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| Foreign Private Issuers Soon May Comply with IFRS Instead of GAAP |
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| The SEC has adopted a final rule which provides for the acceptance of financial statements prepared in accordance with International Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) without reconciliation to US GAAP. It will become effective 60 days after publication in the Federal Register, which is expected in the first weeks of 2007. Links to resources about this rule applicable to DR issuers are noted below: |
| www.sec.gov/rules/final/2007/33-8879.pdf |
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| IFRS "Roadmap" Updates |
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| The SEC has scheduled a Roundtable for March 6 consisting of senior SEC staff members on the "roadmap" regarding International Financial Reporting Standards. This "roadmap" describes the path toward eliminating the need for non-U.S. companies to reconcile to U.S. GAAP financial statements, and allowing them to reconcile to accepted IFRS statements instead. The link to the SEC press release issued on February 13 is www.sec.gov/news/press/2007/2007-19.htm. |
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| SEC December 2006 Open Meeting |
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| In its open meeting on December 13, 2006, the SEC took several actions of potential significance to our non-U.S. issuer clients. These actions include interpretative guidance regarding the implementation of Section 404 of Sarbanes-Oxley (SOX) and a revised rule proposal relating to foreign issuer de-registration. |
| SOX Section 404 Management Guidance The SEC voted to propose for public comment the following measures to improve implementation of Section 404 by reporting companies.
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| The proposed rule/proposed interpretative guidance regarding Management's Report on Internal Controls over Financial Reporting (relating to SOX 404) is available on the SEC's web site. The public comment period is open until February 26, 2007. |
| SEC Proposed Rule on Management's Report on Internal Controls Over Financial Reporting |
| SEC Press Release on 404 Interpretive Guidance |
| Speech by SEC Commissioner on 404 Proposed Guidance |
| Cleary Gottlieb – Dec 13 Briefing on SEC Guidance regarding Section 404 |
| Clifford Chance – Dec 21 Briefing on SEC Guidance clarifying SOX Section 404 Reporting |
| Clifford Chance – Dec 13 Briefing on SEC Guidance clarifying SOX Section 404 Reporting |
| In a related development, the Public Company Accounting Oversight Board (PCAOB) voted to propose a new auditing standard relating to the audits of issuers' internal control over financial reporting under SOX 404. |
| PCAOB Revised Guidance for Auditors |
| SOX Section 404 – Further Relief
for Certain Issuers The SEC has adopted final rules extending the amount of time for smaller public companies and newly public companies to comply with the internal control reporting requirements of Section 404. The extensions, which are outlined in the links below, apply to non-accelerated filers and companies that are new to Exchange Act reporting, including foreign private issuers that are listing on a U.S. exchange for the first time. |
| SEC Press Release on 404 Further Relief for Smaller and Newly Public Companies |
| SEC Final Rule Release 33-8760 |
| Clifford Chance – Dec 15 Briefing on 404 Further Relief for Smaller and Newly Public Companies |
| Foreign Private Issuer Deregistration
The SEC voted to repropose for public comment rule amendments that govern when a foreign private issuer may terminate registration of classes of securities under the Securities Exchange Act and exit the SEC reporting system. The SEC initially proposed similar rule amendments in December 2005, and this reproposal also includes new concepts. For example, it includes a reproposed Rule 12h-6 regarding deregistration, and newly proposed Amendments to Rule 12g3-2(b). Based on statements made at the public meeting, the proposal also appears to include that if an issuer delists a class of equity securities from a U.S. exchange, or terminates a sponsored ADR program it must wait 12 months before it can terminate reporting obligations in reliance on Rule 12h-6's proposed trading volume test. The reproposed rule is posted on the SEC web site. Since this is essentially a second proposal (or re-proposal) of a changed rule, the comment period is short. As of January 9, the Foreign Issuer Deregistration Proposal has been published in the Federal Register, and the comment deadline is February 12, 2007. |
| SEC Reproposal on Deregistration for Foreign Private Issuers |
| Clifford Chance Briefing on SEC Reproposal of Deregistration Rules |
| SEC Press Release on Deregistration |
| Speech by SEC Staff, including Comments on Deregistration |
| Cleary Gottlieb – Dec 13 Briefing on Deregistration for Non-U.S. Issuers |
| Clifford Chance – SEC Deregistration Reproposal |
| Thacher Proffitt & Wood Bulletin on Deregistration for Non-U.S. Issuers |
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| NYSE Rule Changes —Annual Reports |
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| The SEC has approved certain NYSE rule changes that will allow non-U.S. companies to more easily communicate important financial information to their ADR investors. These rule changes were proposed by the NYSE for its Listed Company Manual and were approved by the SEC on August 21. 2006. Benefits to ADR issuers include permission to use the company web site to distribute financials. |
| Click here for a detailed newsletter article from Depositary Receipt Services |
| Click here for the SEC approval form |
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| Securities Offering Reform |
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| On December 1, 2005 the SEC's recently-adopted Securities Offering Reforms went into effect. The new rules are designed to modernize the registration, communication and offering processed under the Securities Act of 1933. The most significant benefit of the reforms will be a type of issuer called a Well-Known Seasoned Issuer (WKSI), but many of the reforms can be taken advantage of by other types of issuers as well. The reforms principally deal with SEC registered offerings, although some of the new rules do expand the ability to disseminate research reports in unregistered offerings under Rule 144A or Reg. S. The reforms apply equally to U.S. and non-U.S. issuers. While the full impact of Securities Offering Reform on non-U.S. companies will become known over time, we wanted to provide DR market participants access to a compendium of information available from government agencies, law firms, the media and experts within Citigroup. |
| Click here for SEC documents and law firm briefings |
| Click here for Citigroup DR White Paper |
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| Relaxed Deregistration Requirements for Non-U.S. Issuers |
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| On December 23, 2005, the SEC proposed new rules which, if adopted, would facilitate the process for non-U.S. issuers to deregister their securities under the Securities Exchange Act of 1934 and thereby terminate their ongoing SEC periodic reporting obligations. The new rules propose more flexible standards, based on U.S. market interest in a non-U.S. company's securities, for exiting the SEC reporting system, and a more lenient methodology for determining a non-U.S. company's level of U.S. ownership. The proposal will be subject to public comment until Feb. 28, 2006. We expect that these rule proposals will be studied with great interest by |
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| Click here for briefings |
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| Copyright ©2007 Citibank, N.A. CITIGROUP and Umbrella Device are trademarks and service marks of Citigroup Inc. or its affiliates and are used and registered throughout the world. The above information is being provided solely for information purposes by Citibank, N.A. At the time of publication, this information was believed to be accurate, but Citibank, N.A. makes no representation or warranty as to correctness of the information set forth above. The above information does not constitute a recommendation, solicitation or offer by Citibank, N.A. for the purchase or sale of any securities, nor shall this material be construed in any way as investment or legal advice or a recommendation, reference or endorsement by Citibank, N.A. |