[Federal Register: September 10, 2008 (Volume 73, Number 176)]
[Rules and Regulations]
[Page 52751-52769]
[DOCID:fr10se08-19]

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Part III

Securities and Exchange Commission

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17 CFR Parts 239, 240, and 249

Exemption From Registration Under Section 12(G) of the Securities
Exchange Act of 1934 for Foreign Private Issuers; Final Rule

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 239, 240 and 249

[Release No. 34-58465; International Series Release No. 1309; File No.
S7-04-08]
RIN 3235-AK04

Exemption From Registration Under Section 12(G) of the Securities
Exchange Act of 1934 for Foreign Private Issuers

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: We are adopting amendments to the rule that exempts a foreign
private issuer from having to register a class of equity securities
under Section 12(g) of the Securities Exchange Act of 1934 (``Exchange
Act'') based on the submission to the Commission of certain information
published by the issuer outside the United States. The exemption allows
a foreign private issuer to have its equity securities traded in the
U.S. over-the-counter market without registration under Section 12(g).
The adopted rule amendments will eliminate the current written
application and paper submission requirements under Rule 12g3-2(b) by
automatically exempting from Exchange Act Section 12(g) a foreign
private issuer that meets specified conditions. Those conditions will
require an issuer to maintain a listing of its equity securities in its
primary trading market located outside the United States, and require
it to publish electronically in English specified non-United States
disclosure documents. As a result, the adopted amendments should make
it easier for U.S. investors to gain access to a foreign private
issuer's material non-United States disclosure documents and thereby to
make better informed decisions regarding whether to invest in that
issuer's equity securities through the over-the-counter market in the
United States or otherwise. As is currently the case, issuers must
continue to register their securities under the Exchange Act to have
them listed on a national securities exchange or traded on the OTC
Bulletin Board.

DATES: Effective Date: October 10, 2008.

FOR FURTHER INFORMATION CONTACT: Elliot Staffin, Special Counsel, at
(202) 551-3450, in the Office of International Corporate Finance,
Division of Corporation Finance, U.S. Securities and Exchange
Commission, 100 F Street, NE., Washington, DC 20549-3628.

SUPPLEMENTARY INFORMATION: We are adopting amendments to Commission
Rules 12g3-2 \1\ and 15c2-11 \2\ under the Exchange Act,\3\ Forms
15F,\4\ 40-F,\5\ and 6-K \6\ under the Exchange Act, and Form F-6 \7\
under the Securities Act of 1933 (``Securities Act'').\8\
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    \1\ 17 CFR 240.12g3-2.
    \2\ 17 CFR 240.15c2-11.
    \3\ 15 U.S.C. 78a et seq.
    \4\ 17 CFR 249.324.
    \5\ 17 CFR 249.240f
    \6\ 17 CFR 249.306.
    \7\ 17 CFR 239.36.
    \8\ 15 U.S.C. 77a et seq.
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Table of Contents

I. Executive Summary and Background
    A. Introduction
    1. Current Rule 12g3-2(b) Requirements
    2. Proposed Rule 12g3-2 Amendments
    B. Principal Comments Regarding the Proposed Rule Amendments
    C. Summary of the Adopted Rule Amendments
II. Discussion
    A. Foreign Listing Condition
    1. The Primary Trading Market Definition
    2. Elimination of the Proposed 20 Percent Trading Volume
Condition
    3. Treatment of Compensatory Stock Options
    B. Non-Exchange Act Reporting Condition
    1. Non-Reporting Issuers
    2. Deregistered Issuers
    C. Electronic Publishing of Non-U.S. Disclosure Documents
    1. Electronic Publishing Requirement To Claim Exemption
    2. Electronic Publishing Requirement To Maintain Exemption
    3. English Translation Requirement
    D. Elimination of the Written Application Requirement
    E. Duration of the Amended Rule 12g3-2(b) Exemption
    F. Elimination of the Successor Issuer Prohibition
    G. Elimination of the Rule 12g3-2(b) Exception for MJDS Filers
    H. Elimination of the ``Automated Inter-Dealer Quotation
System'' Prohibition and Related Grandfathering Provision
    I. Revisions to Form F-6
    J. Amendment of Exchange Act Rule 15c2-11
    K. Transition Periods
    1. Regarding Section 12 Registration
    2. Regarding Processing of Paper Submissions
III. Paperwork Reduction Act
    A. Rule 12g3-2(b) Submissions or Publications
    B. Form F-6
IV. Cost-Benefit Analysis
    A. Expected Benefits
    B. Expected Costs
V. Consideration of Impact on the Economy, Burden on Competition and
Promotion of Efficiency, Competition and Capital Formation
VI. Regulatory Flexibility Act Certification
VII. Statutory Basis and Text of Rule Amendments

I. Executive Summary and Background

A. Introduction

    Exchange Act Rule 12g3-2(b) \9\ exempts a foreign private issuer
\10\ from Section 12(g) registration \11\ if, among other requirements,
the issuer furnishes to the Commission on an ongoing basis information
it has made public or is required to make public under the laws of its
jurisdiction of incorporation, organization or domicile, pursuant to
its non-U.S. stock exchange filing requirements, or that it has
distributed or is required to distribute to its security holders
(collectively, its ``non-U.S. disclosure documents'').\12\ The
Commission adopted Rule 12g3-2(b) more than 40 years ago in order to
exempt from Section 12(g) registration foreign companies that have not
obtained a listing on a national securities exchange or otherwise
sought a public market for their equity securities in the United
States.\13\
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    \9\ 17 CFR 240.12g3-2(b).
    \10\ See the definition of foreign private issuer at Exchange
Act Rule 3b-4(c) (17 CFR 240.3b-4(c)).
    \11\ When read in conjunction with Exchange Act Rules 12g-1 (17
CFR 240.12g-1) and 12g3-2(a) (17 CFR 240.12g3-2(a)), Exchange Act
Section 12(g) requires an issuer to file an Exchange Act
registration statement regarding a class of equity securities within
120 days of the last day of its fiscal year if, on that date, the
number of its record holders is 500 or greater, the number of its
U.S. resident holders is 300 or more, and the issuer's total assets
exceed $10 million.
    \12\ Current Exchange Act Rule 12g3-2(b)(1)(iii) (17 CFR
240.12g3-2(b)(1)(iii)).
    \13\ Release No. 34-8066 (April 28, 1967). For additional
background on the initial adoption of Rule 12g3-2(b), see Part I.A
of Release No. 34-57350 (February 19, 2008), 73 FR 10102 (February
25, 2008) (``Proposing Release'').
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    Acquiring the Rule 12g3-2(b) exemption enables a foreign private
issuer to have its equity securities traded on a limited basis in the
over-the-counter market in the United States while avoiding
registration under Exchange Act Section 12(g). Typically a foreign
private issuer obtains the Rule 12g3-2(b) exemption in order to have
established an unlisted, sponsored or unsponsored depositary facility
for its American Depositary Receipts (``ADRs'').\14\ Establishing the
Rule 12g3-

2(b) exemption also permits registered broker-dealers to fulfill their
current information obligations concerning foreign private issuers'
securities for which they seek to publish quotations.\15\ It further
facilitates resales of an issuer's securities to qualified
institutional buyers (``QIBs'') under Rule 144A.\16\
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    \14\ An ADR is a negotiable instrument that represents an
ownership interest in a specified number of securities, which the
securities holder has deposited with a designated bank depositary.
The filing of Securities Act Form F-6 (17 CFR 239.36) is required in
order to establish an ADR facility. The eligibility criteria for the
use of Form F-6 include the requirement that the issuer of the
deposited securities have a reporting obligation under Exchange Act
Section 13(a) or have established the exemption under Rule 12g3-
2(b). See General Instruction I.A.3 of Form F-6. While required to
be registered on Form F-6 under the Securities Act, ADRs are exempt
from registration under Exchange Act Section 12(g) pursuant to
current Exchange Act Rule 12g3-2(c) (17 CFR 240.12g3-2(c)).
    \15\ Brokers currently can comply with their obligations under
Exchange Act Rule 15c2-11 (17 CFR 240.15c2-11) when a foreign
company has established and maintains the Rule 12g3-2(b) exemption
by, in part, reviewing the information furnished to the Commission
under the exemption. See Rule 15c2-11(a)(4) (17 CFR 240.15c2-
11(a)(4)).
    \16\ See Securities Act Rule 144A(d)(4) (17 CFR 230.144A(d)(4)).
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1. Current Rule 12g3-2(b) Requirements
    Currently, in order to establish the Exchange Act Rule 12g3-2(b)
exemption, a foreign private issuer must initially submit to the
Commission a list of its non-U.S. disclosure requirements as well as
copies of its non-U.S. disclosure documents published since the
beginning of its last fiscal year.\17\ An issuer must further submit
its non-U.S. disclosure documents on an ongoing basis in order to
maintain the exemption. The current Rule provides that an issuer need
only submit copies of information that is material to an investment
decision for the purpose of obtaining or maintaining the exemption.\18\
At the time of the initial submission, an issuer must also provide the
Commission with the number of U.S. holders of its equity securities and
the percentage held by them, as well as a brief description of how its
U.S. holders acquired those shares.\19\
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    \17\ Current Exchange Act Rule 12g3-2(b)(1)(i) (17 CFR 240.12g3-
2(b)(1)(i)). Historically, an issuer has submitted its home
jurisdiction materials as part of a letter application to the
Commission, which has been processed through the Office of
International Corporate Finance in the Division of Corporation
Finance. The written application process does not apply to an issuer
that receives the Rule 12g3-2(b) exemption upon the effectiveness of
its Exchange Act deregistration pursuant to Exchange Act Rule 12h-6
(17 CFR 240.12h-6).
    \18\ Current Exchange Act Rule 12g3-2(b)(3) (17 CFR 240.12g3-
2(b)(3)). As examples of material information, the Rule lists an
issuer's financial condition or results of operations, changes in
its business, the acquisition or disposition of assets, the
issuance, redemption or acquisition of securities, changes in
management or control, the granting of options or other payment to
directors or officers, and transactions with directors, officers or
principal security holders.
    \19\ Current Exchange Act Rule 12g3-2(b)(1)(v) (17 CFR 240.12g3-
2(b)(1)(v)). An issuer must also disclose the dates and
circumstances of the most recent public distribution of securities
by the issuer or an affiliate.
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    Rule 12g3-2(b) currently requires that an applicant submit all of
the necessary non-U.S. disclosure documents and other information
before the date that a registration statement would otherwise become
due under Section 12(g).\20\ Once an issuer has timely submitted its
application and obtained the exemption, the issuer may surpass any of
the record holder, U.S. resident holder, or asset thresholds that would
otherwise trigger an obligation to register a class of securities under
Section 12(g) or the rules thereunder, as long as it maintains the
exemption by submitting the required non-U.S. disclosure documents.
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    \20\ Current Exchange Act Rule 12g3-2(b)(2) (17 CFR 240.12g3-
2(b)(2)).
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    For most of its 40-year history, the Rule 12g3-2(b) disclosure
regime has mandated paper submissions. Even after the adoption of EDGAR
filing rules for foreign private issuers, the Commission has required a
foreign private issuer to submit its initial Rule 12g3-2(b) supporting
materials in paper.\21\ The Commission has based this treatment of Rule
12g3-2(b) materials on the analogous treatment of applications for an
exemption from Exchange Act reporting obligations filed pursuant to
Exchange Act Section 12(h).\22\
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    \21\ See Release No. 33-8099 (May 14, 2002), 67 FR 36678 (May
24, 2002).
    \22\ 15 U.S.C. 78l(h). We require the filing of Section 12(h)
exemptive applications in paper pursuant to Regulation S-T Rule
101(c)(16) (17 CFR 232.101(c)(16)).
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    In March 2007, the Commission voted to adopt amendments to Rule
12g3-2, which enable a foreign private issuer to claim the Rule 12g3-
2(b) exemption immediately upon the effectiveness of its termination of
Exchange Act registration and reporting pursuant to contemporaneously
adopted Exchange Act Rule 12h-6.\23\ The March 2007 amendments require
an issuer that has obtained the Rule 12g3-2(b) exemption, upon the
effectiveness of its termination of registration and reporting pursuant
to Rule 12h-6, to publish specified non-U.S. disclosure documents in
English on an ongoing basis on its Internet Web site or through an
electronic information delivery system generally available to the
public in its primary trading market, rather than submit that
information in paper to the Commission.\24\ The amendments further
permit, but do not require, a foreign private issuer that has obtained
or will obtain the Rule 12g3-2(b) exemption, upon application to the
Commission and not pursuant to Rule 12h-6, to publish electronically in
the same manner its non-U.S. disclosure documents required to maintain
the exemption.\25\
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    \23\ See Release No. 34-55540 (March 27, 2007), 72 FR 16934
(April 5, 2007).
    \24\ Current Exchange Act Rule 12g3-2(e) (17 CFR 240.12g3-2(e)).
    \25\ Current Exchange Act Rule 12g3-2(f) (17 CFR 240.12g3-2(f)).
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    The March 2007 amendments further clarified the English translation
requirements under Rule 12g3-2(b).\26\ The amendments provide that,
when electronically publishing its non-U.S. disclosure documents
required to maintain the Rule 12g3-2(b) exemption, at a minimum, a
foreign private issuer must electronically publish English translations
of the following documents if in a foreign language:
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    \26\ Current Exchange Act Rule 12g3-2(b)(4) (17 CFR 240.12g3-
2(b)(4)) provides that copies furnished to the Commission of press
releases and any materials distributed directly to security holders
must be in English, and states that English summaries and versions
may be used instead of English translations. However, the rule does
not specify what other documents must be translated fully into
English, and when summaries or versions may be used.
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     Its annual report, including or accompanied by annual
financial statements;
     Interim reports that include financial statements;
     Press releases; and
     All other communications and documents distributed
directly to security holders of each class of securities to which the
exemption relates.\27\
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    \27\ Note 1 to Current Exchange Act Rule 12g3-2(e).
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2. Proposed Rule 12g3-2 Amendments
    In February 2008, we proposed amendments to Rule 12g3-2(b) in order
to adapt that exemptive regime to the several significant developments
occurring since its initial adoption four decades ago.\28\ Those
developments include the increased globalization of securities markets,
advances in information technology, and the increased use of ADR
facilities by foreign companies to trade their securities in the United
States, which have multiplied the number of foreign companies engaged
in cross-border activities, as well as increased the amount of U.S.
investor interest in the securities of foreign companies. Just as those
developments led us to re-evaluate and revise the Commission rules
governing when a foreign private issuer may terminate its Exchange Act
registration and reporting obligations, so those same factors have led
us to reconsider as well the Commission rules that determine when a
foreign private issuer must enter the Section 12(g) registration
regime.
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    \28\ Release No. 34-57350.
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    We proposed to amend Exchange Act Rule 12g3-2 to permit a foreign
private issuer to claim the Rule 12g3-2(b) exemption, without having to
submit an application to, or otherwise notify, the Commission, as long
as:

     The issuer is not required to file or furnish reports
under Exchange Act Section 13(a) \29\ or 15(d);
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    \29\ 15 U.S.C. 78m(a).
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     The issuer currently maintains a listing of the subject
class of securities on one or more exchanges in a foreign jurisdiction
that, either singly or together with the trading of the same class of
the issuer's securities in another foreign jurisdiction, constitutes
the primary trading market for those securities;
     Either:
    [cir] The average daily trading volume (``ADTV'') of the subject
class of securities in the United States for the issuer's most recently
completed fiscal year has been no greater than 20 percent of the
average daily trading volume of that class of securities on a worldwide
basis for the same period; or
    [cir] The issuer has terminated its registration of a class of
securities under Exchange Act Section 12(g), or terminated its
obligation to file or furnish reports under Exchange Act Section 15(d),
pursuant to Exchange Act Rule 12h-6; and
     Unless claiming the exemption in connection with or
following its recent Exchange Act deregistration, the issuer has
published specified non-U.S. disclosure documents, required to be made
public from the first day of its most recently completed fiscal year,
in English on its Internet Web site or through an electronic
information delivery system generally available to the public in its
primary trading market.
    As proposed, a foreign private issuer that met the above
requirements would be immediately exempt from Exchange Act registration
under Rule 12g3-2(b) even if, on the last day of its most recently
completed fiscal year, it exceeded the asset and shareholder thresholds
for Section 12(g) registration, and although the 120-day window for
filing a registration statement under Section 12(g) had elapsed.
Further, as proposed, an issuer could immediately claim the Rule 12g3-
2(b) exemption upon the effectiveness of, or following its recent
Exchange Act deregistration, whether pursuant to the older exit rules
of Rule 12g-4 or 12h-3,\30\ or Rule 12h-6, or the suspension of its
reporting obligations under Section 15(d),\31\ if it met the above
requirements other than the electronic publication condition for its
most recently completed fiscal year.
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    \30\ 17 CFR 240.12g-4 or 240.12h-3. Both Rules 12g-4 and 12h-3
permit an issuer to exit the Exchange Act reporting regime following
the filing of a Form 15 (17 CFR 249.323), which certifies that the
issuer has fewer than 300 record holders or less than 500 record
holders and total assets not exceeding $10 million on the last day
of each of its most recent 3 fiscal years.
    \31\ An issuer may suspend its Section 15(d) reporting
obligations under Rule 12h-3 or Section 15(d) itself. The statutory
section provides that suspension occurs if, on the first day of the
fiscal year, other than the year in which the issuer's registration
statement went effective, the issuer's record holders number less
than 300.
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    The proposed rules would require any issuer, whether a prior
registrant or not, to maintain the Rule 12g3-2(b) exemption by
publishing its specified non-U.S. disclosure documents on an ongoing
basis and for each subsequent fiscal year, in English, on its Internet
Web site or through an electronic information delivery system generally
available to the public in its primary trading market. The proposed
rules would require the electronic publication in English of the same
types of information required under the March 2007 amendments.
    As proposed, the Rule 12g3-2(b) exemption would remain in effect
until:
     The issuer no longer satisfies the electronic publication
condition;
     The issuer no longer maintains a listing for the subject
class of securities on one or more exchanges in its primary trading
market;
     The ADTV of the subject class of securities in the United
States exceeds 20 percent of the average daily trading volume of that
class of securities on a worldwide basis for the issuer's most recently
completed fiscal year, other than the year in which the issuer first
claims the exemption; or
     The issuer registers a class of securities under Exchange
Act Section 12 or incurs reporting obligations under Exchange Act
Section 15(d).

B. Principal Comments Regarding the Proposed Rule Amendments

    We received letters from 32 commenters, including law firms,
business, industry and legal trade associations, depositary banks,
financial advisory firms, and an OTC market participant. Most
commenters strongly supported the Commission's proposals to eliminate
the written application process for the Exchange Act Rule 12g3-2(b)
exemption and replace the paper submission process for an issuer's non-
U.S. disclosure documents with mandated electronic publication as a
condition to claiming and maintaining the exemption.
    However, most commenters were critical of the proposal that, as a
condition to claiming and maintaining the Rule 12g3-2(b) exemption, a
foreign private issuer's U.S. ADTV must be no greater than 20% of its
worldwide ADTV for the issuer's most recently completed fiscal year.
Those commenters urged us either to eliminate the trading volume
condition in its entirety or else increase the U.S. ADTV threshold to a
higher percentage, such as 35%, 40% or 50% of worldwide ADTV. Some
commenters also requested that we impose a trading volume condition
only as an initial requirement for claiming the exemption, and not as a
condition for continued use in subsequent years.
    Other areas receiving comment included whether:
     To adopt the foreign listing condition as a requirement
for either initially claiming the exemption or maintaining it in
subsequent years;
     To permit an issuer to publish English summaries, brief
English descriptions, or English versions instead of English
translations of its non-U.S. disclosure documents;
     To provide a period of time for an issuer to cure a
deficiency in its compliance with one or more conditions before it
would be required to register under the Exchange Act;
     To require an issuer to provide some form of public notice
that it was claiming and intended to rely on the Rule 12g3-2(b)
exemption;
     To modify Form F-6 in light of the rule amendments,
including whether to adopt provisions regarding unsponsored ADR
facilities; and
     To grandfather any issuer having the Rule 12g3-2(b)
exemption before the effective date of the rule amendments.

C. Summary of the Adopted Rule Amendments

    We have carefully considered commenters' concerns regarding the
proposed amendments to Rule 12g3-2(b), and have addressed many of them
in the rule amendments that we are adopting today. Most notably, we
have determined to adopt a trading volume measure solely as part of the
foreign listing/primary trading market condition, and not as a separate
condition. As adopted, the rule amendments will enable a foreign
private issuer to claim the Rule 12g3-2(b) exemption,\32\ without
having to submit a written application to the Commission, as long as
the issuer:
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    \32\ By the use of the term ``claim'' in his release, we do not
mean to imply that a foreign private issuer must apply for or
provide notice of the Rule 12g3-2(b) exemption in order to qualify
for that exemption. Rather, as amended, the Rule 12g3-2(b) exemptive
regime is meant to be self-executing.
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     Currently maintains a listing of the subject class of
securities on one or more exchanges in its primary trading market,
which is defined to mean, as proposed, that:

    [cir] At least 55 percent of the trading in the subject class of
securities on a worldwide basis took place in, on or through the
facilities of a securities market or markets in a single foreign
jurisdiction or in no more than two foreign jurisdictions during the
issuer's most recently completed fiscal year; and
    [cir] If a foreign private issuer aggregates the trading of its
subject class of securities in two foreign jurisdictions, the trading
for the issuer's securities in at least one of the two foreign
jurisdictions is greater than the trading in the United States for the
same class of the issuer's securities;
     The issuer is not required to file or furnish reports
under Exchange Act Section 13(a) or 15(d), as proposed; and
     Unless claiming the exemption upon or following its recent
Exchange Act deregistration, the issuer has published in English
specified non-U.S. disclosure documents, from the first day of its most
recently completed fiscal year, on its Internet Web site or through an
electronic information delivery system generally available to the
public in its primary trading market.\33\
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    \33\ These rule amendments relate solely to the application of
Exchange Act Section 12(g) and not to antifraud or other provisions
of the U.S. federal securities laws.
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    The adopted rule amendments will require an issuer to maintain the
Rule 12g3-2(b) exemption by electronically publishing the specified
non-U.S. disclosure documents for subsequent years. An issuer will lose
the exemption if it:
     Fails to publish electronically the required non-U.S.
disclosure documents;
     No longer meets the foreign listing/primary trading market
condition; or
     Incurs Exchange Act reporting obligations.
    We are adopting the rule amendments regarding English translation
requirements, as proposed. While we decline to permit the use of
``brief English descriptions'' or ``English versions,'' we have
clarified that, generally, an issuer may provide an English summary for
a non-U.S. disclosure document if such a summary would be permitted for
a document submitted under cover of Form 6-K \34\ or Exchange Act Rule
12b-12(d)(3).\35\
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    \34\ 17 CFR 249.306.
    \35\ 17 CFR 240.12b-12(d)(3).
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    We are adopting conforming amendments to Form F-6 and Rule 15c2-11.
Other adopted rule amendments include eliminating, as proposed:
     The current provision that generally prohibits the Rule
12g3-2(b) exemption tosuccessor issuers;
     The rarely used ability of a Canadian issuer filing under
the Multijurisdictional Disclosure System (``MJDS'') to obtain the Rule
12g3-2(b) exemption for a class of equity securities while having
Exchange Act reporting obligations regarding a class of debt
securities;
     The current provision that prohibits an issuer from
relying on the Rule 12g3-2(b) exemption if its securities are traded
through an automated inter-dealer quotation system; and
     The related provision grandfathering Nasdaq-traded
companies meeting specified conditions from Rule 12g3-2(b)'s automated
inter-dealer quotation system prohibition.
    While the adopted rule amendments do not include a grandfathering
provision, we are establishing, as proposed, a three-year transition
period to provide sufficient time for any current Rule 12g3-2(b)-exempt
issuer, which will no longer qualify for the exemption under the rule
amendments, either to comply with all of the conditions of amended Rule
12g3-2(b) or register under the Exchange Act. We also are establishing,
as proposed, a three-month transition period following the
effectiveness of the rule amendments during which the Commission will
accept and process any non-U.S. disclosure documents submitted in paper
by Rule 12g3-2(b)-exempt issuers. Thereafter, the Commission will no
longer process paper Rule 12g3-2(b) submissions.
    By enabling a qualified foreign private issuer to claim the Rule
12g3-2(b) exemption automatically, and without regard to the number of
its U.S. shareholders, the adopted rule amendments should encourage
more foreign private issuers to claim the Rule 12g3-2(b) exemption.
That would enable the establishment of additional ADR facilities, make
it easier for broker-dealers to fulfill their obligations under
Exchange Act Rule 15c2-11 with respect to the equity securities of a
non-reporting foreign private issuer, and facilitate the resale of a
foreign company's securities to QIBs in the United States under
Securities Act Rule 144A. Consequently, the adopted rule amendments
should foster the increased trading of a foreign private issuer's
securities in the U.S. over-the-counter market.
    By requiring the electronic publication in English of specified
non-U.S. disclosure documents for an issuer claiming the Rule 12g3-2(b)
exemption, the adopted amendments should make it easier for U.S.
investors to gain access to a foreign private issuer's material non-
U.S. disclosure documents, and make better informed decisions regarding
whether to invest in that issuer's equity securities through the over-
the-counter market in the United States or otherwise. Thus, the adopted
amendments should foster increased efficiency in the trading of the
issuer's securities for U.S. investors.

II. Discussion

A. Foreign Listing Condition

    We are adopting, as proposed, the condition that, in order to be
eligible to claim the Rule 12g3-2(b) exemption, an issuer must
currently maintain a listing of the subject class of securities on one
or more exchanges in a foreign jurisdiction that, either singly or
together with the trading of the same class of the issuer's securities
in another foreign jurisdiction, constitutes the primary trading market
for those securities.\36\ This condition is substantially similar to
the foreign listing condition adopted as part of the March 2007
amendments.\37\
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    \36\ Exchange Act Rule 12g3-2(b)(1)(ii) (17 CFR 240.12g3-
2(b)(1)(ii)).
    \37\ Exchange Act Rule 12h-6(a)(3) (17 CFR 240.12h-6(a)(3)).
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    The purpose of the foreign listing condition is to help assure that
there is a non-U.S. jurisdiction that principally regulates and
oversees the trading of the issuer's securities and the issuer's
disclosure obligations to investors. This foreign listing condition
increases the likelihood that the principal pricing determinants for a
foreign private issuer's securities are located outside the United
States, and makes more likely the availability of a set of non-U.S.
securities disclosure documents to which a U.S. investor may turn for
material information when making investment decisions about the
issuer's securities in the U.S. over-the-counter market.
    Several commenters supported the proposed foreign listing condition
substantially as proposed or at least in principle.\38\ Some commenters
supported a condition that would require an issuer to be subject to a
recognized foreign regulatory authority and a set of public disclosure
obligations, but would not require a foreign listing.\39\ We decline to
adopt such a provision because, among other factors, we believe it
could be difficult for market participants to determine whether an
issuer is in fact subject to a

complying foreign regulatory regime. In addition, a listing on a
securities market generally involves the affirmative action of an
issuer to be traded on that market and to be subject to the listing
requirements of that market, including applicable ongoing disclosure
requirements. The foreign listing requirement therefore supports one of
the underlying purposes of the Rule 12g3-2(b) exemption--to make
material information available to investors.
---------------------------------------------------------------------------

    \38\ See, for example, the letter of the Bank of New York
(``BNY''), dated April 25, 2008. This letter, along with other
comment letters, is available at http://www.sec.gov/comments/s7-04-
08/s70408.shtml.
    \39\ See, for example, the letter of Sullivan & Cromwell, dated
April 25, 2008.
---------------------------------------------------------------------------

    A few commenters opposed the foreign listing condition on the
grounds that it would impose costs on those issuers that have not yet
obtained a foreign listing, and which are likely to be smaller
companies.\40\ As we noted when proposing the rule amendments, the
foreign listing condition is consistent with the Commission staff's
past and current practice of administering the Rule 12g3-2(b)
exemption. Any issuer, regardless of size, has had to obtain a foreign
listing before it could receive the exemption. Accordingly, the adopted
rule should impose no new burdens in this regard.\41\
---------------------------------------------------------------------------

    \40\ See, for example, the letter of the American Bar
Association, Business Law Section (``ABA''), dated April 30, 2008.
    \41\ As is currently the case, an issuer that, on the last day
of its most recently completed fiscal year, has not exceeded the 500
worldwide holder threshold under Exchange Act Section 12(g), the 300
U.S. holder threshold under Rule 12g3-2(a), or the $10 million
annual aset threshold under Rule 12g-1, could claim an exemption
from Section 12(g) registration for a class of equity securities
based upon one or more of those provisions, and would not have to
comply with Rule 12g3-2(b)'s foreign listing or other conditions, if
it chose not to rely on that rule for its exemption from Section
12(g) registration. However, such an issuer would have to claim the
Rule 12g3-2(b) exemption, and satisfy all of its conditions, if it
sought to have established an ADR facility for its equity
securities. ADRs must be registered on a Form F-6, which requires an
issuer of the deposited securities to be either an Exchange Act
reporting company or have the Rule 12g3-2(b) exemption.
---------------------------------------------------------------------------

1. The Primary Trading Market Definition
    The adopted rule amendments define primary trading market, as
proposed, to mean that at least 55 percent of the worldwide trading in
the issuer's subject class of securities took place in, on or through
the facilities of a securities market or markets in a single foreign
jurisdiction or in no more than two foreign jurisdictions during the
issuer's most recently completed fiscal year. The rule amendments
further instruct that, if a foreign private issuer aggregates the
trading of its subject class of securities in two foreign jurisdictions
for that purpose, the trading for the issuer's securities in at least
one of the two foreign jurisdictions must be larger than the trading in
the United States for the same class of the issuer's securities.\42\
---------------------------------------------------------------------------

    \42\ Note 1 to Rule 12g3-2(b)(1) (17 CFR 240.12g3-2(b)(1)).
---------------------------------------------------------------------------

    As proposed, we have based the adopted definition on the definition
of primary trading market under the March 2007 amendments. Like the
earlier amendments, the amendments we are adopting today will permit an
issuer to aggregate its securities over multiple markets in one or two
foreign jurisdictions in recognition that many foreign private issuers
have listings on more than one exchange in one or more non-U.S.
markets.\43\
---------------------------------------------------------------------------

    \43\ As under the earlier amendments, measurement for the
primary trading market determination will be by reference to ADTV as
reported by the relevant market. An issuer would measure the ADTV of
on-exchange transactions in its securities aggregated over one or
two foreign jurisdictions against its worldwide trading volume. The
issuer could include in this measure off-exchange transactions in
those jurisdictions comprising the numerator only if it includes
those off-exchange transactions when calculating worldwide trading
volume in the denominator. This denominator would consist of U.S.
ADTV, which must include both on-exchange and off-exchange
transactions, and non-U.S. ADTV, which must include on-exchange
transactions, but could also include off-exchange transactions. See
Note 1 to Rule 12g3-2(b)(1) and Release No. 34-55540 at 72 FR 16934,
16939.
---------------------------------------------------------------------------

    Some commenters urged the Commission to adopt a primary trading
market definition that would permit an issuer to aggregate its trading
over an unlimited number of foreign jurisdictions or permit an issuer's
trading in its primary foreign markets to comprise less than 55 percent
of its worldwide trading.\44\ We decline to adopt these suggestions
because, by defining an issuer's primary trading market to comprise no
more than two foreign jursidictions, it becomes more likely that an
eligible issuer will be subject to an overseas regulator with principal
authority for regulating the issuance and trading of the issuer's
securities and the issuer's disclosure to investors. Similarly,
requiring an issuer's primary non-U.S. trading to constitute no less
than 55 percent of its worldwide trading helps assure that a clear
majority of an issuer's securities trading occurs outside the United
States. If the United States was the sole or principal market for a
foreign private issuer's securities, then the Commission would have a
greater regulatory interest in subjecting the foreign company to the
Exchange Act reporting regime.
---------------------------------------------------------------------------

    \44\ See, for example, the letters of JPMorgan Chase Bank
(``JPMorganChase''), dated April 18, 2008, and the Organization for
International Investment (``OFII''), dated April 23, 2008.
---------------------------------------------------------------------------

    The adopted rule amendments will not require an issuer establishing
the exemption, but not deregistering, to have maintained a foreign
listing for the previous twelve months, or for some other specified
period of time, as was required under the March 2007 amendments. As
noted in the Proposing Release, we see no reason to exclude newly
listed foreign companies from eligibility. Many foreign exchanges
require substantial initial disclosure before a listing is accepted.
Moreover, there is currently no similar requirement for a non-reporting
company applying for the Rule 12g3-2(b) exemption.
    Under Rule 12h-6, an issuer must certify that, at the time it files
its Form 15F,\45\ it meets that rule's foreign listing requirement.
That issuer will also have to meet Rule 12g3-2(b)'s foreign listing
requirement upon the effectiveness of its Exchange Act termination of
registration and reporting under Rule 12h-6 in order to be able to
claim the Rule 12g3-2(b) exemption. Since typically that effectiveness
occurs 90 days from the date of filing of the Form 15F, we expect most
Form 15F filers will satisfy the adopted foreign listing requirement
under Rule 12g3-2(b).\46\
---------------------------------------------------------------------------

    \45\ 17 CFR 249.324. Similar to a Form 15, Form 15F is the form
that a foreign private issuer must file to certify that it meets the
conditions for terminating its Exchange Act registration and
reporting obligations under Rule 12h-6.
    \46\ Unless the Commission objects, termination of an issuer's
reporting and registration under Rule 12h-6 is effective 90 days
after the filing of its Form 15F. Exchange Act Rule 12h-6(g)(1) (17
CFR 240.12h-6(g)(1)).
---------------------------------------------------------------------------

2. Elimination of the Proposed 20 Percent Trading Volume Condition
    In addition to the trading volume standard under the primary
trading market definition, we proposed that an issuer's U.S. ADTV must
be no greater than 20 percent of its worldwide ADTV for its most
recently completed fiscal year. We have determined not to adopt this
separate trading volume condition.
    Most commenters opposed the 20 percent trading volume condition.
Several commenters maintained that a foreign private issuer cannot
control the level of U.S. trading of its equity securities because U.S.
investors are able to purchase a foreign private issuer's securities in
the issuer's home market and subsequently trade them in the United
States, or purchase the issuer's securities through unsponsored ADR
facilities in the United States. According to these commenters, those
factors could cause an issuer's U.S. trading volume to exceed the
proposed trading volume threshold and thereby require the issuer to
register its securities in the United States although

it has not voluntarily sought a public market there.\47\
---------------------------------------------------------------------------

    \47\ See, for example, the letters of Cleary Gottlieb Steen &
Hamilton LLP (``Cleary Gottlieb''), dated April 25, 2008, and
EuropeanIssuers, dated April 25, 2008.
---------------------------------------------------------------------------

    Some commenters further stated that the proposed trading volume
condition would likely discourage foreign private issuers from
establishing or maintaining sponsored ADR facilities or engaging in
exempted offerings in the U.S., such as private placements and Rule
144A resales, to the detriment of U.S. investors.\48\ In addition,
commenters noted that the proposed trading volume condition would be
unnecessary should the Commission adopt the proposed foreign listing
condition and accompanying definition of primary trading market.\49\
---------------------------------------------------------------------------

    \48\ See, for example, the letters of the International Bar
Association, dated April 25, 2008, and Linklaters, dated April 24,
2008.
    \49\ See, for example, the letters of BNY and O'Melveny & Myers
LLP, dated April 25, 2008.
---------------------------------------------------------------------------

    After consideration of the comments, we have determined that
adopting these amendments without the 20 percent trading volume
condition is consistent with the protection of U.S. investors. Most of
the foreign private issuers that currently claim the Rule 12g3-2(b)
exemption have U.S. trading volumes that fall below the proposed 20
percent threshold although there is no mandatory trading volume
condition.\50\ We expect that the primary trading market provision will
serve to protect U.S. investors by making it more likely that foreign
companies claiming the exemption will be subject to disclosure
requirements where they are listed.
---------------------------------------------------------------------------

    \50\ See the Memo by Jennifer Marietta-Westberg, Office of
Economic Analysis, dated March 10, 2008, which is available at
http://www.sec.gov/comments/s7-04-08/s70408-2.pdf.
---------------------------------------------------------------------------

3. Treatment of Compensatory Stock Options
    Currently, the scope of the exemption afforded to a class of equity
securities under Rule 12g3-2(b) may include compensatory stock options
that relate to that class of equity securities.\51\ Some commenters
expressed their concern that, as proposed, the scope of the amended
rule would not include compensatory stock options since the exemption
extends to a class of equity securities, the compensatory stock options
would likely be deemed a separate class, and the compensatory stock
options would typically not be listed in the issuer's primary trading
market.\52\
---------------------------------------------------------------------------

    \51\ See current Exchange Act Rule 12g3-2(b)(1), which states
that ``securities'' of a foreign private issuer shall be exempt from
Section 12(g) if the rule's conditions are met.
    \52\ See the letter of Gloria W. Nusbacher and 24 other
attorneys.
---------------------------------------------------------------------------

    It is not our intention to change the scope of Rule 12g3-2(b) in
this regard. Accordingly, we have added a note to the amended rule to
clarify that compensatory stock options for which the underlying
securities are in a class exempt under Rule 12g3-2(b) are also exempt
under that rule.\53\
---------------------------------------------------------------------------

    \53\ Note 3 to Exchange Act Rule 12g3-2(b)(1).
---------------------------------------------------------------------------

B. Non-Exchange Act Reporting Condition

    We are adopting the condition, as proposed, that in order to be
eligible for the Rule 12g3-2(b) exemption, an issuer must not have any
reporting obligations under Exchange Act Section 13(a) or 15(d).\54\
Like the current non-Exchange Act reporting condition of Rule 12g3-
2(b),\55\ the purpose of this provision is to prevent an issuer from
claiming the Rule 12g3-2(b) exemption when it already has incurred
active Exchange Act reporting obligations.
---------------------------------------------------------------------------

    \54\ Exchange Act Rule 12g3-2(b)(1)(i) (17 CFR 240.12g3-
2(b)(1)(i)).
    \55\ Current Exchange Act Rule 12g3-2(d)(1) (17 CFR 240.12g3-
2(d)(1)).
---------------------------------------------------------------------------

1. Non-Reporting Issuers
    A foreign private issuer will satisfy the proposed non-reporting
condition if it does not already have reporting obligations under
either Exchange Act Section 13(a) or 15(d). Since Section 13(a) imposes
reporting obligations on an issuer that has registered a class of
securities under Section 12, a foreign private issuer that has an
effective registration statement filed with the Commission under
Section 12(b),\56\ for example, covering a class of debt securities, or
Section 12(g), covering a particular class of equity securities, would
be ineligible to claim the exemption. This treatment is consistent with
the current Exchange Act reporting prohibition under Rule 12g3-
2(b).\57\
---------------------------------------------------------------------------

    \56\ 15 U.S.C. 78l(b).
    \57\ Current Exchange Act Rule 12g3-2(d)(1).
---------------------------------------------------------------------------

    We received relatively few comments on the proposed non-reporting
condition. While some commenters supported the proposed condition,\58\
others requested that, in the interest of increasing the flexibility of
capital raising in the United States for foreign private issuers, we
permit an issuer to claim the Rule 12g3-2(b) exemption with respect to
a particular class of equity securities although it has Exchange Act
reporting obligations regarding a class of debt securities or a
different class of equity securities.\59\ We decline to adopt this
suggested modification because we believe that it could cause confusion
for investors and other market participants regarding the scope of an
issuer's Exchange Act reporting obligations and the protections
available under the Exchange Act.
---------------------------------------------------------------------------

    \58\ See, for example, the letter of Sullivan & Cromwell.
    \59\ See, for example, the letter of OFII.
---------------------------------------------------------------------------

    Currently an issuer may apply for the Rule 12g3-2(b) exemption,
although it may have exceeded the Section 12(g) shareholder thresholds
on the last day of its most recently completed fiscal year, as long as
the statutory 120-day period for filing a Section 12(g) registration
statement has not lapsed.\60\ We proposed to eliminate this 120-day
submission requirement because, under the revised Rule 12g3-2(b)
exemptive scheme, we did not believe that this requirement would be
necessary to protect investors.
---------------------------------------------------------------------------

    \60\ Current Exchange Act Rule 12g3-2(b)(2) (17 CFR 240.12g3-
2(b)(2)).
---------------------------------------------------------------------------

    The revised exemption does not depend on an issuer's determination
of the number of its worldwide or U.S. shareholders, and does not
require that it submit a written application disclosing that
information. Instead, it affirmatively requires a foreign private
issuer to meet a foreign listing requirement and electronically publish
specified material non-U.S. disclosure documents in English. If we also
required an issuer to claim the exemption within the 120-day period, we
believe some issuers, particularly smaller ones, would be unable to
meet that deadline.\61\ Those issuers would have to wait until the end
of their current fiscal year and the start of a new 120-day period
before they could claim the exemption. We see little benefit in
requiring issuers to wait several months before being able to claim the
exemption. On the other hand, providing the exemption and encouraging
these issuers to publish their material non-U.S. disclosure documents
in English should benefit U.S. investors. Commenters uniformly agreed
with our assessment on this issue. Therefore, we are eliminating the
120-day requirement for issuers under Rule 12g3-2(b), as proposed.
---------------------------------------------------------------------------

    \61\ Under current Rule 12g3-2(b), several issuers have applied
for the exemption although the 120-day period has lapsed.
---------------------------------------------------------------------------

2. Deregistered Issuers
    Under the adopted, revised exemptive scheme, a foreign private
issuer that has suspended its Exchange Act reporting obligations upon
the filing of Form 15, pursuant to Rule 12g-4 or 12h-3, or Form 15F,
pursuant to Rule 12h-6, will

satisfy the non-reporting requirement upon the effectiveness of its
deregistration, assuming that it has not otherwise incurred additional
Exchange Act reporting obligations. Similarly, a foreign private issuer
that has suspended its reporting obligations pursuant to the statutory
terms of Section 15(d) will satisfy the non-reporting condition
immediately upon its determination that it had less than 300
shareholders as of the beginning of its most recent fiscal year.
    Thus, unlike the current rule, the adopted rule amendments will not
require an issuer to look back over the previous eighteen months and
determine whether it had Exchange Act reporting obligations during that
period.\62\ We eliminated the eighteen month requirement when adopting
the March 2007 rule amendments that granted the Rule 12g3-2(b)
exemption automatically to a foreign private issuer upon the
effectiveness of its termination of Exchange Act registration and
reporting pursuant to Rule 12h-6. We see no reason to treat differently
foreign private issuers that have terminated their Section 12(g)
registration under the older Rule 12g-4 or suspended their Section
15(d) reporting obligations pursuant to that statutory section or under
Rule 12h-3 and following the filing of Form 15. Elimination of a
lengthy waiting period will hasten the electronic publication of a
foreign private issuer's non-U.S. disclosure documents required under
the exemption and, thus, help improve the ability of U.S. investors to
make informed decisions regarding that issuer's securities. Commenters
uniformly supported this revision, which we are adopting as proposed.
---------------------------------------------------------------------------

    \62\ Current Exchange Act Rule 12g3-2(d)(1) provides that the
Rule 12g3-2(b) exemption is generally not available to a foreign
private issuer that, during the preceding 18 months, has registered
a class of securities under Exchange Act Section 12 or had an active
or suspended Section 15(d) reporting obligation.
---------------------------------------------------------------------------

C. Electronic Publishing of Non-U.S. Disclosure Documents

1. Electronic Publishing Requirement To Claim Exemption
    We are adopting, as proposed, the requirement that, unless in
connection with or following a recent Exchange Act deregistration, in
order to claim the Rule 12g3-2(b) exemption, an issuer must have
published in English, on its Internet Web site or through an electronic
information delivery system generally available to the public in its
primary trading market, information that, from the first day of its
most recently completed fiscal year, it:
     Has made public or been required to make public pursuant
to the laws of the country of its incorporation, organization or
domicile;
     Has filed or been required to file with the principal
stock exchange in its primary trading market on which its securities
are traded and which has been made public by that exchange; and
     Has distributed or been required to distribute to its
security holders.\63\

    These are the same categories of information that the Commission
has historically required a non-reporting company to submit in paper
when applying for the exemption under Rule 12g3-2(b).\64\ They also are
the same non-U.S. disclosure documents that, more recently, the
Commission has required an issuer to publish electronically in order to
maintain its Rule 12g3-2(b) exemption claimed upon the effectiveness of
its deregistration under Rule 12h-6.\65\ Commenters strongly supported
this electronic publication requirement.\66\
---------------------------------------------------------------------------

    \63\ Exchange Act Rule 12g3-2(b)(1)(iii) (17 CFR 240.12g3-
2(b)(1)(iii)) and Note 2 to Exchange Act Rule 12g3-2(b)(1). As
proposed, the adopted amendments do not require a deregistered
issuer to satisfy the non-U.S. publication requirement in order to
claim the Rule 12g3-2(b) exemption since that issuer will have filed
Exchange Act reports for the prior fiscal year upon which investors
may rely.
    \64\ Current Exchange Act Rule 12g3-2(b)(1)(i).
    \65\ Current Exchange Act Rule 12g3-2(e)(2).
    \66\ While commenters uniformly supported the electronic
publication condition, some questioned the proposed requirement to
provide English translations of specified non-U.S. disclosure
documents. See Part II.C.3 of this release.
---------------------------------------------------------------------------

    The purpose of this non-U.S. electronic publication condition is to
provide U.S. investors with ready access to material information when
trading in the issuer's equity securities in the over-the-counter
market.\67\ This condition also will assist U.S. investors who are
interested in trading the issuer's securities in its primary securities
market. Moreover, having a foreign private issuer's key non-U.S.
disclosure documents electronically published in English will assist
broker-dealers in meeting their Rule 15c2-11 obligations and facilitate
resales of that issuer's securities to QIBs under Rule 144A.
---------------------------------------------------------------------------

    \67\ Any trading of a foreign private issuer's Rule 12g3-2(b)-
exempt securities in the United States would have to occur through
an over-the-counter market such as that maintained by the Pink
Sheets, LLC since, as of April, 1998, the NASD has required a
foreign private issuer to register a class of securities under
Exchange Act Section 12 before its securities could be traded
through the electronic over-the-counter bulletin board administered
by Nasdaq. See, for example, NASD Notice to Members (January 1998).
---------------------------------------------------------------------------

    As under the current rule, the adopted amendments will require an
issuer only to publish electronically information that is material to
an investment decision regarding the subject securities,\68\ such as:
---------------------------------------------------------------------------

    \68\ Exchange Act Rule 12g3-2(b)(3)(i) (17 CFR 240.12g3-
2(b)(3)(i)). Although the substantive requirements are the same, we
have made conforming changes to General Instruction E and Part II,
Item 9 of Form 15F to reflect the renumbering of the non-U.S.
publication requirements of Rule 12g3-2(b).
---------------------------------------------------------------------------

     Results of operations or financial condition;
     Changes in business;
     Acquisitions or dispositions of assets;
     The issuance, redemption or acquisition of securities;
     Changes in management or control;
     The granting of options or the payment of other
remuneration to directors or officers; and
     Transactions with directors, officers or principal
security holders.\69\
---------------------------------------------------------------------------

    \69\ These are the same types of information specified in
current Exchange Act Rule 12g3-2(b)(3) (17 CFR 240.12g3-2(b)(3)).
---------------------------------------------------------------------------

2. Electronic Publishing Requirement to Maintain Exemption
    In order to maintain the Rule 12g3-2(b) exemption, the adopted
amendments will require an issuer to publish the same information
specified in the prior fiscal year provision, on an ongoing basis and
for subsequent fiscal years, on its Internet Web site or through an
electronic information delivery system in its primary trading
market.\70\ This requirement will apply to any issuer claiming the
exemption, whether or not a former Exchange Act registrant. Like the
prior fiscal year publication condition, this ongoing publication
condition will help assure that investors and other market participants
have access to an issuer's specified non-U.S. disclosure documents, in
English, which are material to an investment decision. Most commenters
strongly supported this ongoing non-U.S. electronic publication
condition.
---------------------------------------------------------------------------

    \70\ Exchange Act Rule 12g3-2(b)(2)(i) (17 CFR 240.12g3-
2(b)(2)(i)).
---------------------------------------------------------------------------

    Similar to the current rule,\71\ the adopted rule amendments will
require an issuer to publish electronically its non-U.S. disclosure
documents promptly after the information has been made public, pursuant
to its home jurisdiction laws, non-U.S. stock exchange rules, or
shareholder meeting rules and practices.\72\ As under current
Commission staff practice, what constitutes ``promptly'' will depend on
the type of document and the amount of time required to prepare an
English

translation. Currently an issuer typically must electronically publish
or submit in paper a copy of a material press release on or around the
same business day of its original publication.
---------------------------------------------------------------------------

    \71\ Current Exchange Act Rule 12g3-2(b)(1)(iii).
    \72\ Exchange Act Rule 12g3-2(b)(2)(ii) (17 CFR 240.12g3-
2(b)(2)(ii)). Form 6-K imposes a similar requirement.
---------------------------------------------------------------------------

    The adopted amendments will permit an issuer to meet Rule 12g3-
2(b)'s electronic publication requirement concurrently with the
publishing in English of a non-U.S. disclosure document through an
electronic information delivery system generally available to the
public in its primary trading market. Thus, if an issuer's non-U.S.
stock exchange or securities regulatory authority permits the issuer to
publish electronically a required report on its electronic delivery
system, and the public has ready access to the report and other
documents maintained on the system,\73\ that electronic publication
solely will satisfy the proposed Rule 12g3-2(b)'s electronic publishing
requirements.
---------------------------------------------------------------------------

    \73\ An example of such a system is the System for Electronic
Document Analysis and Retrieval (``SEDAR'') maintained by the
Canadian Securities Administrators.
---------------------------------------------------------------------------

3. English Translation Requirement
    We are adopting, as proposed, the condition that, in order to claim
or maintain the Rule 12g3-2(b) exemption, an issuer must publish
electronically, at a minimum, English translations of the following
documents if in a foreign language:
     Its annual report, including or accompanied by annual
financial statements;
     Interim reports that include financial statements;
     Press releases; and
     All other communications and documents distributed
directly to security holders of each class of securities to which the
exemption relates.\74\
---------------------------------------------------------------------------

    \74\ Exchange Act Rule 12g3-2(b)(3)(ii) (17 CFR 240.12g3-
2(b)(3)(ii)).
---------------------------------------------------------------------------

    These are the same documents for which an issuer that has
deregistered under Rule 12h-6 must currently provide English
translations.\75\
---------------------------------------------------------------------------

    \75\ Note 1 to Current Exchange Act Rule 12g3-2(e) (17 CFR
240.12g3-2(e)).
---------------------------------------------------------------------------

    Some commenters requested that we permit an issuer to provide brief
English descriptions or English versions of specified non-U.S.
disclosure documents instead of English translations.\76\ We decline to
adopt this suggestion because, as we stated in the Proposing Release,
the specified non-U.S. disclosure documents are the same documents for
which the Commission staff has historically required English
translations because of their importance to investors.\77\
---------------------------------------------------------------------------

    \76\ See, for example, the letters of Sullivan & Cromwell and
Simpson Thacher & Bartlett (``Simpson Thacher''), dated April 18,
2008.
    \77\ See Part II.D.1 of the Proposing Release. We similarly
eliminated the ability of foreign registrants to provide English
versions or brief English descriptions of specified non-U.S.
documents submitted under cover of Form 6-K because of the vagueness
and lack of utility of such versions and descriptions submitted to
the Commission. See Release No. 33-8099 (May 14, 2002), 67 FR 36678
(May 24, 2002).
---------------------------------------------------------------------------

    Some commenters also requested that we provide guidance regarding
when an issuer may provide an English summary instead of an English
translation.\78\ Generally, if, as a registrant, an issuer could submit
an English summary for a non-U.S. disclosure document under cover of
Form 6-K or pursuant to Exchange Act Rule 12b-12(d)(3), it can do so
when claiming or maintaining the Rule 12g3-2(b) exemption.
---------------------------------------------------------------------------

    \78\ See, for example, the letters of Shearman & Sterling, dated
April 25, 2008, and Sullivan & Cromwell.
---------------------------------------------------------------------------

D. Elimination of the Written Application Requirement

    The adopted rule amendments eliminate the current requirement that,
in order to obtain the Rule 12g3-2(b) exemption, if not proceeding
under Rule 12h-6, a foreign private issuer must submit written
materials, typically in the form of a letter application, to the
Commission. These materials currently include a list of the issuer's
non-U.S. disclosure requirements, the number of U.S. holders of its
subject securities and the percentage of outstanding shares held by
them, the circumstances in which its U.S. holders acquired those
securities, and the date and circumstances of the most recent public
distribution of the securities of the issuer or its affiliate.\79\ As
long as an issuer satisfies the adopted rule's conditions, it no longer
has to submit these materials to the Commission. Commenters strongly
supported eliminating the written application process.
---------------------------------------------------------------------------

    \79\ Current Exchange Act Rules 12g3-2(b)(1), (2) and (5). As
part of the written application process, an issuer must also submit
paper copies of its non-U.S. disclosure documents published since
the first day of its most recently completed fiscal year.
---------------------------------------------------------------------------

    Elimination of Rule 12g3-2(b)'s written application process for all
foreign private issuers is consistent with our adoption of an automatic
application of the Rule 12g3-2(b) exemption upon the effectiveness of
an issuer's deregistration under Rule 12h-6. Moreover, since the
adopted rule amendments permit an issuer to claim the Rule 12g3-2(b)
exemption based on a foreign listing/primary trading market condition,
regardless of the number of its U.S. shareholders, the current
shareholder information requirement would be of marginal use. Further,
since, as adopted, as a condition to claiming and maintaining the Rule
12g3-2(b) exemption, an issuer will have to publish electronically its
non-U.S. disclosure documents, investors should be able to ascertain
many of the issuer's non-U.S. disclosure requirements from a review of
those publicly available documents.
    From time to time, the Commission has published a list of issuers
claiming the Rule 12g3-2(b) exemption that have submitted relatively
current information pursuant to that rule.\80\ Commission staff has
compiled this list based on a review of submitted paper documents. As
we stated in the Proposing Release, as part of the streamlining of the
Rule 12g3-2(b) process that the adopted rule amendments are intended to
effect, the Commission anticipates it will no longer publish these
lists subsequent to the effective date of the new rules.\81\
---------------------------------------------------------------------------

    \80\ See, for example, Release No. 34-51893 (June 21, 2005), 70
FR 37128 (June 28, 2005).
    \81\ See the Proposing Release at n. 86.
---------------------------------------------------------------------------

    Some commenters suggested that, as a substitute for these lists, we
adopt a requirement that an issuer must notify the Commission and other
market participants that it is claiming and intends to rely on the Rule
12g3-2(b) exemption.\82\ We decline to adopt such a notice requirement
because we believe that, as other commenters have noted, a notice
requirement could run contrary to the goal of encouraging an issuer to
claim the Rule 12g3-2(b) exemption and electronically disseminate its
non-U.S. disclosure documents in English.\83\ Nevertheless, an issuer
that wants to provide notice to investors, broker-dealers and other
market participants may do so by, for example, stating on its Internet
Web site that it has electronically published specified non-U.S.
disclosure documents in order to claim or maintain the Rule 12g3-2(b)
exemption.
---------------------------------------------------------------------------

    \82\ See, for example, the letters of Simpson Thacher and
Sullivan & Cromwell.
    \83\ See the letters of Ziegler, Ziegler & Associates, dated
April 28, 2008, and BNY.
---------------------------------------------------------------------------

E. Duration of the Amended Rule 12g3-2(b) Exemption

    As adopted, the amended Rule 12g3-2(b) exemption will remain in
effect until an issuer:
     No longer electronically publishes the specified non-U.S.
disclosure documents required to maintain the exemption;
     No longer maintains a listing for the subject class of
securities on one or more exchanges in a primary trading market, as
defined by the rule; or

     Registers a class of securities under Section 12 of the
Exchange Act or incurs reporting obligations under Section 15(d) of the
Exchange Act.\84\
---------------------------------------------------------------------------

    \84\ Exchange Act Rule 12g3-2(c) (17 CFR 240.12g3-2(c)).
---------------------------------------------------------------------------

    The duration of the amended Rule 12g3-2(b) exemption is similar to
the duration of the current exemption. Both depend on an issuer's
continued compliance with the requirement to publish its non-U.S.
disclosure documents. Under both provisions, Section 12 registration or
the incurrence of Section 15(d) reporting obligations terminates the
exemption.\85\ Moreover, currently, if an issuer can no longer claim
the Rule 12g3-2(b) exemption because it has not complied with the
rule's publication requirements, it must determine on the last day of
the fiscal year whether, because of its record holder count, it would
be required to register a class of securities under Section 12(g). The
same would hold true under the rule amendments for a non-compliant
issuer.
---------------------------------------------------------------------------

    \85\ See, for example, current Exchange Act Rule 12g3-2(e)(3). A
Rule 12g3-2(b)-exempt issuer that acquires an Exchange Act reporting
company following an exchange of shares, and thereby succeeds to the
target company's Exchange Act reporting obligations under Exchange
Act Rule 12g-3 (17 CFR 240.12g-3) or Exchange Act Rule 15d-5 (17 CFR
240.15d-5), would lose the Rule 12g3-2(b) exemption upon succession.
If such successor issuer qualified for deregistration under Exchange
Act Rule 12h-6, it could claim the Rule 12g3-2(b) exemption upon
deregistration.
---------------------------------------------------------------------------

    We are also adopting the provision, as proposed, that an issuer
will lose the Rule 12g3-2(b) exemption if it no longer meets the
foreign listing condition. An issuer will no longer satisfy the foreign
listing condition either because it is no longer listed in its primary
trading market, or because the one or two foreign jurisdictions in
which it trades no longer qualifies as its primary trading market, as
defined by the rule. Since the definition of primary trading market
uses a trading volume standard for the issuer's most recently completed
fiscal year, an issuer will have to redetermine its relative U.S. and
foreign trading volumes on an annual basis.
    Some commenters opposed basing the duration of the Rule 12g3-2(b)
exemption on whether an issuer remains listed in its primary trading
market.\86\ We believe this provision is necessary in order to help
ensure the continued availability of a set of non-U.S. disclosure
documents to which investors may turn when making decisions regarding
an issuer's securities. It is also necessary to help make sure that an
issuer's principal trading market has not become the U.S. market, which
would require the issuer to register and report under the Exchange Act.
---------------------------------------------------------------------------

    \86\ See the letters of the ABA and Sullivan & Cromwell. The
primary objection was that adherence to the electronic publication
condition should be a sufficient basis for maintaining the exemption
as it is under the current rule.
---------------------------------------------------------------------------

    Some commenters requested that we at least establish a ``cure''
period, such as six or twelve months, during which an issuer would
either have to correct any deficiency or else register under the
Exchange Act.\87\ We decline to adopt a specific cure period. We
believe that in order to best protect investors, an issuer that finds
itself not in compliance with any of the conditions required to
maintain the Rule 12g3-2(b) exemption must either re-establish
compliance with the rule in a reasonably prompt manner or else register
under the Exchange Act.
---------------------------------------------------------------------------

    \87\ See, for example, the letter of the OFII.
---------------------------------------------------------------------------

    There is no cure period for domestic issuers that find they are
subject to registration under Section 12(g). Thus, foreign private
issuers are treated in a similar manner as domestic issuers in this
respect. As noted, foreign private issuers may be able to avoid
registration by re-establishing compliance with Rule 12g3-2(b), for
example, by relisting its securities in its primary trading market.

F. Elimination of the Successor Issuer Prohibition

    The adopted rule amendments will eliminate the provision that
precludes an issuer from obtaining the Rule 12g3-2(b) exemption if,
following the issuance of shares to acquire by merger, consolidation,
exchange of securities or acquisition of assets, it has succeeded to
the Exchange Act reporting obligations of another issuer.\88\ Until
recently, the sole exception to this successor issuer prohibition was
for Canadian companies that registered the securities to be issued in
the transaction on specified MJDS registration statements under the
Securities Act.\89\
---------------------------------------------------------------------------

    \88\ Current Exchange Act Rule 12g3-2(d)(2). An issuer succeeds
to the Exchange Act reporting obligations of another either under
Exchange Act Rule 12g-3 (17 CFR 240.12g-3) or 15d-5 (17 CFR 240.15d-
5).
    \89\ The specified MJDS registration statements are Forms F-8,
F-9, F-10 and F-80 (17 CFR 239.38, 239.39, 239.40, and 239.41).
---------------------------------------------------------------------------

    As part of the March 2007 rule amendments, we adopted a provision
that permits a successor issuer to terminate its newly acquired
Exchange Act reporting obligations as long as it meets Rule 12h-6's
substantive requirements for equity or debt securities issuers.\90\ We
also amended Exchange Act Rule 12g3-2 to permit a successor issuer to
claim the Rule 12g3-2(b) exemption upon the effectiveness of its
termination of Exchange Act registration and reporting under Rule 12h-
6. We see no reason to treat differently a successor issuer that
qualifies for deregistration under one of the older exit rules, Rule
12g-4 or 12h-3, or under Section 15(d).
---------------------------------------------------------------------------

    \90\ 17 CFR 240.12h-6(d). Under that rule, a non-Exchange Act
reporting foreign private issuer that has acquired a reporting
foreign private issuer in a transaction exempt under the Securities
Act, for example, under Rule 802 (17 CFR 230.802), or Securities Act
Section 3(a)(10) (15 U.S.C. 77c(a)(10)), may qualify immediately for
termination of its Exchange Act reporting obligations under Rule
12h-6, without having to file an Exchange Act annual report, as long
as the acquired company's reporting history fulfills Rule 12h-6's
prior reporting condition and the successor issuer meets the rule's
other conditions.
---------------------------------------------------------------------------

    Elimination of the successor issuer prohibition will help encourage
a successor issuer to claim the Rule 12g3-2(b) exemption and
electronically publish its specified non-U.S. disclosure documents in
English. No commenter opposed the proposed elimination of the successor
issuer prohibition. Accordingly, we are removing the successor issuer
prohibition under Rule 12g3-2(b), as proposed.

G. Elimination of the Rule 12g3-2(b) Exception for MJDS Filers

    The adopted rule amendments will eliminate the Rule 12g3-2
provisions that make the Rule 12g3-2(b) exemption available to Canadian
issuers that have only filed with the Commission specified registration
statements under the MJDS,\91\ although they may have filed those
registration statements within the previous 18 months or to effect
transactions in which they would succeed to Exchange Act reporting
obligations.\92\ Because the adopted amendments will eliminate the 18
month and successor issuer prohibitions under Rule 12g3-2(b), they will
remove as unnecessary the MJDS filer exceptions to those prohibitions.
---------------------------------------------------------------------------

    \91\ The Commission adopted the Rule 12g3-2 provisions when
adopting the MJDS in order to encourage Canadian issuers to use the
MJDS. See Release No. 33-6879 (October 22, 1990), 55 FR 462881
(November 2, 1990), as adopted in Release No. 33-6902 (June 21,
1991), 56 FR 30036 (July 1, 1991). The MJDS generally permits a
qualified Canadian issuer to file with the Commission its Canadian
registration statements and reports under cover of the MJDS forms.
    \92\ Current Exchange Act Rules 12g3-2(d)(1) and (2).
---------------------------------------------------------------------------

    The adopted rule amendments will also eliminate the current ability
of a Canadian issuer that already has the Rule 12g3-2(b) exemption, but
that subsequently acquires Exchange Act reporting obligations as a MJDS
filer, for example, with regard to a class of debt securities, to
retain the Rule 12g3-2(b) exemption for its equity securities. Such a
MJDS filer currently may submit its

non-U.S. disclosure documents simultaneously to fulfill its Exchange
Act reporting obligations under the MJDS and its non-U.S. publication
obligations under Rule 12g3-2(b).\93\
---------------------------------------------------------------------------

    \93\ Under the current rules, a Canadian issuer that checks the
appropriate box on the cover of each filed Form 40-F and submitted
Form 6-K is able to use those Exchange Act reports to maintain its
Rule 12g3-2(b) exemption as well.
---------------------------------------------------------------------------

    We proposed to eliminate this ability of a MJDS filer
simultaneously to maintain the Rule 12g3-2(b) exemption both because
few issuers have ever used that ability and because it no longer is the
case that a MJDS filer must file the same documents to fulfill its
obligations under the Exchange Act and Rule 12g3-2(b). Since the
enactment of the Sarbanes-Oxley Act,\94\ and Commission rules adopted
under that Act, Canadian issuers must respond to several U.S.
disclosure requirements when preparing their Form 40-F annual
reports.\95\
---------------------------------------------------------------------------

    \94\ Public Law 107-204, 116 Stat. 745 (2002).
    \95\ See, for example, Form 40-F's certifications required
concerning an issuer's disclosure controls and procedures and its
internal controls over financial reporting, and the disclosure
required concerning its audit committee financial expert, its code
of ethics, and its off-balance sheet arrangements.
---------------------------------------------------------------------------

    Only one commenter opposed eliminating this rarely used ability to
be a MJDS filer while simultaneously claiming the Rule 12g3-2(b)
exemption.\96\ The primary ground for objection was that some issuers
may already be relying on the ability to use MJDS reports for this dual
purpose. We continue to believe that this ability is rarely used if at
all. Moreover, as explained below, we are adopting a three-year
transition period following effectiveness of the adopted rule
amendments, that will provide ample time for a MJDS registrant of debt
securities, which has simultaneously claimed the Rule 12g3-2(b)
exemption for a class of equity securities, to register that class of
securities under the Exchange Act.\97\
---------------------------------------------------------------------------

    \96\ See the letter of Osler, Hoskins & Harcourt, dated April
28, 2008.
    \97\ See Part II.K.1 below.
---------------------------------------------------------------------------

    Accordingly, we are adopting the elimination of this MJDS
provision, as proposed.\98\ Under the adopted rule amendments, a MJDS
registrant will be eligible to claim the Rule 12g3-2(b) exemption on
the same grounds as other foreign registrants. If it has recently
exited the Exchange Act reporting regime under Rule 12h-6, 12g-4 or12h-
3 or Section 15(d), it can claim the exemption, assuming it satisfies
the rule amendments' other conditions. Otherwise, the filing of a MJDS
registration statement under the Securities Act or Exchange Act will
trigger Exchange Act reporting obligations and preclude that issuer
from claiming the exemption.
---------------------------------------------------------------------------

    \98\ The adopted rule amendments remove the instruction on the
cover page of Form 40-F and Form 6-K requiring a registrant to
indicate whether it also is furnishing the materials pursuant to
Rule 12g3-2(b).
---------------------------------------------------------------------------

H. Elimination of the ``Automated Inter-Dealer Quotation System''
Prohibition and Related Grandfathering Provision

    The adopted amendments will also eliminate the provision generally
prohibiting a foreign private issuer from claiming the Rule 12g3-2(b)
exemption if it has securities or ADRs quoted in the United States on
an automated inter-dealer quotation system,\99\ which, until recently,
referred to the inter-dealer quotation system administered by the
National Association of Securities Dealers Inc., and known as Nasdaq.
The Commission initially adopted this prohibition in 1983 because of
its belief that, since its establishment in 1971, Nasdaq had so matured
into a trading system with substantial similarities to a national
securities exchange that Nasdaq-traded foreign private issuers should
be required to meet the same disclosure standards as exchange-traded
foreign private issuers.\100\ We are eliminating this prohibition, as
proposed, because Nasdaq has since become a national securities
exchange.\101\
---------------------------------------------------------------------------

    \99\ Current Exchange Act Rule 12g3-2(d)(3) (17 CFR 12g3-
2(d)(3)).
    \100\ Release No. 34-20264 (October 6, 1983), 48 FR 46736
(October 14, 1983).
    \101\ Nasdaq ceased operations as an automated inter-dealer
quotation system and became a national securities exchange effective
August 1, 2006. See Release No. 34-53128 (January 13, 2006), 71 FR
3550 (January 23, 2006).
---------------------------------------------------------------------------

    When the Commission adopted the automatic inter-dealer quotation
system prohibition, it recognized that the general prohibition could
cause some Nasdaq-quoted foreign companies that already had obtained
the Rule 12g3-2(b) exemption to withdraw from Nasdaq. Therefore, the
Commission excepted from that prohibition securities that:
     Were quoted on Nasdaq on October 5, 1983 and have been
continuously traded since;
     Were exempt under Rule 12g3-2(b) on October 5, 1983 and
have remained so since; and
     After January 2, 1986, were issued by a non-Canadian
company.\102\
---------------------------------------------------------------------------

    \102\ Current Exchange Act Rule 12g3-2(d)(3). The Commission
based the more limited grandfathering of Canadian securities on the
more active U.S. market for those securities, which had led to
abuses under Rule 12g3-2(b). Release No. 34-20264.
---------------------------------------------------------------------------

    The adopted rule amendments will eliminate this grandfathering
provision because, as we stated in the Proposing Release, due to
developments occurring since its adoption, we no longer believe the
grandfathering provision is necessary. Only nine of the grandfathered
issuers remain listed on Nasdaq.\103\ Pursuant to Commission order,
Nasdaq is now a national securities exchange, and those issuers must
register their securities under Exchange Act Section 12(b) by August 1,
2009 if they wish to remain listed on Nasdaq.\104\ Pursuant to the
terms of the Commission order, as long as the nine grandfathered
issuers continue to comply with the conditions of Rule 12g3-2(b),
brokers and dealers may trade their securities in reliance on the Rule
12g3-2(b) exemption until the above deadline for Exchange Act
registration. Those few commenters that addressed the issue supported
the proposed elimination of the grandfathering provision.\105\
Accordingly, we are adopting the elimination, as proposed.
---------------------------------------------------------------------------

    \103\ Letter from Edward S. Knight to Nancy M. Morris (July 31,
2006), attached to Release No. 34-54240 (July 31, 2006), 71 FR 45246
(August 8, 2006).
    \104\ Release No. 34-54241 (July 31, 2006), 71 FR 45359 (August
8, 2006). The Commission granted the grandfathered issuers an
additional three years to register their securities under Section
12(b) in order to avoid disruptions in the trading of their
securities caused by their delisting from Nasdaq and to provide them
with time to meet U.S. disclosure requirements.
    \105\ See the ABA letter and the letter of the Pink OTC Markets
Inc. (``Pink OTC''), dated April 10, 2008.
---------------------------------------------------------------------------

I. Revisions to Form F-6

    Currently, a registrant of ADRs must state on Form F-6, the
registration statement used to register ADRs under the Securities Act,
that the issuer of the deposited securities against which the ADRs will
be issued is either an Exchange Act reporting company or furnishes
public reports and other documents to the Commission pursuant to Rule
12g3-2(b).\106\ We proposed to require a Form F-6 registrant to state
that, if the issuer of deposited securities is not an Exchange Act
reporting company, such issuer publishes information in English
required to maintain the Rule 12g3-2(b) exemption on its Internet Web
site or through an electronic information delivery system generally
available to the public in its primary trading market. The registrant
would also have to disclose the issuer's address of its Internet Web
site or the

electronic information delivery system in its primary trading
market.\107\
---------------------------------------------------------------------------

    \106\ Part I, Item 2 of Form F-6. Form F-6 states that the
registrant is the legal entity created by the deposit agreement for
the issuance of ADRs for the deposited securities.
    \107\ A registrant that has effected a Form F-6 registration
statement before the effective date of these final rules would not
have to amend the Form F-6 to provide the issuer's Internet Web site
address until the registrant's first substantive amendment of the
Form F-6. However, once a registrant has disclosed the issuer's
Internet address on the Form F-6, it should promptly amend the Form
F-6 to disclose a subsequent change in that address.
---------------------------------------------------------------------------

    Some commenters stated that, if the Commission elects not to
publish an annual list of Rule 12g3-2(b)-exempt issuers, it will be
difficult for a depositary of an unsponsored ADR facility \108\ to
determine that the issuer of the subject securities has complied with
the electronic publication condition of Rule 12g3-2(b). Those
commenters requested that, for unsponsored facilities, we either
eliminate the Form F-6 condition that an issuer must be subject to
Exchange Act reporting or must furnish reports required under Rule
12g3-2(b),\109\ or revise the proposed Form F-6 amendment to permit the
depositary to base its representation concerning an issuer's Rule 12g3-
2(b) electronic publication upon the depositary's reasonable, good
faith belief.\110\
---------------------------------------------------------------------------

    \108\ Currently an ADR facility may be either sponsored or
unsponsored. With a sponsored facility, the issuer of the deposited
securities is a party to the deposit agreement along with the
depositary and is able to exercise some control regarding the terms
and operations of the facility. With an unsponsored facility, the
depositary solely controls the terms and operations of the facility.
    \109\ See the letter of JPMorganChase.
    \110\ See the letters of Ziegler, Ziegler & Associates and BNY.
---------------------------------------------------------------------------

    We are not revising the requirement under Form F-6 that the issuer
of the deposited securities be either an Exchange Act reporting company
or be exempt from registration under Rule 12g3-2(b) because such
revision would eliminate any ongoing disclosure obligations as a
condition of Form F-6 registration, which would not be in the best
interest of investors. However, we are amending Form F-6 to state that,
in the case of an unsponsored ADR facility, a Form F-6 filer may base
its representation that the issuer publishes information in English
required to maintain the exemption from registration under Exchange Act
Rule 12g3-2(b) upon the filer's reasonable, good faith belief after
exercising reasonable diligence.\111\ Except for this one change, we
are adopting the Form F-6 amendment, as proposed.
---------------------------------------------------------------------------

    \111\ See the Note to Form F-6, Part I, Item 2.
---------------------------------------------------------------------------

    Currently an issuer that does not seek to have its securities
traded in the United States in the form of ADRs is able, by not
formally establishing the Rule 12g3-2(b) exemption and submitting
documents to the Commission, to restrict the ability of ADR depositary
banks to establish unsponsored ADR facilities. Because the adopted rule
amendments will expand the availability of the Rule 12g3-2(b) exemption
by making it available to all otherwise eligible foreign private
issuers that post materials to their Web sites or publish them through
an electronic information delivery system in their primary trading
market, ADR depositaries will be able to establish unsponsored ADRs on
this expanded group of foreign private issuers based upon their
reasonable, good faith belief, after exercising reasonable diligence,
that those issuers comply with Rule 12g3-2(b).\112\
---------------------------------------------------------------------------

    \112\ ADR depositaries will also be able to establish sponsored
ADR facilities with foreign private issuers that choose to have
their shares represented by ADRs in the United States.
---------------------------------------------------------------------------

    We solicited comment on whether, because of the expanded
availability of the Rule 12g3-2(b) exemption under the proposed rule
amendments, we should require, as a condition to the registration of
ADRs on Form F-6, that the issuer give its consent to the depositary,
or at least that the depositary must have notified the issuer of its
intention to register ADRs and must not have received an affirmative
statement of objection from the issuer. Those few commenters that
addressed this matter disagreed on whether imposing such additional
conditions on the creation of unsponsored ADR facilities was necessary
or advisable.\113\ Given this disagreement, and because we concur with
those commenters who stated that imposing such additional conditions
could run counter to the goal of streamlining the Rule 12g3-2(b) regime
for the benefit of investors and issuers,\114\ we are not adopting at
this time any additional conditions regarding the formation of
unsponsored ADR facilities.
---------------------------------------------------------------------------

    \113\ See the letters of Cleary Gottlieb and EuropeanIssuers,
both of which favored requiring a depositary to notify an issuer
before establishing an unsponsored ADR facility, and requiring it to
terminate an unsponsored facility created without the consent of an
issuer if the issuer decides to create a sponsored facility. But see
the letters of BNY and Pink OTC, both of which opposed the adoption
of a condition requiring a depositary to obtain the consent of an
issuer before establishing an unsponsored ADR facility, and the
letter of Deutsche Bank, dated April 21, 2008, which stated that,
because, in practice, depositary banks typically obtain the issuer's
consent before establishing an unsponsored ADR facility, a rule
requiring such consent was not necessary.
    \114\ See the letters of BNY and Pink OTC.
---------------------------------------------------------------------------

J. Amendment of Exchange Act Rule 15c2-11

    Exchange Act Rule 15c2-11 \115\ contains requirements that are
intended to deter broker-dealers from initiating or resuming quotations
for covered over-the-counter securities that may facilitate a
fraudulent or manipulative scheme. The Rule currently prohibits a
broker-dealer from publishing (or submitting for publication) a
quotation for a covered over-the-counter security in a quotation medium
unless it has obtained and reviewed current information about the
issuer.\116\ One of the specified types of information satisfying this
Rule 15c2-11 obligation is information furnished to the Commission
pursuant to Rule 12g3-2(b). A broker-dealer must make this information
reasonably available upon request to any person expressing an interest
in a proposed transaction involving the security with the broker-
dealer.\117\
---------------------------------------------------------------------------

    \115\ 17 CFR 240.15c2-11.
    \116\ Rule 15c2-11(a) (17 CFR 240.15c2-11(a)). The broker-dealer
must also have a reasonable basis for believing that the issuer
information, when considered along with any supplemental
information, is accurate and is from a reliable source.
    \117\ Rule 15c2-11(a)(4) (17 CFR 240.15c2-11(a)(4)).
---------------------------------------------------------------------------

    We proposed to amend Rule 15c2-11 to conform to the proposed rule
amendments so that a broker-dealer must have available the information
that, since the beginning of its last fiscal year, the issuer has
published pursuant to the Rule 12g3-2(b) exemption. We further proposed
to permit a broker-dealer to fulfill its Rule 15c2-11 obligation to
make reasonably available upon request the information published
pursuant to Rule 12g3-2(b) by providing the requesting person with
appropriate instructions regarding how to obtain the information
electronically. This reflects our view that most investors will have
ready access to the electronically published documents of Rule 12g3-
2(b)-exempt issuers.
    The proposed amendment of Rule 15c2-11 received little comment.
Because this proposal will make it easier for broker-dealers to fulfill
their Rule 15c2-11 obligations for the benefit of investors, we are
adopting it, as proposed. Because some issuers currently still make
paper submissions to maintain their Rule 12g3-2(b) exemption, we expect
that, during the first year of the amended rules' effectiveness, a
broker-dealer may have to resort to both paper submissions and
electronically published materials in order to fulfill its Rule 15c2-11
obligations regarding a particular issuer.

Eventually, however, a broker-dealer will only have to look to an
issuer's electronically published materials for the purpose of Rule
15c2-11.

K. Transition Periods

1. Regarding Section 12 Registration
    While we believe most issuers that currently have the Rule 12g3-
2(b) exemption will continue to be able to claim the exemption upon the
effectiveness of the adopted rule amendments, some may not be able to
do so because, for example, they no longer maintain a foreign listing
or their principal foreign trading market comprises less than 55
percent of their worldwide trading and, therefore, does not meet the
definition of primary trading market under the amended rule. Those
issuers will have to file a Section 12 registration statement if they
are unable to meet all of the amended rule's conditions or fail to
qualify under another exemption from Section 12(g). In order to provide
those issuers with sufficient time to prepare for and complete the
Section 12 registration process, including obtaining required audited
financial statements, we are adopting a three-year transition period,
as proposed. Those issuers must become Exchange Act registrants no
later than three years from the effective date of the adopted rule
amendments if they are unable to comply fully with all of the amended
rule's conditions.\118\
---------------------------------------------------------------------------

    \118\ We adopted a similar three-year transition period to
enable those grandfathered Nasdaq-traded foreign companies that were
Rule 12g3-2(b)-exempt to register under Section 12(b) after Nasdaq
became an exchange. See Release No. 34-54241 (July 31, 2006), 71 FR
45359 (August 8, 2006).
---------------------------------------------------------------------------

    We believe this three-year transition period is necessary for the
benefit not just of issuers, but of broker-dealers and investors as
well. If a currently exempt issuer is unable to claim the Rule 12g3-
2(b) exemption upon the effectiveness of the rule amendments because it
no longer has a foreign listing or cannot meet the primary trading
market definition, but continues to comply with the electronic
publishing condition, a broker-dealer will be able to rely on that
issuer's electronic postings to meet its Rule 15c2-11 obligations to
investors and to facilitate resales of that issuer's securities in Rule
144A transactions during the transition period.
    Several commenters urged the Commission to grandfather indefinitely
current Rule 12g3-2(b)-exempt companies.\119\ Most of those issuers
also stated their support for a three-year transition period as an
alternative to a grandfathering provision.\120\ We decline to adopt a
grandfathering provision because, in the interest of protecting
investors, we believe that any issuer that claims the Rule 12g3-2(b)
exemption must comply fully with the foreign listing condition and
definition of primary trading market. Adoption of a three-year
transition period will enable issuers to achieve full compliance with
Rule 12g3-2(b) or Exchange Act registration without unduly burdening
them.
---------------------------------------------------------------------------

    \119\ See the letters of the ABA, BNY, JPMorganChase, Pink OTC,
and Shearman & Sterling.
    \120\ The ABA suggested a five-year transition period.
---------------------------------------------------------------------------

2. Regarding Processing of Paper Submissions
    We expect that, following the effectiveness of the adopted rule
amendments, some Rule 12g3-2(b)-exempt companies will continue to
submit their non-U.S. disclosure documents in paper to the Commission
either because they are unaware of the amendments or lack electronic
publishing capabilities. In order to assist those companies in
complying with the new amendments, and because there may also be some
investors who currently do not have ready access to the Internet, we
are adopting a three-month transition period, as proposed. During this
period, the Commission will continue to process paper Rule 12g3-2(b)
submissions and make them publicly available in the Public Reference
Room for three months following the effectiveness of the rule
amendments. Thereafter, the Commission will no longer process paper
Rule 12g3-2(b) submissions. An issuer that continues to make Rule 12g3-
2(b) submissions in paper after this three-month period, and does not
publish the submitted documents electronically as required, will no
longer be able to claim the Rule 12g3-2(b) exemption.
    Those commenters that addressed the matter supported such a
transition period,\121\ although one commenter suggested a one-year
period instead of a three-month period.\122\ Because of recent advances
in information technology, we continue to believe that three months
will be sufficient time for all Rule 12g3-2(b)-exempt issuers to
develop the capabilities to publish electronically their non-U.S.
disclosure documents, and for investors and other interested persons to
determine how and where to access those electronically published
documents.
---------------------------------------------------------------------------

    \121\ See the letters of the ABA, BNY and Pink OTC.
    \122\ See the BNY letter.
---------------------------------------------------------------------------

III. Paperwork Reduction Act

    The final rule amendments contain ``collection of information''
requirements within the meaning of the Paperwork Reduction Act of 1995
(``PRA'').\123\ The title of the affected collections of information
are submissions under Exchange Act Rule 12g3-2 (OMB Control No. 3235-
0119) and Securities Act Form F-6 (OMB Control No. 3235-0292). An
agency may not conduct or sponsor, and a person is not required to
respond to, a collection of information unless it displays a currently
valid OMB control number. Compliance with the amendments to Rule 12g3-2
and Form F-6 is mandatory.
---------------------------------------------------------------------------

    \123\ 44 U.S.C. 3501 et seq.
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    Exchange Act Rule 12g3-2 is an exemptive rule that, under paragraph
(b) of that rule, provides an exemption from Exchange Act Section 12(g)
registration for a foreign private issuer that, on an ongoing basis,
either submits copies of its material non-U.S. disclosure documents to
the Commission in paper or publishes those documents on its Internet
Web site or through an electronic information delivery system in its
primary trading market. We adopted paragraph (b) of Rule 12g3-2 in
order to provide information for U.S. investors concerning foreign
private issuers with limited securities trading in U.S. capital
markets.
    Securities Act Form F-6 is the form used to register ADRs, which
are a special type of security issued by a U.S. bank, representing a
specified amount of securities issued by a foreign company that are
deposited with the bank. We adopted Form F-6 in order to provide
investors with information concerning a foreign company's ADRs, as
disclosed in the deposit agreement, which must be attached as an
exhibit to the Form F-6.
    The hours and costs associated with making submissions under
Exchange Act Rule 12g3-2(b) and preparing and filing Form F-6
constitute reporting and cost burdens imposed by those collections of
information. We based our estimates of the effects that the final rule
amendments will have on those collections of information primarily on
our review of the most recently completed PRA submissions for Rule
12g3-2(b) documents and Form F-6, on the particular requirements for
those submissions and form, and on other information, for example,
concerning relative U.S. and foreign trading volume for foreign private
issuers whose equity securities trade in the U.S. over-the-counter
market.

    The final rule amendments to Exchange Act Rule 12g3-2 will permit a
foreign private issuer to claim the Rule 12g3-2(b) exemption, without
having to submit paper copies of written materials to the Commission,
if, among other requirements, it maintains a listing of the subject
class of securities on one or more exchanges in its primary trading
market. The final rule amendments define primary trading market to mean
that at least 55 percent of the trading in the issuer's subject class
of securities on a worldwide basis took place in, on or through the
facilities of a securities market or markets in a single foreign
jurisdiction or in no more than two foreign jurisdictions during the
issuer's most recently completed fiscal year. The final rule amendments
also provide that, if a foreign private issuer aggregates the trading
of its subject class of securities in two foreign jurisdictions for the
purpose of meeting the primary trading market definition, the trading
for the issuer's securities in at least one of the two foreign
jurisdictions must be larger than the trading in the United States for
the same class of the issuer's securities.
    The final rule amendments further require that, as a condition to
claiming the Rule 12g3-2(b) exemption, a non-Exchange Act reporting
issuer must publish in English specified non-U.S. disclosure documents
required by Rule 12g3-2(b) for its most recently completed fiscal year
on its Internet Web site or through an electronic information delivery
system in its primary trading market, instead of requiring their
submission in paper as part of a written application to the Commission.
The final rule amendments also require an issuer similarly to publish
electronically specified non-U.S. disclosure documents in English on an
ongoing basis for subsequent fiscal years as a condition to maintaining
the Rule 12g3-2(b) exemption, rather than permitting their submission
in paper to the Commission.
    The final amendments to Form F-6 will require a registrant to state
that the issuer of the deposited securities, which is not an Exchange
Act reporting company, publishes information in English required to
maintain the Rule 12g3-2(b) exemption on the issuer's Internet Web site
or through its primary trading market's electronic information delivery
system.\124\ The final amendments will also require the registrant to
disclose the address of the issuer's Internet Web site or electronic
information delivery system. A registrant that already has an effective
Form F-6 will have to disclose the address of where the issuer
electronically publishes its non-U.S. disclosure documents under Rule
12g3-2(b) when the registrant first amends its Form F-6 following the
effective date of the final rule amendments.
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    \124\ The final amendments provide that the registrant of an
unsponsored ADR facility may make the required representation based
upon its reasonable good faith belief after exercising reasonable
diligence.
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    We have prepared the annual burden and cost estimates of the final
rule amendments on Rule 12g3-2(b) submissions or publications and Form
F-6 based on the following current estimates and assumptions:
     A foreign private issuer incurs 75% of the burden required
to produce each Rule 12g3-2(b) submission or publication, excluding the
initial application for the Rule 12g3-2(b) exemption and English
translation work, and 25% of the burden required to perform work for
the initial application and English translation for the Rule 12g3-2(b)
submissions or publications;
     Outside firms, including legal counsel, accountants and
other advisors incur 25% of the burden required to produce each Rule
12g3-2(b) submission or publication, not including the initial
application for the Rule 12g3-2(b) exemption and English translation
work, at an average cost of $400 per hour, and 75% of the burden
required to produce the initial application at an average cost of $400
per hour, and 75% of the burden resulting from English translation work
at an average cost of $125 per hour;
     English translation work constitutes on average 25% of the
total work required for the Rule 12g3-2(b) submissions;
     A registrant satisfies 25% of the burden required to
produce each Form F-6; and
     Outside firms, including legal counsel, accountants and
other advisors, satisfy 75% of the burden required to produce each Form
F-6 at an average cost of $400 per hour.
    We published a notice requesting comment on the collection of
information requirements in the Proposing Release and submitted these
requirements to the Office of Management and Budget (``OMB'') for
review in accordance with the PRA.\125\ We received several comment
letters regarding the proposed rule amendments, although none addressed
their estimated effects on the collection of information requirements.
We have revised the proposed rule amendments in response to those
comments. As a result, we have revised the estimated reporting and cost
burdens of the rule amendments, as discussed below.
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    \125\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
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A. Rule 12g3-2(b) Submissions or Publications

    We estimate that, currently under Rule 12g3-2(b), on an annual
basis:
     1,036 foreign private issuers claim the Rule 12g3-2(b)
exemption;
     Each issuer makes on average 12 submissions or
publications, for a total of 12,432 submissions or publications under
Rule 12g3-2(b);
     Production of those Rule 12g3-2(b) submissions or
publications requires a total of 49,728 burden hours, or an average of
4 burden hours per submission or publication (for all work performed by
foreign private issuers and outside firms);
     Of those total burden hours, 13,700 hours result from work
incurred by 685 issuers to produce their initial Rule 12g3-2(b)
applications; \126\
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    \126\ We previously estimated that 685 issuers obtained the Rule
12g3-2(b) exemption before the adoption of Rule 12h-6, which
eliminated the application process for issuers that deregister
pursuant to that new rule. See Release No. 34-55540. All of the 685
issuers obtained the Rule 12g3-2(b) exemption after having submitted
a letter application to the Commission. Based on a review of several
Rule 12g3-2(b) applications, and an assessment of Rule 12g3-2(b)'s
requirements and current practice, we estimated then, and continue
to estimate, that it takes approximately 20 hours on average to
complete a Rule 12g3-2(b) letter application. 685 x 20 hrs. = 13,700
hrs.
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     Foreign private issuers incur a total of 25,943 burden
hours \127\ to produce the Rule 12g3-2(b) submissions or publications,
or an average of 2.1 burden hours per submission or publication; \128\
and
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    \127\ 49,728 hrs. - 13,700 hrs. = 36,028 hrs. for work excluding
application work. 36,028 hrs. x .25 = 9,007 hrs. for English
translation work. 36,028 hrs. - 9,007 hrs. = 27,021 hrs. x .75 =
20,266 hrs. for non-English translation work. 9,007 hrs. x .25 =
2,252 hrs. for English translation work. 13,700 hrs. x .25 = 3,425
hrs. for application work. 20,266 hrs. + 2,252 hrs. + 3,425 hrs. =
25,943 hrs. for total work performed by foreign private issuers.
25,943 hrs./12,432 = 2.1 hrs per submission or publication.
    \128\ The last OMB-approved submission for Rule 12g3-2(b)
reported 31,080 burden hours for foreign private issuers. Our
current estimate of 25,943 burden hours is due to our assessment of
the average annual burden hours required to produce written
applications under Rule 12g3-2(b), most of which are incurred by
outside firms. The decrease in hours represents an adjustment to the
previous OMB-approved burden estimate for Rule 12g3-2(b), which we
noted when submitting the PRA estimate for the Proposing Release.
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     Outside firms perform service at a total cost of
$7,656,375 \129\ to produce

the Rule 12g3-2(b) submissions or publications.\130\
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    \129\ 27,021 hrs. x .25 = 6,755 hrs. x $400/hr. = $2,702,000 for
non-English translation work. 9,007 hrs. x .75 = 6,755 hrs. x $125/
hr. = $844,375 for English translation work. 13,700 hrs. x .75 =
10,275 hrs. x $400/hr. = $4,110,000 for application work. $2,702,000
+ $844,375 + $4,110,000 = $7,656,375 for total work performed by
outside firms.
    \130\ The last OMB-approved submission for Rule 12g3-2(b)
reported $4,895,100 in total costs for outside firms. Our current
estimate of $7,656,375 is due to the previously noted assessment of
the average annual burden hours required to produce written
applications under Rule 12g3-2(b). This increase in costs represents
an adjustment to the previous OMB-approved cost estimate for Rule
12g3-2(b), which we noted when submitting the PRA estimate for the
Proposing Release.
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    We estimate that, on an annual basis, up to 350 additional foreign
private issuers could claim the Rule 12g3-2(b) exemption as a result of
the amendments to Rule 12g3-2 we are adopting today.\131\ This increase
in the number of Rule 12g3-2(b)-exempt issuers would cause:
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    \131\ We previously estimated that the proposed rule amendments
would cause an additional 150 issuers to claim the Rule 12g3-2(b)
exemption. We have increased the estimated number of issuers
affected by the final rule amendments in part due to the elimination
of the proposed condition that would have required an issuer to have
its U.S. trading volume no greater than 20 percent of its worldwide
trading volume for its last fiscal year. Under the final rule
amendments, an issuer must still meet the foreign listing/primary
trading market condition, which effectively limits the issuer's U.S.
trading volume to no greater than 45%. The increase in the estimated
number of issuers affected by the final rule amendments is also due
to a reconsideration of the number of unsponsored ADR facilities
that could result from the amended rules.
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     The number of issuers claiming the Rule 12g3-2(b)
exemption to total 1,386;
     The number of Rule 12g3-2(b) publications to total 16,632;
\132\
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    \132\ 1,386 x 12 = 16,632 publications.
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     The number of burden hours required to produce these Rule
12g3-2(b) publications to total 59,528 hours (for all work performed by
issuers and outside firms); \133\
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    \133\ 16,632 x 4 hrs. = 66,528 hrs. 350 x 20 hrs. = 7,000 hrs.
of work saved by the elimination of the written application
requirement. 66,528 hrs. - 7,000 hrs. = 59,528 hrs.
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     The number of burden hours incurred by foreign private
issuers to produce the Rule 12g3-2(b) publications to total 37,206
hours, or 2.2 burden hours per publication; \134\ and
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    \134\ 59,528 hrs. x .25 = 14,882 hrs. for English translation
work. 59,528 hrs. - 14,882 hrs. = 44,646 hrs.; 44,646 hrs. x .75 =
33,485 hrs. for non-English translation work; 14,882 hrs. x .25 =
3,721 hrs. for English translation work; 33,485 hrs. + 3,721 hrs. =
37,206 total hrs. incurred by foreign private issuers. 37,206 hrs./
16,632 = 2.2 hrs. per publication. This represents an increase of
6,126 hrs. from the most recent OMB-approved burden estimate for
Rule 12g3-2(b) submissions or publications. Using a rate of $175/hr.
for in-house work, the adopted amendments could result in $6,511,050
of in-house costs incurred by foreign private issuers compared to
$5,439,000 of in-house costs based on the previous OMB-approved
burden estimate for Rule 12g3-2(b) submissions or publications.
37,206 hrs. x $175/hr. = $6,511,050. 31,080 hrs. x $175/hr. =
$5,439,000.
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     Outside firms perform services at a total cost of
$5,860,050 \135\ to produce the Rule 12g3-2(b) publications.\136\
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    \135\ 44,646 hrs. x .25 = 11,162 hrs. x $400/hr. = $4,464,800
for non-English translation work; 14,882 hrs. x .75 = 11,162 hrs. x
$125/hr. = $1,395,250 for English translation work; $4,464,800 +
$1,395,250 = $5,860,050 for total costs incurred by outside firms.
This represents an increase of $964,950 from the most recent OMB-
approved cost estimate for Rule 12g3-2(b) submissions or
publications.
    \136\ Based on the above estimates, the amendments could result
in a $2,037,000 increase in Rule 12g3-2(b) costs. $6,511,050 +
$5,860,050 = $12,371,100 in total post-amendment Rule 12g3-2(b)
costs. $5,439,000 + $4,895,100 = $10,334,100 in total pre-amendment
Rule 12g3-2(b) costs. $12,371,100 - $10,334,100 = $2,037,000
increase in Rule 12g3-2(b) costs.
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B. Form F-6

    We currently estimate that, on an annual basis:
     150 registrants file Form F-6;
     Each registrant files one Form F-6, for a total of 150
Form F-6s;
     Production of these Form F-6s requires 150 burden hours,
or one burden hour per Form F-6 (for all work performed by registrants
and outside firms);
     Of those total hours, registrants incur 38 hours to
produce the Form F-6s, or an average of .25 hours per Form F-6; \137\
and
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    \137\ 150 hrs. x .25 = 38 hrs.
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     Outside firms perform services at a total cost of $45,000
to produce the Form F-6s.\138\
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    \138\ 150 hrs. x .75 x $400/hr. = $45,000.
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    We estimate that, on an annual basis, approximately 350 additional
registrants could file Form F-6 as a result of the final rule
amendments. We further estimate that, as a result of the final rule
amendments, the burden required to produce each Form F-6 would increase
by .5 hours. This increase in the number of Form F-6s and burden hours
would cause:
     The number of Form F-6s filed to increase by 350 for a
total of 500;
     The total hours required to produce the Form F-6s to
increase by 525 hours for a total of 675 hours, or 1.35 hours per Form
F-6; \139\
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    \139\ For the additional 350 filers: 350 x 1.5 hrs. = 525 hrs.,
525 hrs. + 150 hrs. = 675 hrs., 675 hrs./500 = 1.35 hrs. per Form F-
6.
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     The number of burden hours incurred by registrants to
produce the Form F-6s to increase by 131 hours to 169 hours, or.34
hours per Form F-6; \140\ and
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    \140\ 675 hrs. x .25 = 169 hrs., 169 hrs. - 38 hrs. = 131 hrs.,
169 hrs./500 = .34 hr. per Form F-6. Using a rate of $175/hr. for
in-house work, the adopted amendments could result in $29,575 of in-
house costs incurred by foreign private issuers compared to $6,650
of pre-amendment in-house costs. 169 hrs. x $175/hr. = $29,575. 38
hrs. x $175/hr. = $6,650.
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     Outside firms to perform services at a total cost of
$202,400 (an increase of $157,400) \141\ to produce the Form F-6s.\142\
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    \141\ 675 hrs. x .75 = 506 hrs. x $400/hr. = $202,400. $202,400
- $45,000 = $157,400.
    \142\ Based on the above estimates, the amendments could result
in a $180,325 increase in Form F-6 costs. $29,575 + $202,400 =
$231,975 in total post-amendment Form F-6 costs. $6,650 + $45,000 =
$51,650 in total pre-amendment Form F-6 costs. $231,975 - $51,650 =
$180,325 increase in Form F-6 costs. Thus, considering the estimated
effects on both Rule 12g3-2(b) submissions and publications and Form
F-6, the amendments could result in a $2,217,325 increase in total
costs. $2,037,000 + $180,325 = $2,217,325.
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IV. Cost-Benefit Analysis

A. Expected Benefits

    The adopted rule amendments are designed to encourage more foreign
companies, which have not listed or otherwise publicly sold their
securities in the United States, to claim the Rule 12g3-2(b) exemption,
and thereby require them to publish on the Internet material disclosure
documents in English, enhancing the ability of U.S. investors to trade
equity securities of such companies in the U.S. over-the-counter
market. The Rule 12g3-2(b) exemption permits a foreign company to have
established an unlisted ADR facility under which its equity securities
are traded as ADRs in the U.S. over-the-counter market for the
convenience of U.S. investors, even if its U.S. investors exceed the
Section 12(g) shareholder thresholds.\143\ The Rule 12g3-2(b) exemption
also permits a foreign company to have its equity securities traded in
the form of ordinary shares through the U.S. over-the-counter market,
makes it easier for broker-dealers to fulfill their obligations under
Exchange Act Rule 15c2-11, and facilitates the resale of a foreign
company's securities to qualified institutional buyers in the United
States under Securities Act Rule 144A.
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    \143\ Use of an ADR facility makes it easier for a U.S. investor
to receive dividends in U.S. dollars. Moreover, because the
clearance and settlement process for ADRs generally is the same for
securities of domestic companies that are traded in U.S. markets, a
U.S. holder of an ADR is able to hold securities of a foreign
company that trades, clears and settles within automated U.S.
systems and within U.S. time periods.
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    The adopted rule amendments should result in new investment
opportunities in foreign securities for U.S. investors by encouraging
more foreign companies to claim the Rule 12g3-2(b) exemption and
thereby have their securities traded in the United States over-the-
counter market. The new investment opportunities in foreign securities
may also lead to improved diversification in the portfolios of U.S.
investors.
    The adopted rule amendments will encourage more foreign companies
to

claim the Rule 12g3-2(b) exemption by reducing the costs of obtaining
that exemption for foreign private issuers in two ways. First, the rule
amendments will enable an otherwise eligible issuer to claim the Rule
12g3-2(b) exemption, regardless of the number of its U.S. security
holders, as long as it maintains a listing of the subject class of
equity securities on one or more exchanges in no more than two foreign
jurisdictions constituting its primary trading market. The rule
amendments define ``primary trading market'' to mean that at least 55
percent of the worldwide trading volume of the issuer's subject class
of securities occurs in no more than two foreign jurisdictions, and the
trading volume in one of the foreign jurisdictions must be larger than
the U.S. trading volume for the same class of securities. Currently
Rule 12g3-2(b) requires an issuer to disclose the number of its U.S.
security holders and the percentage of its outstanding securities held
by them when applying for the Rule's exemption from Exchange Act
registration.\144\ Since it is typically more difficult for a foreign
company to calculate the number of its U.S. holders than to determine
its U.S. or foreign trading volume, the adopted rule amendments should
make it easier for more foreign companies to claim the exemption and
thereby have their securities traded in the U.S. over-the-counter
market for the benefit of U.S. investors.
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    \144\ An issuer must also currently recalculate the number of
its U.S. security holders when applying for reinstatement of the
Rule 12g3-2(b) exemption should it lose that exemption due to non-
compliance with the Rule's ongoing requirements.
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    Second, the adopted rule amendments will eliminate the current