SEC Votes to Repropose Rules Allowing Foreign Private Issuer Deregistration Under the Exchange Act


Washington, D.C., Dec. 13, 2006 - Today the Commission voted to repropose 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 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 exit the Exchange Act registration and reporting regime if the class of the issuer's securities has less than 300 record holders who are U.S. residents. Because of the increased globalization of the U.S. securities markets that has occurred since the adoption of these 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 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.

Reproposed Exchange Act Rule 12h-6 would permit the termination of Exchange Act reporting regarding a class of equity securities under either Section 12(g) or Section 15(d) of the Exchange Act by a foreign private issuer that meets a quantitative benchmark designed to measure relative U.S. market interest for that class of securities, which does not depend on a head count of the issuer's U.S. security holders. The reproposed benchmark would require the comparison of the average daily trading volume of an issuer's securities in the United States with that in its primary trading market. Because the Commission did not fully address this approach when it originally proposed Rule 12h-6 last December, and because of other proposed changes to Rule 12h-6 not fully discussed in the original rule proposal, it has reproposed Rule 12h-6 and the accompanying rule amendments.

"Foreign private issuers are a very important part of our capital markets. By providing foreign registrants with an appropriate means to terminate their Exchange Act reporting obligations based solely on their securities' relatively small U.S. trading volume, today's proposal is intended to provide more clarity and certainty to foreign issuers as well as to U.S. investors in those companies," said John White, Director of the Division of Corporation Finance at the SEC. "The revised proposal should make the deregistration process less complicated and burdensome for foreign private issuers without sacrificing investors' interests. We look forward to receiving comments from the broad range of parties with views on foreign deregistration as the Commission continues to recognize and respond to the challenges and needs of our markets' increasing globalization while never losing sight of our primary mission of investor protection."

Highlights of the Rule Reproposal

Trading Volume Standard

Reproposed Rule 12h-6 would:

Other Conditions for Equity Securities Registrants

Reproposed Rule 12h-6 would also require an equity securities registrant to:

Expanded Scope of Rule 12h-6

Reproposed Rule 12h-6 would expand the scope of the originally proposed rule in two respects:

Reproposed Rule 12g3-2(b) Amendments

The reproposed rule amendments would permit a foreign private issuer to claim the Rule 12g3-2(b) exemption:

Comments on the rule reproposal must be received by the Commission within 30 days of its publication in the Federal Register.

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The full text of the detailed release concerning these items will be posted to the SEC Web site as soon as possible.