The WFE supports the SEC’s determination to ensure that listed companies, including those with Foreign Private Issuer status, continue to adhere to robust listing standards that protect investors and market integrity.
Following on from the SEC’s Concept Release on possible amendments to the definition of Foreign Private Issuer (FPI) under US securities law, this response considers the SEC proposals and how to ensure that investors are provided with the information that they need without unduly narrowing the range of companies able to qualify for FPI status.
Due to the accommodations and exemptions granted to FPIs, as well as the growing number of FPIs in the US, the WFE understands the need to take stock of the FPI landscape and whether the eligibility criteria remain fit for purpose. Key factors in how the SEC should proceed will be 1) whether the change in FPI population has, in fact, exposed investors to significant harm, and 2) whether the existing FPI criteria adequately ensure that FPIs meet the standards expected of companies trading in the US.
Before determining what, if any, regulatory changes should be pursued in this space, the WFE would urge the SEC to undertake a careful assessment of the current situation and publish a detailed cost-benefit analysis of any harms identified as well as the predicted benefits of proposed regulatory changes. As part of its assessment, the SEC should consider not only US regulation and securities law but also what listing rules exchanges already have in place. US exchanges have implemented rigorous listing standards and act as front-line assessors for listed companies, including foreign issuers, and so it is worth considering whether those standards mitigate or address the concerns identified.
If the SEC does decide to pursue regulatory change, the SEC should take care to ensure that proposed amendments are appropriately calibrated and targeted to address any specific issues and subsets of the FPI population identified as posing harm. The SEC should also seek to align any proposals with existing standards and definitions that have been designed to operate globally and maximise international access, such as the WFE Membership Criteria for exchanges. These steps will mitigate the risk of introducing broad amendments to the FPI regime that could reshape cross-listing incentives, liquidity distribution, data/reporting obligations, and access to US markets.
