SEC Expresses Concerns Regarding Foreign Private Issuers Population, Seeks Input for Changes to Definition

On June 4, 2025, the SEC published a Concept Release (Release) requesting public comment on whether the definition of Foreign Private Issuer (FPI) should be amended. The Release sets forth 69 questions for consideration. The potential approaches described in the Release evince regulatory skepticism regarding the adequacy of disclosure requirements applicable to the current population of FPIs. In particular, the SEC expresses concern over FPIs that

• are incorporated in jurisdictions that do not have a robust disclosure regime
• are incorporated in one jurisdiction while headquartered/operating in another (specifically, FPIs incorporated in the Cayman Islands or the British Virgin Islands and headquartered or operating in China)
• trade exclusively or predominantly in the U.S. 

The public comment period will remain open for 90 days following publication of the Release in the Federal Register. Any changes to the SEC’s current rules will require the SEC to propose new or revised rules, solicit public comments, then adopt final rules.

Evolution in the Population of FPIs

The disclosure regime governing FPIs has been established for more than 40 years¹ and revised several times in the intervening years.² FPIs are afforded certain accommodations and exceptions to federal securities laws because of their compliance with the securities laws of their home country jurisdiction.

The Release notes how the FPI landscape has changed dramatically in the past several decades. For instance, over the past decade the number of FPIs whose securities are traded almost exclusively (99%) in the U.S. has increased 44%. As of 2023, nearly 55% of FPIs trade exclusively in the U.S., and over 75% of FPIs conduct 90% of their global trading in the U.S. In 2003, the most common FPI jurisdictions of incorporation and headquarters were Canada and the United Kingdom. In 2023, however, the most common FPI jurisdiction for incorporation was the Cayman Islands (33.3% of FPIs), and the most common jurisdiction of headquarters was mainland China (22.6% of FPIs). The data also show an increase in the percentage of FPIs incorporated in one jurisdiction and headquartered in another: from 7% in 2003 to 48% in 2023. In addition, for an increasing number of FPIs, the relevant home country jurisdiction provides issuers with exemptions from disclosure requirements or other regulatory requirements if they qualify as FPIs under U.S. law. As Commissioner Mark Uyeda remarked, “This trend may increase investment risks for U.S. investors — and may also create unfair competitive advantages [over U.S. domestic registrants].”³ Additionally, as Commissioner Caroline Crenshaw stated, “The data appear to paint a picture of regulatory forum shopping.”⁴

Proposed Solutions for Public Input

Potential approaches proposed by the SEC are summarized below. The SEC’s stated goal is to ensure that U.S. investors have continuing opportunities to invest in a variety of securities while protecting U.S. investors by maintaining regulatory and oversight standards.

• An Update to the Existing FPI Eligibility Criteria modifying the various tests used to determine whether a foreign issuer is eligible for FPI status by either adjusting the U.S. Holder threshold or revising the “business contacts” criteria currently considered.
• A Foreign Trading Volume Requirement that would require FPIs to annually assess their foreign trading volume to determine eligibility for FPI status. 
• A Major Foreign Exchange Listing Requirement that would require FPIs to register on a major foreign exchange to maintain FPI status. 
• An SEC Assessment of Foreign Regulation requiring FPIs to be incorporated or headquartered in jurisdictions the SEC considers to have a robust regulatory and oversight regime and for FPIs to be subject to the securities laws of those jurisdictions.
• A Mutual Recognition System similar to that currently used between U.S. and Canadian issuers in which jurisdictions would be expected to maintain certain regulatory standards acceptable to protect and permit U.S. Holders access to foreign issuers. 
• An International Cooperation Arrangement that would require the FPI to certify that it is incorporated or headquartered in a jurisdiction that has signed the IOSCO Multilateral Memorandum of Understanding Concerning Consultation, Cooperation, and the Exchange of Information.⁵

Benefits of FPI Status

FPIs are currently afforded many benefits from modified reporting, for example, 

• extended time to file year-end annual reports 
• no required quarterly filings, thus no quarterly SOX certifications
• the ability to use IFRS (as issued by the IASB) instead of U.S. GAAP
• exemptions from proxy requirements, say-on-pay rules, individualized executive compensation disclosures, Section 16, and Regulation FD 
• current reporting on Form 6-K is “promptly,” instead of four business days, with limited triggers

As a result, FPIs should carefully consider the consequences of any changes in the current FPI status. 

Implications and What to Do Now

The SEC is becoming increasingly concerned about the quality of reporting by FPIs, in particular where the SEC believes the FPIs may have relatively weak home country governance requirements or are single listed. FPIs should be aware that customary annual and periodic reporting may come under increased scrutiny. For example, this trend is already underway with respect to mainland China-based issuers as the SEC staff continues to issue comments based on guidance provided in the December 2021 and July 2023 Sample Letters to China-Based Companies and Regarding China-Specific Disclosures.⁶

FPIs should consider whether to submit a response to the SEC with their concerns and comments, which could include advocating for or expressing concerns with the proposed approaches in the Release. Companies whose securities primarily trade in the U.S. may also want to consider the business and regulatory viability and desirability of a dual listing in another jurisdiction. 

¹ See, e.g., Rules, Registration And Annual Report Form for Foreign Private Issuers, Release No. 34-16371 (Nov. 29, 1979) (establishing Form 20-F and amending Form 6-K).

² See, e.g., International Disclosure Standards, Release No. 33-7745 (Sept. 28, 1999) [64 FR 53900 (Oct. 5, 1999)] (revising the current FPI definition set forth in Rule 405). 

³ Statement of Mark Uyeda regarding the Concept Release on Foreign Private Issuer Eligibility (June 4, 2025).

⁴ Statement of Caroline Crenshaw regarding the Concept Release on Foreign Private Issuer Eligibility (June 4, 2025).

⁵ Commissioner Hester Peirce has stated that she is opposed to the introduction of an International Cooperation Arrangement Requirement, calling it a “weak solution” that does nothing to “ensure that American investors have access to the material disclosure that is an essential part of our regulatory regime.” Statement of Hester Peirce regarding the Concept Release on Foreign Private Issuer Eligibility (June 4, 2025).

⁶ For reference, please see the following links for the December 2021 Sample Letter and the July 2023 Sample Letter.