US Securities Law Update: Mandatory Electronic Filing for Foreign Private Issuers
May 2002
In May 2002, the US Securities and Exchange Commission (US SEC) adopted amendments to the rules governing its Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. These amendments will require a non-US company that qualifies as a "foreign private issuer" (FPI) to submit most of its US Securities Act of 1933 (US Securities Act) and US Securities Exchange Act of 1934 (US Exchange Act) submissions via EDGAR in electronic format, beginning 4 November 2002.
Since 1996, the US SEC has required virtually all US domestic companies to file electronically most documents submitted under the US Securities Act and the US Exchange Act. The electronic filing of reports with the US SEC is done through its EDGAR system. EDGAR filings are publicly available on the US SEC’s website at www.sec.gov and through other information providers. Prior to these amendments to Regulation S-T (which governs US SEC EDGAR procedures), a non-US company that qualified as an FPI under the US Exchange Act had been permitted to submit its reports either in paper format or via EDGAR. The US SEC has decided generally to require FPIs to submit their disclosure documents only via the EDGAR system. The changes will apply as well to "foreign government" filers.
The following is intended as a basic, non-technical summary of the electronic filing requirements applicable to FPIs.
Documents Required to Be Filed Electronically
Under the new rules, the following documents will be required to be filed electronically:
- US Securities Act registration statements (Forms F-1, F-2, F-3, F-4, F-6);
- US Exchange Act registration statements and reports (Forms 20-F);
- Multijurisdictional Disclosure System (MJDS) forms and schedules filed by Canadian issuers;
- statements of beneficial ownership on Schedules 13D and 13G that pertain to an FPI;
- tender offer schedules that pertain to an FPI;
- reports on Form 6-K, with certain exceptions, described below;
- Forms F-X, the form for designating a US agent for service of process, with certain exceptions, described below;
- most forms under the US Trust Indenture Act of 1939 (US Trust Indenture Act) (Forms T-1, T-2 and T-3); and
- Forms CB for cross-border rights offers, exchange offers and business combinations exempt from US Securities Act registration, where the party filing or submitting the Form CB is a US Exchange Act reporting company.
Documents Permitted to Be Filed in Paper Format
Under the new rules, the US SEC has provided for several exceptions to mandatory electronic filing. The following documents may be submitted in paper format at the FPI’s option:
- glossy annual reports sent to security holders;
- documents filed under US Exchange Act Rule 12g3-2(b) by FPIs exempt from Section 12(g) of the US Exchange Act;
- Forms CB and accompanying Forms F-X submitted by parties that are not US Exchange Act reporting companies;
- Forms F-X submitted when Canadian issuers are qualifying an offering statement pursuant to the provisions of Regulation A;
- home country reports or other documents submitted under cover of a Form 6-K as long as the report or other document:
- is not a press release;
- is not required to be and has not been distributed to the FPI's security holders; and
- if discussing a material event, including disclosure of annual audited or interim consolidated financial results, has already been the subject of a Form 6-K submission or other US SEC filing on EDGAR; and
- annual and periodic reports and reports concerning proposed distributions of primary obligations submitted by specified supranational entities, such as the World Bank, required to file reports with the US SEC.
The amendments also eliminate the requirement that EDGAR filers must submit a paper copy of their first electronic filing.
Foreign Language Documents
Rule 306 of Regulation S-T governs the treatment of foreign language documents in EDGAR filings. Prior to these amendments, no foreign language documents were permitted in EDGAR filings. In their place,
English translations of documents required as exhibits or attachments were required. After consideration of various comments regarding the need for English translations, the US SEC has adopted a limited English summary option for Division of Corporation Finance submissions that is the same for electronic and paper filers and specifically enumerates which exhibits must be translated in full. Under this approach, Rule 306(a) has been amended to provide that all EDGAR submissions must be in the English language, except as otherwise provided by this rule. If a submission requires the inclusion of a document that is in a foreign language, filers must submit a "fair and accurate English translation" of the foreign language document in accordance with the rules governing the treatment of foreign language documents. Alternatively, if the foreign language document is an exhibit or attachment to a filing or submission to the Division of Corporation Finance, a party may provide a fair and accurate English summary of the foreign language document if permitted by the foreign language rules.
At the same time, the foreign language rules have been amended to provide that a Division of Corporation Finance filer may not summarize certain documents, such as the following:
- articles of incorporation, memoranda of association, bylaws and other comparable documents, whether original or restated;
- instruments defining the rights of security holders, including indentures qualified or to be qualified under the US Trust Indenture Act;
- voting agreements, including voting trust agreements;
- contracts to which directors, officers, promoters, voting trustees or security holders named in a registration statement are parties;
- contracts upon which a filer’s business is substantially dependent;
- audited annual and interim consolidated financial information; and
- any document that is or will be the subject of a confidential treatment request under US Securities Act Rule 406 or US Exchange Act Rule 24b-2.
Other documents may be the subject of an English summary instead of an English translation. English summaries must fairly and accurately summarize the terms of each material provision of the foreign language document and fairly and accurately describe the terms that have been omitted or abridged. These requirements are consistent with current staff practice.
Under these amendments, electronic and paper filers must provide either an English translation or English summary. An English "version" (something short of a fair and accurate English summary) is not permitted.
The instructions to Form 6-K now specify that FPIs must submit full English translations of the following documents under Form 6-K, whether submitted electronically or in paper:
- press releases;
- communications and other documents distributed directly to security holders for each class of securities for which a reporting obligation under the US Exchange Act exists, except for offering circulars and prospectuses that relate entirely to non-US offerings; and
- documents disclosing annual audited or interim consolidated financial information.
Exhibits
The new rules treat FPIs in the same way as US domestic filers regarding exhibits under Rule 102 of Regulation S-T. US domestic filers are not required to submit electronically exhibits previously submitted in paper that are being incorporated by reference into an EDGAR document. FPIs may voluntarily refile exhibits on EDGAR but are not required to do so. As with US domestic filers, when amending organic documents such as articles of incorporation or bylaws, FPIs will be required to restate these documents and file them in electronic format.
Incorporation by Reference
The new rules also treat FPIs in the same way as US domestic filers regarding incorporation by reference into EDGAR filings of material filed in paper, such as an annual or other report to security holders or paper reports on Form 6-K. FPIs must file the incorporated portion of the paper filing in electronic format as an exhibit to the EDGAR filing. FPIs should consider this requirement when deciding whether to submit Forms 6-K in paper or EDGAR format.
Transition
The new rules will be effective as of 4 November 2002. The six-month transition period is intended to give FPIs and foreign governments sufficient time to familiarize themselves with the EDGAR rules and procedures. The US SEC is encouraging FPIs to submit test filings or to file electronically on a voluntary basis during the transition period.
EDGAR filings must be made in compliance with the US SEC’s EDGAR Filing Manual, which is available on the US SEC’s website at www.sec.gov/info/edgar/filermanual.htm.
Expected Costs
FPIs should expect to incur some initial and ongoing costs. Depending on an FPI's technological proficiency, costs in addition to legal fees may include the following: purchasing computer equipment and software; training employees; hiring agents with knowledge of the EDGAR process (such as financial printers); translating documents; formatting documents in
HTML 3.2 or ASCII, the only formats currently accepted by EDGAR; and transmitting documents.
Hardship Exemption
FPIs, like US domestic companies, are eligible to apply to the US SEC for temporary or continuing hardship exemptions if electronic filing is unduly burdensome or expensive.
This memorandum is not intended to provide definitive legal advice with respect to any specific factual or legal situation. No legal or business decision should be based solely on its content.
