|  | | 2006 News and Press Releases | | |
HEADLINE NEWS:
S.E.C. Changes Its Tune on Letting Foreign Securities Leave
Floyd Norris
The New York Times. December 7, 2006
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EXCERPT: It will be much easier for foreign companies to withdraw their securities from American public markets, so long as those securities primarily trade overseas, the Securities and Exchange Commission indicated yesterday. Many companies, particularly in Europe, have asked to withdraw, believing that doing so would save them money and that American investors, particularly institutional ones, would choose to still buy their securities on foreign markets. For companies that withdraw, Americans would no longer be able to obtain financial statements and other disclosures of the companies through S.E.C. filings, and the companies would not have to adjust their financial statements to United States accounting rules. Trading by Americans would move to foreign markets, where trading costs could be higher, particularly for individual investors. The commission has traditionally taken the position that if American investors bought a security while relying on disclosures required by American law, it should be very difficult for a company to cease making such disclosures so long as a significant number of Americans still own the security. The change in course was announced by the S.E.C. in a news release that said it would consider a new rule next week. The new rule is a sharp departure from one that was proposed by the commission a year ago and drew strong criticism, particularly from Europe. That rule would have permitted companies to withdraw only if fewer than 10 percent of their securities were held by Americans and less than 5 percent of the trading went on in the United States. Instead, the S.E.C. said yesterday, the new rule will be based only on trading volume. It did not propose a threshold, but few foreign issues trade in large volume in American markets. In most stocks, the vast majority of trading is done in the home market, even if many of the investors live elsewhere. “We believe that the new proposal will better serve the needs of both U.S. investors and foreign issuers by providing a clear, consistent, easy-to-apply and fair standard pursuant to which foreign registrants may withdraw from our capital markets and end their obligations to comply with our rules,” said John White, who became director of the commission’s division of corporation finance in March, three months after the earlier proposal was made. He had been a securities lawyer with Cravath, Swaine & Moore. |
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