Non-U.S. Issuer IPOs Will Face Greater Public Disclosure

Editor’s Note: Richard J. Sandler is a partner at Davis Polk & Wardwell LLP and co-head of the firm’s global corporate governance group. This post is based on a Davis Polk client update.

The SEC staff has traditionally allowed non-U.S. issuers to file IPO or other first-time registration statements on a “draft” non-public basis, enabling them to avoid the scrutiny associated with a public EDGAR filing. The staff significantly limited this accommodation today.

Beginning December 8, 2011, the staff will review initial registration statements of non-U.S. issuers that are submitted on a non-public basis only where the registrant is:

  • 1. a foreign government registering its debt securities;
  • 2. a foreign private issuer that is listed or is concurrently listing its securities on a non-U.S. securities exchange;
  • 3. a foreign private issuer that is being privatized by a foreign government; or
  • 4. a foreign private issuer that can demonstrate that the public filing of an initial registration statement would conflict with the law of an applicable foreign jurisdiction.

The staff also stated that in certain circumstances it may request a non-U.S. issuer to publicly file its registration statement even though it would otherwise be within the general parameters of the policy outlined above. For example, if the filing relates to a competing bid in an acquisition transaction or in the event of publicity about a proposed offering or listing.

The staff’s new policy will not apply to non-public initial submissions made by non-U.S. issuers before today, although it will apply to subsequent amendments of those submissions.

Non-public submissions have been very useful in facilitating and encouraging access to the U.S. capital markets by foreign private issuers, particularly in volatile markets. Unlike domestic issuers, this policy allowed foreign private issuers to get ready for an IPO quietly without publicly revealing their IPO plans until they were ready to launch marketing. The inability to file on a non-public basis may affect the analysis of non-U.S. issuers evaluating whether to list their shares in the United States as the registration statement will now be public from the initial filing.

See the SEC’s statement on Non-Public Submissions from Foreign Issuers here.

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