding a foreign trading volume requirement. The SEC is also seeking comment on considerations and consequences of adding a minimum foreign trading volume test that would require an FPI to have a prescribed percentage of the trading volume of its securities in a market outside the US over a 12-month period in order to benefit from FPI accommodations. The SEC shares estimated data on the impact on the current population of FPIs using 1%, 3%, 5%, 10%, 15% and 50% foreign trading volume thresholds. Based on these estimates, at the 1% threshold over half of current FPIs would lose their status.
• Adding a “major” foreign exchange listing requirement. The SEC also seeks comment as to whether it should require an FPI to be listed on a “major” foreign exchange, which it could define in a future rulemaking. The SEC noted in the Concept Release that this requirement could also be paired with a foreign trading volume requirement.
• Incorporating an SEC assessment of foreign regulation. The SEC also sought comment on options requiring the SEC to make subjective determinations about the quality of regulatory oversight in a particular jurisdiction on the basis of factors such as the disclosure requirements under local law and the extent to which a local regulator enforces local securities law.
• Establishing new mutual recognition systems. This approach would emulate the MJDS framework the SEC has already established with Canadian provincial securities regulators (there is no federal securities regulator in Canada), which permits eligible US and Canadian issuers to conduct cross-border securities offerings and satisfy ongoing disclosure requirements under home country law for purposes of both countries’ securities laws. If it were to apply this approach more broadly, the SEC would seek to establish similar reciprocity with regulators in other jurisdictions.
• Adding an international cooperation arrangement requirement. Under this alternative, the SEC would require an FPI to either be incorporated or headquartered in, and subject to the oversight of, a jurisdiction that has signed the IOSCO Multilateral Memorandum of Understanding Concerning Consultation, Cooperation, and the Exchange of Information (“MMoU”) or the Enhanced MMoU. The SEC does note that this alternative would likely supplement one or more others described above.

Key Implications

The SEC suggests a range of proposals whose impacts will vary widely depending on a particular company’s circumstances. The SEC’s own data shows that implementation of a foreign trading requirement would eliminate FPI eligibility for a significant percentage of affected companies. Other alternatives could have similar impacts. On the other hand, more-targeted suggestions such as reducing the 50% threshold under the shareholder test may impact a smaller percentage of current FPIs.

Losing FPI status would require affected companies to transition to the set of SEC forms dedicated to domestic filers. For example, they would begin reporting annually on Form 10-K, quarterly on Form 10-Q, and periodically on Form 8-K. Further, they would become subject to the proxy rules and the Section 16 short-swing profit rules. If they were previously reporting under IFRS, such companies would also be required to begin preparing financial statements under US GAAP. NYSE and Nasdaq also have different listing standards for domestic and foreign issuers. Moreover, despite positive references to MJDS, certain proposed changes to the FPI definition could result in loss of FPI status for Canadian MJDS issuers. Given the additional accommodations available to Canadian companies, loss of FPI status can result in significant transition time and cost, including the need to convert reserve reports from Canadian to US standards for MJDS-eligible mining companies.

In order to avoid these transition costs and challenges, some affected companies may choose to delist and deregister in the US. Deregistering in the US could be more challenging than affected companies expect, as a company that has lost FPI status would not be eligible to deregister under the self-executing Rule 12g3-2(b) without modification of that rule, which the concept release considers. A more detailed list of potential impacts is included in the Concept Release.

Next Steps

As noted above, public comments on the questions posed in the Concept Release as well as relating to the topics covered in the Concept Release are due September 8, 2025. The issuance of this Concept Release indicates the SEC’s focus on revisiting the definition of FPIs. However, it remains to be seen whether the public comments solicited will prompt the SEC towards rulemaking or other changes related to the FPI regulatory framework.

[1] Attempts to amend this exemption have been recently re-introduced at the Senate.