Lander Gets His SEC Interpretation: SEC Staff Clarifies Resale Rules for Privately Placed Securities of Companies After Loss of Their FPI Status
February 3, 2015
For some reason, we have seen an increase in non-U.S. companies losing their SEC status as foreign private issuers ("FPIs"). When a company loses its FPI status, it is treated as a U.S. domestic issuer for SEC reporting purposes. With the change in status, the non-U.S. company is treated as a U.S. issuer, and it becomes subject not only to stricter and more comprehensive periodic reporting and proxy statements under the Securities Exchange Act of 1934 and stricter more comprehensive rules for public offerings and private placements under the Securities Act of 1933 (“Securities Act”), but also the rules change for resales of its privately placed (“restricted”) securities.
An open question that arises when a non-U.S. company loses its FPI status has been the possible effect upon a U.S. investor’s resales of restricted securities purchased before the loss of FPI status. We sought and were successful in obtaining a SEC staff interpretation on January 23, 2015 (Compliance and Disclosure Interpretation (“CDI”) Question 279.01) clearly stating that the character of the securities of a non-U.S. company is fixed at the time of issuance regardless of the later loss of the company’s FPI status for SEC reporting purposes. That is, the resale restrictions of Rule 905 only apply to securities that when issued are those of a U.S. issuer. This effectively keeps U.S. investors on an equal footing with their fellow investors who are not in the United States. This also benefits non-U.S. companies offering their securities in the U.S. capital markets.
For more information concerning the matters discussed in this advisory, please contact the author Guy P. Lander
) or your regular CL&M attorney.
Carter Ledyard & Milburn LLP uses Client Advisories to inform clients and other interested parties of noteworthy issues, decisions and legislation which may affect them or their businesses. A Client Advisory does not constitute legal advice or an opinion. This document was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
© 2018 Carter Ledyard & Milburn LLP.
© Copyright 2015