Exemption to Reporting Requirements for International Issuers

August 23rd, 2016 by Laura Anthony, Esq.

Exemption to Reporting Requirements for International Issuers

In the Lawcast detailing the OTCQX International listing requirements I referenced Exchange Act Rule 12g3-2(b). That rule permits foreign private issuers to have their equity securities traded on the U.S. over-the-counter market without registration under Section 12 of the Exchange Act and therefore without being subject to the Exchange Act reporting requirements. The rule is automatic for foreign issuers that meet its requirements. A foreign issuer may not rely on the rule if it is otherwise subject to the Exchange Act reporting requirements such as if it has voluntarily registered under Section 12.

The rule provides that an issuer is not required to be subject to the Exchange Act reporting requirements if: (i) the issuer currently maintains a listing of its securities on one or more exchanges in a foreign jurisdiction which is the primary trading market for such securities; and (ii) the issuer has published, in English, on its website or through an electronic information delivery system generally available to the public in its primary trading market (such as the OTC Markets website), information that, since the first day of its most recently completed fiscal year, it (a) has made public or been required to make public pursuant to the laws of its country of domicile; (b) has filed or been required to file with the principal stock exchange in its primary trading market and which has been made public by that exchange; and (c) has distributed or been required to distribute to its security holders.

Primary Trading Market means that foreign market where at least 55 percent of the trading in the subject class of securities on a worldwide basis took place during the company’s most recently completed fiscal year.

In order to maintain the Rule 12g3-2(b) exemption, the company must continue to publish the required information on an ongoing basis and for each fiscal year.

The information required to be published includes information that is material to an investment decision regarding the securities, such as information concerning: (i) Results of operations or financial condition; (ii) Changes in business; (iii) Acquisitions or dispositions of assets; (iv) The issuance, redemption or acquisition of securities; (v) Changes in management or control; (vi) The granting of options or the payment of other remuneration to directors or officers; and (vii) Transactions with directors, officers or principal security holders.

At a minimum, a foreign private issuer must electronically publish English translations of the following documents: (i) Its annual report, including or accompanied by annual financial statements; (ii) Interim reports that include financial statements; (iii) Press releases; and (iv) All other communications and documents distributed directly to shareholders.

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