On June 4, 2025, the U.S. Securities and Exchange Commission announced that it published a concept release to solicit public comment on the definition of foreign private issuer (FPI). FPIs benefit from a number of accommodations from the reporting and disclosure requirements applicable to domestic issuers, such as registration and reporting forms designed for FPIs, longer timelines to file annual reports, no requirement to file quarterly reports, an exemption from the proxy rules, and the ability to present financial statements prepared in accordance with International Financial Reporting Standards, and insiders are exempt from obligations to file Section 16 ownership reports and are not subject to the short swing profit rule under the Securities Exchange Act of 1934 (Exchange Act).
Foreign issuers, other than a foreign government, meet the definition of an FPI if 50 percent or less of their outstanding voting securities are held of record directly or indirectly by U.S. residents. If more than 50 percent of the outstanding voting securities are held by U.S. residents, the company can still qualify as an FPI unless a majority of its executive officers are U.S. citizens or residents, a majority of its directors are U.S. citizens or residents, more than 50 percent of its assets are located in the United States, or its business is administered principally in the U.S.[1]
According to the SEC, a recent review by SEC staff of FPIs subject to Exchange Act reporting obligations (Exchange Act reporting FPIs) showed significant changes in the population of FPIs over the past two decades. For example, the review indicated that from 2003 to 2023, the composition of Exchange Act reporting FPIs shifted from companies with home jurisdictions primarily in Canada and the United Kingdom to companies incorporated in the Cayman Islands with headquarters in mainland China. In addition, the review showed that a majority of Exchange Act reporting FPIs are trading exclusively or primarily in U.S. capital markets.
Given the passage of time since the development of the FPI rules, the changes in the composition of Exchange Act reporting FPIs, and the concentration of trading in U.S. capital markets by FPIs, the SEC is seeking comment on whether the current accommodations for FPIs should continue to be available and on potential approaches to amending the FPI definition.
Noting that comments on other aspects of the FPI definition are welcome, the concept release includes discussion and questions on the following possible approaches to amending the definition of FPI:
- updating the existing FPI eligibility criteria;
- adding a foreign trading volume requirement;
- adding a major foreign exchange listing requirement;
- incorporating an SEC assessment of foreign regulation applicable to the FPI;
- establishing new mutual recognition systems; or
- adding an international cooperation arrangement requirement
The comment period will be open for 90 days following publication of the concept release in the Federal Register. Interested persons may submit comments using the Commission’s internet comment form, available here, or via email to rule-comments@sec.gov, with “File Number S7-2025-01” in the subject line.
For additional information from the SEC, please see the SEC Fact Sheet and statements issued by the SEC Chairman and Commissioners, available here, here, here, and here.
[1] See Securities Act Rule 405 and Exchange Act Rule 3b-4(c).
