

[Federal Register: December 30, 2005 (Volume 70, Number 250)]
[Proposed Rules]               
[Page 77687-77713]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30de05-26]                         


[[Page 77687]]

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Part VI





Securities and Exchange Commission





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17 CFR Parts 200, 232, 240, et al.



Termination of a Foreign Private Issuer's Registration of a Class of 
Securities Under Section 12(g) and Duty To File Reports Under Section 
15(d) of the Securities Exchange Act of 1934; Proposed Rule


[[Page 77688]]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 200, 232, 240 and 249

[Release No. 34-53020; International Series Release No. 1295; File No. 
S7-12-05]
RIN 3235-AJ38

 
Termination of a Foreign Private Issuer's Registration of a Class 
of Securities Under Section 12(g) and Duty To File Reports Under 
Section 15(d) of the Securities Exchange Act of 1934

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: We propose to amend the rules allowing a foreign private 
issuer to terminate the registration of a class of equity securities 
under section 12(g) of the Securities Exchange Act of 1934 (and thus 
stop filing reports required as a result of registration) and to cease 
its reporting obligations regarding a class of equity or debt 
securities under section 15(d) of the Exchange Act. Under the current 
rules, a foreign private issuer may find it difficult to terminate its 
Exchange Act registration and reporting obligations despite the fact 
that there is relatively little interest in the issuer's securities 
among United States investors. Moreover, currently a foreign private 
issuer can only suspend, and cannot permanently terminate, a duty to 
report arising under section 15(d). The proposed rules would permit the 
termination of Exchange Act reporting regarding a class of equity 
securities under either section 12(g) or section 15(d) by a foreign 
private issuer that meets specified criteria designed to measure U.S. 
market interest for that class of securities. The proposed rules would 
also permit a foreign private issuer to terminate, and not merely 
suspend, its section 15(d) reporting obligations regarding a class of 
debt securities as long as it meets conditions similar to the current 
requirements for suspending its reporting obligations relating to that 
class of debt securities. At the same time, the proposed rules would 
seek to provide U.S. investors with ready access through the Internet 
to material information about a foreign private issuer that is required 
by its home country on an ongoing basis after it has exited the 
Exchange Act reporting system.

DATES: Comments should be received on or before February 28, 2006.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/proposed.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File Number S7-12-05 on the subject line; or
     Use the Federal eRulemaking Portal (http://www.regulations.gov
). Follow the instructions for submitting comments.


Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number S7-12-05. This file 
number should be included on the subject line if e-mail is used. To 
help us process and review your comments more efficiently, please use 
only one method. The Commission will post all comments on the 
Commission's Internet Web site (http://www.sec.gov/rules/proposed.shtml
). Comments also are available for public inspection and 

copying in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549. All comments received will be posted without 
change; we do not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly.

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 propose to amend Commission Rule 30-1,\1\ 
Rule 101 \2\ of Regulation S-T,\3\ and Rules 12g3-2, 12g-4 and 12h-3 
\4\ under the Securities Exchange Act of 1934 (``Exchange Act''),\5\ 
and to add Rule 12h-6 \6\ and Form 15F \7\ under the Exchange Act.
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    \1\ 17 CFR 200.30-1.
    \2\ 17 CFR 232.101.
    \3\ 17 CFR 232.10 et seq.
    \4\ 17 CFR 240.12g3-2, 240.12g-4 and 240.12h-3.
    \5\ 15 U.S.C. 78a et. seq.
    \6\ 17 CFR 240.12h-6, as proposed.
    \7\ 17 CFR 249.324, as proposed.
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I. Background

A. Overview of the Current Rules Governing Exiting the Exchange Act 
Reporting Regime

    Under the current Exchange Act reporting regime, whether a domestic 
or foreign private issuer \8\ can terminate its reporting obligations 
under section 13(a) of the Act \9\ depends on how it became subject to 
those obligations. An issuer may have become subject to section 13(a) 
reporting obligations by:
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    \8\ As defined in Rule 3b-4(c) (17 CFR 240.3b-4(c)), a foreign 
private issuer is a corporation or other organization incorporated 
or organized in a foreign country that either has 50 percent or less 
of its outstanding voting securities held of record by United States 
residents or, if more than 50 percent of its voting securities are 
held by U.S. residents, about which none of the following are true:
    (1) A majority of its executive officers or directors are U.S. 
citizens or residents;
    (2) More than 50 percent of its assets are located in the United 
States; and
    (3) The issuer's business is administered principally in the 
United States.
    \9\ 15 U.S.C. 78m(a).
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     Listing a class of either equity or debt securities on a 
national securities exchange and registering this class under section 
12(b) of the Exchange Act; \10\
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    \10\ 15 U.S.C. 78l(b).
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     Registering a class of equity securities under section 
12(g) \11\ either voluntarily or because it had 500 or more security 
holders of record and more than $10 million in total assets \12\ and, 
if a foreign private issuer, more than 300 shareholders resident in the 
United States on the last day of its most recently completed fiscal 
year; \13\ or
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    \11\ This statutory section only applies to equity securities. 
See Exchange Act Section 12(g)(1) [15 U.S.C. 78l(g)(1)].
    \12\ Exchange Act Rule 12g-1 (17 CFR 240.12g-1).
    \13\ Exchange Act Rule 12g3-2(a) (17 CFR 240.12g3-2(a)). A 
foreign private issuer may avoid an Exchange Act registration 
obligation under section 12(g) by establishing the exemption under 
Exchange Act Rule 12g3-2(b) (17 CFR 240.12g3-2(b)).
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     Registering either equity or debt securities under a 
Securities Act registration statement, which has gone effective, thus 
triggering section 13(a) reporting obligations under Section 15(d) of 
the Exchange Act.\14\
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    \14\ 15 U.S.C. 78o(d). There are other methods by which an 
issuer may be obliged to file reports under section 13(a), such as, 
for example, under Exchange Act Rule 12g-3 (17 CFR 240.12g-3) in the 
case of a successor registrant.
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    An issuer may be subject to reporting obligations under more than 
one of the above statutory sections and rules. While an issuer is 
deemed to have only one active set of reporting obligations, when an 
issuer attempts to exit the Exchange Act reporting system, it must 
consider whether there are any dormant or suspended reporting 
obligations that would preclude the issuer from ceasing its Exchange 
Act reporting.
    For example, an issuer may have active section 13(a) reporting 
obligations because it has a class of equity securities listed on a 
national securities exchange and registered with the Commission

[[Page 77689]]

under section 12(b) of the Exchange Act. When attempting to exit the 
Exchange Act reporting system, the registrant not only must take steps 
to effect its delisting from the national securities exchange,\15\ but 
also it must consider whether it has any dormant or suspended reporting 
obligations under section 12(g)\16\ or 15(d) that will become operative 
once its section 12(b) registration ceases.\17\
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    \15\ Exchange Act Rule 12d2-2 (17 CFR 240.12d2-2) governs the 
process of the delisting of a class of securities from a national 
securities exchange. To effect the delisting and subsequent 
termination of an issuer's registration of a class of securities 
under section 12(b), the national securities exchange or issuer must 
file a Form 25 with the Commission. We recently adopted amendments 
to our rules and Form 25 to streamline the procedures for removing 
from listing, and withdrawing from registration, securities under 
section 12(b). See Release No. 34-52029 (July 14, 2005), 70 FR 42456 
(July 22, 2005).
    \16\ A registrant may have section 12(g) reporting obligations 
following its termination of registration under section 12(b): (1) 
If it had initially registered the class of securities under section 
12(g) prior to listing the securities on a national securities 
exchange; or (2) under Exchange Act Rule 12g-2 (17 CFR 240.12g-2). 
That rule provides that any class of securities that would have been 
required to be registered under section 12(g) except for the fact 
that it was listed and registered on a national securities exchange 
shall be deemed to be registered under section 12(g) upon the 
termination of registration under section 12(b) as long as the class 
of securities are not exempt from registration under section 12 and 
are held of record by 300 or more persons.
    \17\ Exchange Act section 15(d) automatically suspends the duty 
to file reports under that section regarding securities registered 
under an effective Securities Act registration statement once the 
issuer has registered the class of securities under section 12 of 
the Exchange Act.
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    Exchange Act Rule 12g-4 currently governs whether an issuer may 
terminate its registration of a class of securities under section 12(g) 
of the Exchange Act and its corresponding section 13(a) reporting 
obligations.\18\ Under this rule, a foreign private issuer may seek 
termination of its registration of a class of securities under section 
12(g) by certifying in Form 15 \19\ that the subject class of 
securities is held by less than 300 residents in the United States or 
by less than 500 U.S. residents when the issuer's total assets have not 
exceeded $10 million on the last day of each of the issuer's most 
recent three fiscal years.\20\ For the purpose of determining the 
number of U.S. resident shareholders under this rule, a foreign private 
issuer must use the method of counting provided under Exchange Act Rule 
12g3-2(a).\21\ This method requires looking through the record 
ownership of brokers, dealers, banks or other nominees on a worldwide 
basis and counting the number of separate accounts of customers 
resident in the United States for which the securities are held.\22\ 
Under this rule, issuers are required to make inquiries of all 
nominees, wherever located and wherever in the chain of ownership, for 
the purpose of assessing the number of U.S. resident holders.
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    \18\ An issuer must look to this rule both when it has only 
registered a class of securities under section 12(g) and following 
the termination of registration of a class of equity securities 
under section 12(b).
    \19\ 17 CFR 249.323.
    \20\ Exchange Act Rule 12g-4(a)(2) (17 CFR 240.12g-4(a)(2)). 
Alternatively, a foreign private issuer may seek to terminate its 
section 12(g) registration under the Rule 12g-4 provision that 
applies to any issuer, whether domestic or foreign. Under this 
provision, an issuer must certify on Form 15 that its class of 
equity securities is held of record by less than 300 persons or by 
less than 500 persons when the issuer's total assets have not 
exceeded $10 million on the last day of each of the issuer's most 
recent three fiscal years. Exchange Act Rule 12g-4(a)(1) (17 CFR 
240.12g-4(a)(1)).
    \21\ 17 CFR 240.12g3-2(a).
    \22\ See 17 CFR 240.12g3-2(a)(1).
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    An issuer that has determined that it meets the threshold 
requirements for termination of registration of a class of securities 
under Rule 12g-4, and has also never engaged in a registered offering 
under the Securities Act, may seek termination of its Exchange Act 
reporting obligations by filing the Form 15 certification.\23\ However, 
an issuer that has registered securities under an effective Securities 
Act registration statement must determine if it has any suspended 
reporting obligations under section 15(d) that will become operative 
after it has terminated the registration of a class of securities under 
Exchange Act section 12(g).
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    \23\ Filing this form immediately suspends the issuer's Exchange 
Act reporting obligations. If, after 90 days from the date of filing 
the Form 15, the Commission has not objected, the suspension becomes 
a termination. See Rule 12g-4(b) (17 CFR 12g-4(b)).
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    Rule 12h-3 \24\ is the Exchange Act rule governing when an issuer 
may suspend its reporting obligations under section 15(d).\25\ While 
Rule 12h-3's standards are substantially similar to those under Rule 
12g-4,\26\ there are two important differences. First, an issuer may 
generally not suspend its section 15(d) reporting obligations until it 
has filed one Exchange Act annual report after the offering in 
question. Second, an issuer cannot permanently terminate its reporting 
obligations under section 15(d) but can only suspend those 
obligations.\27\ Therefore, for as long as the subject class of 
securities is outstanding, a foreign private issuer must also determine 
at the end of each fiscal year whether the number of U.S. resident 
security holders or total number of record holders has increased enough 
to trigger anew its section 15(d) reporting obligations.
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    \24\ 17 CFR 240.12h-3.
    \25\ Section 15(d) itself provides that an issuer cannot suspend 
its reporting obligations unless the subject class of securities is 
held of record by less than 300 persons at the beginning of a fiscal 
year other than the year in which the Securities Act registration 
statement triggering the section 15(d) reporting obligations became 
effective.
    \26\ See, in particular, Rule 12h-3(b)(2) (17 CFR 240.12h-
3(b)(2)).
    \27\ Exchange Act Rule 12h-3(a) (17 CFR 240.12h-3(a)).
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B. The Increased Internationalization of the U.S. Securities Markets

    It has been almost four decades since the Commission first adopted 
the ``300 U.S. resident shareholder'' standard as the benchmark for 
determining both when a foreign private issuer must register a class of 
equity securities under section 12(g) and when it may terminate that 
registration.\28\ Moreover, it has been over two decades since the 
Commission adopted Form 15 under Rules 12g-4 and 12h-3.\29\
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    \28\ See Release No. 34-8066 (April 28, 1967).
    \29\ See Release No. 34-20784 (March 22, 1984), 49 FR 12688 
(March 30, 1984).
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    Since then, market globalization, advances in information 
technology, the increased use of American Depositary Receipt (``ADR'') 
\30\ facilities by foreign companies to sell their securities in the 
United States,\31\ and other factors have increased significantly the 
number of foreign companies that have engaged in cross-border 
activities and sought listings in U.S. securities markets, as well as 
increased the amount of U.S. investor interest in the securities of 
foreign companies. For example:
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    \30\ 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. 
Use of an ADR facility makes it easier for a U.S. resident to 
collect 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.
    \31\ For example, the number of ADR issues traded on the NYSE 
increased from 134 in 1993 to 344 in 2004. During this same period, 
the market capitalization of NYSE-traded ADRs nearly quadrupled. See 
``Summary Data on NYSE-Listed Non-U.S. Companies'' located at http://www.nyse.com/attachment/nonussum0916.xls
.

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     The number of foreign companies with Exchange Act 
reporting obligations increased from approximately 300 in 1985 to over 
1,200 in 2004; \32\
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    \32\ See ``International Registered and Reporting Companies'' 
located at http://www.sec.gov/divisions/corpfin/internatl/companies.shtml
; see also The New Economy Handbook, Derek C. Jones, 

editor, pp. 428-429 (2003).
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     The number of foreign companies listed on the New York 
Stock Exchange (``NYSE'') increased from 54, or approximately 3.5% of 
the total number of NYSE-listed companies in 1985, to

[[Page 77690]]

460 or over 16% of the total number of NYSE-listed companies in 2004; 
\33\ and
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    \33\ See ``Stocks of non-U.S. Corporate Issuers'' located at 
http://www.nysedata.com/factbook; see also ``Listed Company Directory'' located at http://www.nyse.com/about/listed/listed.html. 
tml. 
A similar increase occurred on Nasdaq. See The New Economy Handbook 
at p. 429.
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     The average daily trading value of NYSE-traded foreign 
securities increased from over $350 million, or over 5% of the total 
value of NYSE-traded securities in 1991, to over $4.5 billion, or over 
10% of the total value of NYSE-traded securities in 2000.\34\
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    \34\ See ``NYSE Value of Trading--U.S. and non-U.S. Companies'' 
located at http://www.nyse.com/attachment/sumdolv051005.xls. In 

September 2005, the average daily trading value of NYSE-traded 
foreign securities was over 9% of the total value of NYSE-traded 
securities.
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C. Concerns Regarding the Exchange Act Reporting Exiting Rules for 
Foreign Private Issuers

    Representatives of foreign companies and foreign industry 
associations have recently voiced their concerns to the Commission 
about the rules that govern whether a foreign private issuer may exit 
the Exchange Act registration and reporting regime.\35\ These 
representatives maintain that, due to the increased 
internationalization of U.S. investor interest, the ``300 U.S. resident 
shareholder'' standard has become outdated and too easily exceeded by a 
foreign company that may have engaged in very little recent selling 
activity in the United States. According to these representatives, 
after a few years of listing its securities in the United States, a 
foreign company may discover that there is little U.S. market interest 
in its securities. Yet because it has not been able to reduce the 
number of its U.S. shareholders to below 300, it must continue to incur 
the costs of being an Exchange Act reporting company.
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    \35\ See, for example, the letters from the Association 
Francaise Des Entreprises Privees (``AFEP'') and other European 
industry group representatives, dated February 9, 2004 and March 18, 
2005 (the ``AFEP letters''), which we will make publicly available 
on our Web site and in the Commission's Public Reference Room in its 
Washington, DC headquarters, together with comment letters received 
concerning this proposed rulemaking.
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    These representatives have further criticized the exit rules' 
reliance on the number of U.S. resident shareholders because, with the 
advent of book-entry recording,\36\ it is difficult and costly to 
arrive at an accurate count of a foreign company's U.S. resident 
shareholders. These representatives also are critical of Rule 12h-3 
because it merely suspends rather than permanently terminates a 
company's section 15(d) reporting obligations. As such, years after 
filing a Form 15, a foreign company may find that it has once again 
exceeded the 300 U.S. resident shareholder threshold, and thereupon 
again become subject to section 15(d) reporting duties, without regard 
to its U.S. market activity.
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    \36\ The last three decades have seen the development of a U.S. 
clearance and settlement system that relies on electronic book-entry 
to settle securities transactions and transfer ownership rather than 
one dependent on the use of paper certificates. For an overview of 
this development, see Release No. 33-8398 (March 11, 2004), 69 FR 
12922 (March 18, 2004), the text surrounding n. 104. This movement 
to electronic book-entry clearance and settlement systems has taken 
place on a global basis as well, as both developed and developing 
securities markets have sought to improve efficiency.
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    Finally, these representatives disagree with the fact that our 
current rule does not permit a foreign private issuer to obtain the 
Exchange Act Rule 12g3-2(b) exemption \37\ if, during the previous 18 
months, it has had a class of securities registered under section 12 or 
a reporting obligation, suspended or active, under section 15(d) of the 
Exchange Act.\38\
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    \37\ 17 CFR 240.12g3-2(b). Rule 12g3-2(b) provides an exemption 
from registration under section 12(g) with respect to a foreign 
private issuer that submits to the Commission, on a current basis, 
the home country materials required by the rule.
    \38\ Exchange Act Rule 12g3-2(d)(1) (17 CFR 12g3-2(d)(1)). This 
exception to the Rule 12g3-2(b) exemption does not apply to 
registered Securities Act offerings filed by Canadian companies on 
certain Multijurisdictional Disclosure System (``MJDS'') forms. 
Exchange Act Rule 12g3-2(d) also precludes the Rule 12g3-2(b) 
exemption to a foreign private issuer's securities issued to acquire 
by merger or similar transaction an issuer that had securities 
registered under section 12 or a reporting obligation, suspended or 
active, under section 15(d), except for a transaction registered on 
specified MJDS forms. See Exchange Act Rule 12g3-2(d)(2) (17 CFR 
240.12g3-2(d)(2)).
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II. Discussion

A. Summary of the Proposed Rule Amendments

    In light of the increased internationalization of the U.S. 
securities markets that has occurred, we believe that it is time to 
reconsider the rules allowing a foreign private issuer to exit the 
Exchange Act registration and reporting regime. We propose to amend 
Rules 12g-4 and 12h-3 to eliminate the provisions that primarily 
condition a foreign private issuer's eligibility to cease its Exchange 
Act reporting obligations on whether the number of its U.S. resident 
security holders has fallen below the 300 or 500 person threshold. In 
their place, we propose new Exchange Act Rule 12h-6 that would permit a 
foreign private issuer that meets the conditions discussed below to 
achieve the following:
     Termination of the registration of a class of equity 
securities under section 12(g) and its resulting section 13(a) 
reporting obligations;
     Permanent termination of its section 15(d) reporting 
obligations regarding a class of equity securities; and
     Permanent termination of its section 15(d) reporting 
obligations regarding a class of debt securities.
    A foreign private issuer would be eligible to terminate its 
Exchange Act reporting obligations regarding a class of equity 
securities under proposed Rule 12h-6 if it met the following 
conditions:
     The issuer has been an Exchange Act reporting company for 
the past two years, has filed or furnished all reports required for 
this period, and has filed at least two annual reports under section 
13(a);
     The issuer's securities have not been sold in the United 
States in either a registered or unregistered offering under the 
Securities Act during the preceding 12 months other than securities:
     Sold to the issuer's employees;
     Sold by selling security holders in non-underwritten 
offerings;
     Exempt from registration under section 3 of the Securities 
Act, except section 3(a)(10); \39\ and
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    \39\ 15 U.S.C. 77c(a)(10).
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     Constituting obligations having a maturity of less than 
nine months at the time of issuance and offered and sold in 
transactions exempted from registration under section 4(2) of the 
Securities Act; \40\ and
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    \40\ 15 U.S.C. 77d(2).
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     For the preceding two years, the issuer has maintained a 
listing of the subject class of securities on an exchange in its home 
country, as defined in Form 20-F,\41\ which constitutes the primary 
trading market for the securities.
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    \41\ 17 CFR 249.220f. Form 20-F General Instruction F defines 
``home country'' as the jurisdiction in which the issuer is legally 
organized, incorporated or established and, if different, the 
jurisdiction where it has its principal listing.
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    Rule 12h-6 would further permit a foreign private issuer seeking to 
terminate its registration and reporting obligations regarding a class 
of equity securities to meet one of a set of alternative benchmarks, 
which are not based on a record holder count, and which depend on 
whether the issuer is a well-known seasoned issuer.\42\ If a

[[Page 77691]]

well-known seasoned issuer, then a foreign private issuer could 
terminate its Exchange Act registration and reporting obligations as 
long as either:
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    \42\ For purposes of Rule 12h-6 a ``well-known seasoned issuer'' 
means a well-known seasoned issuer as defined in Securities Act Rule 
405 (17 CFR 230.405) that meets the requirements of paragraph 
(1)(i)(A) of that definition. Under Rule 12h-6, therefore, a ``well-
known seasoned issuer'' must have a worldwide market value of its 
outstanding voting and non-voting common equity held by non-
affiliates of $700 million or more, and must satisfy the other 
requirements of the definition in Securities Act Rule 405 (for 
example, the issuer must not be an ``ineligible issuer''). The time 
of determination of well-known seasoned issuer status under Rule 
12h-6 would be a date within 120 days of the filing of proposed Form 
15F. Although Rule 405 also defines ``well-known seasoned issuer'' 
alternatively to mean an issuer that has registered a specified 
amount of non-convertible securities other than equity over a three-
year period, that part of the definition is inapplicable under 
proposed Rule 12h-6. Only the equity prong of the definition is 
relevant for purposes of termination of registration and reporting 
requirements under proposed Rule 12h-6. The proposed conditions that 
would permit a foreign private issuer to terminate its section 15(d) 
reporting obligations regarding a class of debt securities do not 
distinguish between well-known seasoned issuers and other issuers.
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     The U.S. average daily trading volume of the subject class 
of securities has been no greater than 5 percent of the average daily 
trading volume of that class of securities in its primary trading 
market during a recent 12 month period, and U.S. residents held no more 
than 10 percent of the issuer's worldwide public float \43\ at a date 
within 60 days before the end of that same period; or
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    \43\ The term ``public float'' refers to the outstanding voting 
and non-voting equity securities held by an issuer's non-affiliates. 
As proposed, when calculating the percentage of its worldwide public 
float held by U.S. residents, an issuer would include in its 
worldwide public float only the class or classes of equity 
securities regarding which there is an Exchange Act reporting 
obligation.
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     Regardless of U.S. trading volume, U.S. residents held no 
more than 5 percent of the issuer's worldwide public float at a date 
within 120 days before the filing date of the Form 15F, which is the 
form that a foreign private issuer would have to file to certify that 
it meets the conditions for terminating its Exchange Act registration 
and reporting obligations under proposed Rule 12h-6.
    If not a well-known seasoned issuer, then a foreign private issuer 
could terminate its Exchange Act registration and reporting obligations 
regarding a class of equity securities as long as, regardless of U.S. 
trading volume, U.S. residents held no more than 5 percent of the 
issuer's worldwide public float at a date within 120 days before the 
filing date of the Form 15F.
    Under proposed Rule 12h-6, if a foreign private issuer is unable to 
meet one of these proposed benchmarks, but satisfies the other 
conditions of the rule, it could still terminate its Exchange Act 
registration and reporting obligations regarding a class of equity 
securities as long as that class of securities is held of record by 
less than 300 persons on a worldwide basis or less than 300 persons 
resident in the United States at a date within 120 days before the 
filing date of the Form 15F.
    A foreign private issuer would be eligible to terminate its section 
15(d) reporting obligations regarding a class of debt securities under 
proposed Rule 12h-6 if it met the following conditions:
     The issuer has filed or furnished all required reports 
under section 15(d), including at least one annual report pursuant to 
section 13(a) of the Act; and
     At a date within 120 days before the filing date of the 
Form 15F the class of debt securities is either held of record by less 
than 300 persons on a worldwide basis or less than 300 persons resident 
in the United States.
    Rules 12g-4 and 12h-3 currently require the filing of Form 15 by 
which an issuer certifies that it meets the conditions for ceasing its 
Exchange Act reporting obligations. Unlike Form 15, proposed new Form 
15F would require a foreign private issuer to provide specified 
information regarding several items that would enable investors to 
obtain information regarding the issuer's decision to terminate its 
Exchange Act reporting obligations. In addition, proposed new Form 15F 
would help Commission staff to assess whether the issuer qualifies for 
termination of its Exchange Act reporting obligations. As under current 
Rules 12g-4 and 12h-3, the filing of Form 15F would automatically 
suspend an issuer's reporting duties. If the Commission has not 
objected, the suspension would become a permanent termination 90 days 
after the filing of the Form 15F.\44\
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    \44\ The Commission is also proposing to amend its delegated 
authority rules to permit the Division of Corporation Finance to 
accelerate the effectiveness of a Form 15F termination of reporting 
sooner than the 90th day at the request of the issuer. See the 
proposed amendment to 17 CFR 200.30-1(e). This delegation of 
authority currently exists with respect to Form 15, although it is 
rarely used.
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    Proposed Rule 12h-6 would further require a foreign private issuer, 
no later than fifteen business days prior to the filing of the Form 
15F, to publish a notice, such as a press release, in the United States 
that discloses its intent to terminate its section 13 reporting 
obligations, and to submit a copy of the press release either under 
cover of a Form 6-K, before or at the time of filing of the Form 15F, 
or as an exhibit to the Form 15F.
    Finally, we propose to amend Exchange Act Rule 12g3-2(d) to permit 
a foreign private issuer to establish the Rule 12g3-2(b) exemption for 
a class of equity securities that is the subject of a Form 15F 
immediately upon the effectiveness of termination of Exchange Act 
reporting pursuant to Rule 12h-6. As a condition to maintaining this 
exemption, a foreign private issuer would have to publish in English 
the home country materials required by Rule 12g3-2(b) on its Internet 
Web site or through an electronic information delivery system that is 
generally available to the public in its primary trading market.
    We recognize that U.S. investors benefit from the investment 
opportunities provided by the registration of foreign private issuers 
with the Commission and listing and publicly offering securities in the 
United States. The current exit process may serve as a disincentive to 
foreign private issuers accessing the U.S. public capital markets 
because of the burdens and uncertainties associated with terminating 
registration and reporting under the Exchange Act. We believe that 
these changes to the exit process for foreign private issuers, if 
adopted, should provide those issuers with a meaningful option to 
terminate their Exchange Act reporting obligations when, after electing 
to access the U.S. public capital markets, they find a diminished level 
of U.S. investor interest in their securities. As a result, foreign 
private issuers should be more willing initially to register their 
securities with the Commission when there is a clearly defined process 
with more appropriate benchmarks by which they can terminate their 
Exchange Act reporting obligations if after a period of time U.S. 
investor interest is not significant relative to non-U.S. investor 
interest.
    In addition, we believe the conditions under proposed Rule 12h-6 
are consistent with the interests of U.S. investors in other ways. The 
two-year reporting and the one-year dormancy conditions are intended to 
provide sufficient time periods of Commission reporting and of not 
promoting U.S. investor interest through recent capital raising. The 
conditions relating to trading on a non-U.S. securities exchange and 
the benchmarks based on relevant U.S. public float and (for well-known 
seasoned issuers) relative U.S. trading volume support our view that 
foreign private issuers that would terminate Exchange Act reporting 
under proposed Rule 12h-6 should be subject to an ongoing disclosure 
and financial reporting regime, and have a significant market 
following, in their home market. The conditions relating to the 
publication of a press release or other notice, the filing of proposed 
Form 15F, and the immediate availability of the exemption under Rule 
12g3-2(b) promote transparency of the exit process as well as access by 
U.S. investors to ongoing home country information

[[Page 77692]]

about issuers that terminate their Exchange Act reporting obligations.

B. Proposed Exchange Act Rule 12h-6

1. Purpose and Scope of Proposed Rule 12h-6
    Like current Rule 12g-4, proposed Rule 12h-6 would permit a foreign 
private issuer meeting specified criteria to terminate its registration 
of a class of securities under section 12(g) and its corresponding 
section 13 reporting obligations after filing a certification with the 
Commission. However, unlike the current Exchange Act reporting exiting 
regime, proposed Rule 12h-6 would also permit a foreign private issuer 
to terminate permanently, rather than merely suspend, its reporting 
obligations regarding a class of equity or debt securities, or both, 
under section 15(d).
    As discussed below, proposed Rule 12h-6 would permit termination of 
Exchange Act registration and reporting regarding a class of a foreign 
private issuer's equity securities for which U.S. investor interest is 
small relative to non-U.S. investor interest, and the expected risk of 
harm to U.S. investors of termination of registration and reporting is 
low. Once a foreign company has met the proposed Rule 12h-6 criteria, 
and taken the other necessary steps to effect termination of 
reporting,\45\ we believe that it is unlikely that, following 
termination of its reporting obligations, U.S. trading in the subject 
class of securities would increase to such an extent as to justify 
reimposing Exchange Act reporting obligations, and the proposed rule 
would not do so.
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    \45\ For example, a section 15(d) reporting company would have 
to file a post-effective amendment to terminate the registration of 
its remaining unsold securities under any of its Securities Act 
registration statements.
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    We have proposed to require a foreign company that terminates its 
Exchange Act registration and reporting under Rule 12h-6 regarding a 
class of equity securities to provide material home country documents 
in English under Rule 12g3-2(b) on its Internet Web site or through an 
electronic information delivery system that is generally available to 
the public in its primary trading market.\46\ We believe that this 
proposed ``home country disclosure'' requirement should provide 
continued access to issuer information for U.S. investors that continue 
to own the subject class of equity securities following a foreign 
company's termination of Exchange Act registration and reporting. 
Merely suspending a foreign company's section 15(d) reporting 
obligations could discourage foreign companies from initially 
registering their securities with the Commission and joining our 
Exchange Act reporting system, to the detriment of investors in U.S. 
securities markets.\47\
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    \46\ Proposed Rule 12g3-2(e).
    \47\ Representatives of foreign industry associations have 
stated that the inflexibility of the current Exchange Act reporting 
regime is one reason why their member companies are reluctant to 
list in the United States at the present time. As an example of this 
inflexibility, these representatives have stated the risk that a 
foreign company with limited U.S. interest could withdraw from the 
U.S. market only to become subject to renewed U.S. reporting because 
U.S. investors have acquired its shares in its home market. See the 
AFEP letter, dated February 4, 2004, at pp. 3-4.
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    Proposed Rule 12h-6 would further permit a foreign private issuer 
to terminate permanently its section 15(d) reporting obligations 
regarding a class of debt securities as long as the issuer met 
conditions similar to the current requirements for suspending its 
reporting obligations under Rule 12h-3. One of these conditions would 
require a foreign private issuer's debt securities to be held either by 
less than 300 persons on a worldwide basis or by less than 300 U.S. 
residents.\48\ Once the number of a foreign private issuer's debt 
holders has fallen below either of these thresholds, we believe that it 
is unlikely that the number of its debt holders would increase enough 
to warrant reimposing Exchange Act reporting obligations. Moreover, by 
providing a definite means of exiting the Exchange Act reporting 
system, we would remove one possible disincentive for foreign companies 
to register their debt securities with the Commission, to the benefit 
of U.S. investors.
---------------------------------------------------------------------------

    \48\ See Part II.B.4 of this release for a discussion regarding 
the proposed methodology for counting holders of securities.
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Comment Solicited

    We solicit comment on the purpose and scope of proposed Rule 12h-6.
     Should we permit a foreign company to terminate 
permanently its section 15(d) reporting obligations regarding a class 
of equity securities, as proposed?
     Should we instead merely permit a foreign company to 
suspend its section 15(d) reporting obligations regarding a class of 
equity securities on the condition that those obligations would resume 
once it no longer meets the criteria specified under proposed Rule 12h-
6?
     If so, should we also merely suspend section 12(g) 
reporting on the same grounds?
     Should we permit a foreign company to terminate its 
section 15(d) reporting obligations regarding a class of debt 
securities, as proposed?
     Should we prohibit a foreign company whose sole Exchange 
Act reporting obligations arise from a class of debt securities under 
section 15(d) to terminate those reporting obligations under proposed 
Rule 12h-6?
     Should we merely permit a foreign company to suspend its 
section 15(d) reporting obligations regarding certain classes of debt 
securities? If so, what classes of debt securities should we exclude 
from the proposed Rule 12h-6 termination process?
     Should we require a foreign company that has terminated 
its Exchange Act reporting obligations under proposed Rule 12h-6 to 
resume Exchange Act reporting if it reaches a certain number or 
percentage of U.S. resident shareholders? If so, what number or 
percentage of U.S. shareholders should trigger renewed Exchange Act 
reporting?
     Should we add additional conditions to proposed Rule 12h-
6, such as a requirement that the issuer self-tender for securities 
held by U.S. residents?
     Should proposed Rule 12h-6 require issuers to establish a 
share-sale facility as a condition to termination of registration, 
through which U.S. holders of securities would be able to dispose of 
securities without incurring brokerage or other fees? If so, for what 
period of time would an issuer be required to maintain such a 
facility--one month, two months, or longer or shorter?
     How frequently do foreign companies find that, after 
filing Form 15, the number of their U.S. resident shareholders has 
increased and exceeds the 300 U.S. resident shareholder threshold?
     How unlikely is it that, once a foreign company has met 
the proposed Rule 12h-6 criteria and taken the other steps to effect 
termination of its reporting, U.S. trading or U.S. resident holdings in 
the subject class of securities would increase to an extent that could 
justify reimposing Exchange Act reporting obligations? How unlikely is 
it that, once the number of a foreign private issuer's debt holders 
drops below 300 persons on a worldwide basis or 300 U.S. residents, the 
number of its debt holders would increase to an extent that could 
justify reimposing Exchange Act reporting obligations?
2. Conditions for Equity Securities Registrants
a. The Two Year Exchange Act Reporting Condition
    In order to be eligible to terminate its Exchange Act reporting 
obligations regarding a class of equity securities

[[Page 77693]]

under proposed Rule 12h-6, a foreign private issuer must have been an 
Exchange Act reporting company for the two years preceding its filing 
of the Form 15F. It also must have filed or furnished all reports 
required for this period.\49\ Proposed Rule 12h-6 would also provide 
that an issuer must have filed at least two Exchange Act annual 
reports.\50\
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    \49\ See proposed Exchange Act Rule 12h-6(a)(1).
    \50\ While typically a foreign private issuer would file its 
Exchange Act annual report on Form 20-F, one that filed on the 
domestic Form 10-K or on the MJDS Form 40-F would also potentially 
qualify for termination under proposed Rule 12h-6.
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    The purpose of this Exchange Act reporting condition is to provide 
investors in U.S. securities markets with a reasonable period of time 
to make investment decisions regarding a foreign private issuer's 
securities based on the information provided in Exchange Act annual 
reports and the interim home country materials furnished in English 
under cover of Form 6-K.\51\ Without this Exchange Act reporting 
condition, a foreign private issuer could conduct a U.S. registered 
offering of equity securities under the Securities Act and then seek to 
terminate its section 15(d) reporting duties in less than a year, after 
filing an Exchange Act annual report.\52\ The value of securities of a 
foreign issuer may be discounted, and the level of interest among U.S. 
investors in such securities may be lowered, if U.S. investors are not 
confident that the foreign private issuer will be subject to Exchange 
Act reporting for a sufficient period of time. In addition, without 
this condition, a foreign private issuer could promote U.S. investor 
interest in its equity securities by listing on a U.S. stock market and 
registering a class of securities under section 12(b) or section 12(g), 
and then shortly thereafter terminate its registration without even 
filing one Exchange Act annual report. Once a foreign private issuer 
has elected to list equity securities or otherwise sell equity 
securities publicly to investors in U.S. securities markets, we believe 
that the issuer should have to provide Exchange Act reports for a 
reasonable period of time to enable investors to discern trends about 
and to otherwise evaluate their investment in the issuer. A balance of 
prudence against the burden on a foreign private issuer that has 
attracted limited U.S. investor interest leads us to propose setting 
this requirement at two years.
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    \51\ Under cover of a Form 6-K (17 CFR 249.306), a foreign 
private issuer is required to furnish in English a copy of any 
document that it publishes or is required to publish under the laws 
of its home country or the requirements of its local exchange or 
that it has distributed to shareholders, and which is material to an 
investment decision.
    \52\ For example, without this condition, a foreign private 
issuer with a calendar year end could complete a Securities Act 
registered offering late in the year, file its Form 20-F annual 
report as soon as possible in the following year, and seek 
termination of its section 15(d) reporting obligations under Rule 
12h-6 after only a few months of reporting under the Exchange Act.
---------------------------------------------------------------------------

Comment Solicited

    We solicit comment on the proposed Exchange Act reporting 
requirement.
     Should we require a foreign private issuer to be an 
Exchange Act reporting company for a specified period and to have filed 
or furnished all reports required during that period before it can 
terminate its reporting obligations regarding a class of equity 
securities under proposed Rule 12h-6?
     If so, should we set this Exchange Act reporting 
requirement at two previous years, as proposed?
     Should we require an issuer to have provided two Exchange 
Act annual reports, as proposed?
     Should we instead adopt a longer reporting period that 
requires an issuer to have provided at least three Exchange Act annual 
reports?
     Should we adopt an Exchange Act reporting requirement that 
covers a shorter period, such as one year, and requires a foreign 
private issuer to have filed at least one Exchange Act annual report?
     Or should we permit a foreign private issuer to terminate 
its Exchange Act reporting obligations regarding a class of equity 
securities under proposed Rule 12h-6 even if it has not yet filed one 
Exchange Act annual report?
     If we should impose an Exchange Act reporting requirement 
under proposed Exchange Act Rule 12h-6, should this requirement relate 
only to annual report filings under the Exchange Act and not to filings 
or submissions on Form 6-K?
     Should this requirement relate only to specified materials 
likely to be filed or furnished on Form 6-K (such as annual reports to 
shareholders, proxy statements and other materials relating to meetings 
of shareholders, earnings releases, and interim period financial 
statements), and if so, what should they be?
b. The One Year Dormancy Condition
    Proposed Rule 12h-6 would require a foreign private issuer not to 
have sold any securities in a registered offering in the United States 
during the preceding 12 months, other than securities sold to its 
employees and those sold by its selling security holders in non-
underwritten offerings, before it could terminate its Exchange Act 
reporting obligations regarding a class of equity securities. The 
purpose of this condition is to help ensure that Rule 12h-6 would only 
be available to a foreign issuer when the U.S. securities markets have 
relatively little interest and the issuer is not trying to create or 
take advantage of such interest. A foreign company that has actively 
engaged in U.S. capital raising efforts and sold securities to U.S. 
investors relatively recently should not be permitted to exit the 
Exchange Act reporting regime under Rule 12h-6 on the grounds that the 
U.S. securities markets no longer represent as viable an option for 
capital raising.
    The proposed ``one year dormancy'' condition would further prevent 
a foreign company from exiting the Exchange Act reporting system within 
a year after it has conducted a U.S. registered offering under the 
Securities Act and garnered investors who are entitled to the 
protections afforded by our Exchange Act reporting regime. We have 
excluded from this proposed dormancy period securities sold to a 
foreign company's U.S. employees, since such sales are undertaken 
primarily for purposes other than capital formation. Similarly, we have 
excluded from this proposed dormancy period securities sold by a 
foreign company's selling security holders in non-underwritten 
offerings registered under the Securities Act since such sales are not 
undertaken primarily for the benefit of the issuer.
    The proposed condition would also prohibit a foreign company from 
engaging in unregistered offerings in the United States, other than 
securities sold to its employees, and securities exempt from 
registration under section 3 of the Securities Act, except section 
3(a)(10), during the previous 12 months.\53\ Our reasoning regarding an 
issuer actively seeking U.S. investors would apply equally to 
unregistered offerings. In addition, if we only proscribed registered 
offerings, that condition could act as a disincentive to a foreign 
private issuer to conduct a registered offering in the United States.
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    \53\ This proposed condition would prohibit, for example, offers 
and sales under section 4(2), Rule 144A and Rules 801 and 802 under 
the Securities Act. The proposed condition would not prohibit offers 
and sales effected under Regulation S since such offers and sales, 
which occur outside the United States, are deemed to fall outside 
the scope of Securities Act section 5. See Securities Act Rule 901 
(17 CFR 230.901).
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    We have generally excluded from the proposed one year dormancy 
requirement securities exempt from registration under section 3 of the 
Securities Act \54\ because, given their

[[Page 77694]]

exemptive nature and their limited role in capital formation, they do 
not raise the same concerns as other securities transactions. We also 
propose to exclude from the prohibition obligations having a maturity 
at the time of issuance of less than nine months and exempted from 
registration under section 4(2) of the Securities Act, on the theory 
that so-called ``4(2) commercial paper'' is analogous for these 
purposes to commercial paper exempt from registration under section 
3(a)(3) of the Securities Act.\55\
---------------------------------------------------------------------------

    \54\ 15 U.S.C. 77c.
    \55\ 15 U.S.C. 77c(a)(3).
---------------------------------------------------------------------------

    However, we have proposed to preclude the issuance of securities 
pursuant to a court-approved scheme of arrangement under section 
3(a)(10) of the Securities Act \56\ during the one year dormancy 
period. Such schemes of arrangement typically possess characteristics 
of registered offerings, including the solicitation of numerous U.S. 
resident security holders.
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    \56\ Foreign private issuers have frequently relied on 
Securities Act section 3(a)(10) to effect acquisitions and corporate 
restructurings. See, for example, Anglogold Limited no-action letter 
(January 15, 2004) and Constellation Brands, Inc. no-action letter 
(dated January 29, 2003). Section 3(a)(10) exempts from Securities 
Act registration securities issued in an exchange pursuant to terms 
that have been approved by a court or other governmental authority 
following a hearing regarding their fairness in which all interested 
parties have been given an opportunity to be heard. The exemption 
does not apply to securities issued in a U.S. federal proceeding 
under Title 11 of the United States Code.
---------------------------------------------------------------------------

Comment Solicited

    We solicit comment on the ``one year dormancy'' condition.
     Is it appropriate to prohibit an issuer from selling 
securities in the United States for a period preceding its termination 
of Exchange Act reporting regarding a class of equity securities under 
Rule 12h-6?
     If so, should we adopt a one year dormancy period, as 
proposed? Should the period be more than one year, for example, 18 
months or two years? Should it be less than one year, for example, 
three or six months?
     If it is appropriate to adopt a dormancy condition, should 
it prohibit both registered and unregistered offerings, as proposed? 
Should it prohibit only registered offerings? If so, why should the 
rule distinguish between registered and unregistered offerings?
     Should the dormancy condition exclude from its prohibition 
securities sold to an issuer's employees and those sold by its selling 
security holders in registered, non-underwritten offerings, as 
proposed? Should we distinguish between smaller security holders and 
those who may have control or have other significant interests and sell 
without ending their relationship with the issuer?
     Should the dormancy condition exclude from its prohibition 
securities exempted under Securities Act section 3 other than section 
3(a)(10), as proposed? Should we exclude from the one year prohibition 
securities issued under Securities Act section 3(a)(10) as well?
     Should we exclude ``4(2) commercial paper'' from the 
prohibition, as proposed?
     Are there any other types of securities offerings that 
should be excluded from the prohibition, for example, rights offers, 
certain exchange offers, and offers under Securities Act Rule 144A?\57\
---------------------------------------------------------------------------

    \57\ 17 CFR 230.144A.
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     Should the dormancy period for unregistered offerings only 
extend to equity securities?
c. The Home Country Listing Condition
    Proposed Rule 12h-6 would require a foreign private issuer to have 
maintained a listing of the subject class of equity securities for the 
preceding two years on an exchange in its home country. As proposed, 
the term ``home country'' would have the same meaning as under Form 20-
F, which defines ``home country'' as the jurisdiction in which the 
issuer is legally organized, incorporated or established and, if 
different, the jurisdiction where it has its principal listing.\58\
---------------------------------------------------------------------------

    \58\ See Form 20-F General Instruction F.
---------------------------------------------------------------------------

    Proposed Rule 12h-6 would further require that a foreign private 
issuer's home country constitutes its primary trading market. As 
proposed, the term ``primary trading market'' would mean that at least 
55 percent of the trading in the foreign private issuer's securities 
took place in, on or through the facilities of a securities market in a 
single foreign country during a recent 12 month period.\59\ Proposed 
Rule 12h-6 would define ``recent 12 month period'' to mean a 12 
calendar month period that ended no more than 60 days before the filing 
date of the Form 15F.\60\
---------------------------------------------------------------------------

    \59\ Proposed Rule 12h-6(d)(6). We similarly used ``55 percent 
of trading through the securities market facilities of a single 
foreign country'' as one of the benchmarks for determining whether 
there is substantial U.S. market interest for a foreign private 
issuer's securities under Regulation S. See Securities Act Rule 
902(j)(1)(ii) (17 CFR 230.902(j)(1)(ii)).
    \60\ Proposed Rule 12h-6(d)(7).
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    The purpose of this condition is to provide for a non-U.S. 
jurisdiction that principally regulates and oversees the issuance and 
trading of the issuer's securities and disclosure obligations by the 
issuer to its investors. If the United States was the sole or principal 
market for the foreign private issuer's securities, then the Commission 
would have a greater regulatory interest in continuing to subject the 
foreign company to the Exchange Act reporting regime. In contrast, if 
55 percent or more of the average daily trading volume of the company's 
securities occurred through the facilities of its home country 
securities market, then there is a greater likelihood that the 
principal pricing determinants for the company's securities are within 
the jurisdiction of its home country regulator.\61\ There also is a 
greater likelihood that the foreign company will be subject to a body 
of reporting and other securities regulatory requirements in its home 
jurisdiction. Consequently, for a company meeting these requirements, 
there should be less interruption in the flow of material information 
about the company once it exits the Exchange Act reporting system.
---------------------------------------------------------------------------

    \61\ This ``primary trading market'' requirement would also help 
ensure that an issuer's foreign listing represents a significant 
trading market for its equity securities rather than a listing on a 
non-trading market such as the Luxembourg Stock Exchange.
---------------------------------------------------------------------------

Comment Solicited

    We solicit comment on the proposed ``home country listing'' 
condition.
     Should we require that a company have maintained a listing 
of the subject class of equity securities on an exchange in its home 
country for the last two years, as proposed?
     Do other countries have markets or facilities that are not 
an ``exchange''? If so, should the listing requirement be satisified by 
means of quoting the subject class of securities on foreign markets 
operated other than as an exchange?
     Should we impose a home country listing requirement that 
is shorter than two years, say, one year? Should we impose a home 
country listing requirement that is longer than two years? Should we 
not impose a home country listing requirement at all?
     Should the Commission's rule be sensitive to particular 
characteristics of the listing market or the home country? If so, how 
should this be accomplished?
     Should we require that a foreign private issuer represent 
that it is in compliance with the rules of, or otherwise in good 
standing with, its home country securities regulator or listing 
authority?
     Should we require that a foreign private issuer's home 
country constitutes its primary trading market, as proposed?
     If so, should we require that 55 percent or more of the 
average daily

[[Page 77695]]

trading volume of a foreign company's securities occurred through the 
facilities of a single foreign country securities market during a 
recent 12 month period, as proposed?
     Should we require that a higher percentage, for example, 
60 or 75 percent or a lower percentage, for example, 50 percent of the 
average daily trading volume of a foreign company's equity securities 
occurred through the facilities of its home country securities market 
during a recent 12 month period?
     Should we permit a foreign company to terminate its 
Exchange Act reporting obligations regarding a class of equity 
securities if the percentage of the average daily trading volume of its 
securities that occurred in its home country market is less than 50 
percent as long as that percentage when aggregated with the percentage 
of the average daily trading volume of the company's securities 
occurring in another non-U.S. jurisdiction was at least 55 percent or 
some other percentage greater than 55 percent? Would another test 
better accomplish the goals of the home country listing condition?
     Should we adopt the definition of ``recent 12 month 
period'', as proposed?
    Should we adopt a period that is longer or shorter than 12 months?
     Should we adopt the 60-day window to the 12 month period, 
as proposed?
    Should the window be longer or shorter than 60 days?
d. Public Float and Trading Volume Benchmarks
    Proposed Rule 12h-6 would next permit a foreign private issuer to 
meet one of a set of quantitative conditions designed to measure the 
relative level of U.S. market interest in a foreign company's equity 
securities, and which is not based on a record holder count. The 
particular condition applicable to a foreign company would depend upon 
whether the foreign company met the definition of a well-known seasoned 
issuer under Rule 405 of the Securities Act.\62\
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    \62\ Proposed Rules 12h-6(a)(4) and 12h-6(a)(5).
---------------------------------------------------------------------------

    If the issuer is a well-known seasoned issuer, and the average 
daily trading volume of the subject class of equity securities in the 
United States has been 5 percent or less of the average daily trading 
volume of that class of securities in its primary trading market during 
a recent 12 month period, then the foreign company would be eligible to 
terminate its Exchange Act registration and reporting obligations under 
proposed Rule 12h-6 as long as U.S. residents held no more than 10 
percent of the class of company's outstanding voting and non-voting 
equity securities, regarding which there is an Exchange Act reporting 
obligation, held by the company's non-affiliates on a worldwide basis 
(``worldwide public float'') at a date within 60 days before the end of 
the same 12 month period.\63\ Otherwise, a foreign private issuer that 
is a well-known seasoned issuer could terminate its Exchange Act 
registration and reporting obligations under proposed Rule 12h-6 
regarding a class of equity securities if its U.S. resident 
shareholders held no more than 5 percent of the company's worldwide 
public float at a date within 120 days before the filing date of the 
Form 15F.\64\
    A foreign company that is not a well-known seasoned issuer could 
terminate its Exchange Act registration and reporting under proposed 
Rule 12h-6 if U.S. residents held no more than 5 percent of the 
company's worldwide public float at a date within 120 days before the 
filing date of the Form 15F, regardless of its U.S. trading volume.\65\
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    \63\ Proposed Rule 12h-6(a)(4)(i). The combination of the 60-day 
period for calculating trading volume percentage and the 60-day 
period for calculating U.S. percentage ownership would in effect 
generally provide a 120-day window for calculating percentage 
ownership.
    \64\ Proposed Rule 12h-6(a)(4)(ii).
    \65\ Proposed Rule 12h-6(a)(5).
---------------------------------------------------------------------------

    One of the principal reasons that we are proposing to replace the 
current standard for a foreign private issuer's termination of 
reporting, which rests solely on a ``300 U.S. holder'' benchmark (or 
``500 U.S. holder'' benchmark for companies with $10 million or less in 
assets), with benchmarks based upon, among other things, relative U.S. 
ownership of a foreign company's worldwide public float, is that the 
proposed benchmarks should liberalize a foreign private issuer's 
exiting of the Exchange Act registration and reporting regime. At the 
same time, the proposed benchmarks should work with the other proposed 
conditions to permit a foreign private issuer to exit the Exchange Act 
registration and reporting regime only when the impact of the issuer's 
termination of reporting on the U.S. investor community is expected to 
be low.
    Our expectation that the proposed benchmarks will liberalize 
exiting the Exchange Act reporting regime for foreign private issuers 
arises from an evaluation of data developed by our staff in the 
Division of Corporation Finance and the Office of Economic Analysis 
regarding the number of foreign private issuers that would be eligible 
to deregister under the proposal. The staff developed a database of 510 
foreign private issuers for which data was sufficient to make the 
necessary calculations.\66\ The data show that approximately 26% of 
these foreign private issuers would be eligible to deregister under the 
proposals.\67\ The breakdown of that 26% is as follows:
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    \66\ Of the 510 foreign private issuers, 320 were WKSIs and 190 
were non-WKSIs.
    \67\ Because the counting rules that we propose, discussed 
below, are not currently in use, these figures may be conservative, 
although they may overstate the effect of the proposed conditions to 
the extent that issuers perceive themselves to be already eligible 
to terminate their Exchange Act registration and reporting 
obligations under the current record holder standard in Rules 12g-4 
and 12h-3.
---------------------------------------------------------------------------

     Well-known seasoned issuers with 5% or less U.S. trading 
volume and 10% or less U.S. ownership--26% of WKSIs or 16% of total;
     Well-known seasoned issuers with more than 5% U.S. trading 
volume and 5% or less U.S. ownership--8% of WKSIs or 5% of total; and
     Other issuers with 5% or less U.S. ownership--15% of other 
issuers or 5% of total.
    The proposed benchmarks do not take a ``one size fits all'' 
approach. Although any foreign private issuer may meet the public float 
condition if U.S. residents hold 5 percent or less of the issuer's 
worldwide public float, we have proposed an additional benchmark for a 
foreign company that is a well-known seasoned issuer. For the following 
reasons, we believe that a well-known seasoned issuer that is at or 
below the proposed U.S. trading volume threshold should be able to exit 
the registration and reporting system under Rule 12h-6 even though the 
percentage of its worldwide public float held by U.S. investors is 
greater than the public float benchmark applied to a non-well-known 
seasoned issuer.
    It is more likely that a very large, well-followed foreign company 
will have a greater percentage of its shares held by U.S. residents 
than smaller foreign companies. Large companies, including those that 
are foreign private issuers, are included in various securities indices 
that are tracked by many U.S. institutional investors. Thus, a large 
foreign company may especially find it unduly difficult to terminate 
its Exchange Act reporting obligations, despite the lack of recent U.S. 
securities offerings and other transactions by that company, because a 
significant portion of its public float continues to be held by index-
based U.S. investors.
    In addition, in order to satisfy investor interest around the world 
as

[[Page 77696]]

well as home country requirements, large foreign companies are more 
likely to provide a steady flow of financial and non-financial 
information that is easily accessible. Because of their extensive 
market following, this information is more likely to be the subject of 
analysis and comment. After a large foreign company's termination of 
Exchange Act reporting under proposed Rule 12h-6, it is likely that 
both this steady flow of information from the company and the ensuing 
analysis will continue, to the benefit of U.S. and other investors.
    Although some foreign company representatives have proposed using a 
benchmark based solely on trading volume as the determinant of a 
foreign private issuer's ability to exit the Exchange Act reporting 
regime, we have declined to do so.\68\ A benchmark based solely on 
trading volume could result in an inaccurate gauge of U.S. investor 
interest. For example, some U.S. investors, particularly large 
institutional investors, are more likely to purchase and sell 
securities of foreign well-known seasoned issuers and other foreign 
companies through foreign markets rather than U.S. markets. These U.S. 
investors may look to the information contained in a foreign private 
issuer's Exchange Act reports when investing in the foreign private 
issuer's home market. A benchmark based solely on U.S. trading volume 
as a percentage of worldwide trading volume would not capture these 
U.S. investors and, therefore, would understate the degree of U.S. 
interest in a foreign company's securities.
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    \68\ Some foreign company representatives have suggested an exit 
rule based solely on a foreign company's U.S. trading volume as a 
percentage of its global trading volume. According to these 
representatives, if the U.S. trading volume of a foreign company's 
securities were to fall below a specified percentage of its global 
trading volume, that would signify that the U.S. market is not a 
determinative factor in the pricing of the company's securities. As 
a result, little disruption should occur in the global market for 
the company's securities once the company ceases to provide its 
Exchange Act reports. See the AFEP letter, dated March 18, 2005, at 
p. 4. Although we do not believe that a termination benchmark should 
be based solely on trading volume for the reasons discussed, it 
appears appropriate to use it as part of an overall assessment of 
U.S. market interest in a foreign private issuer's equity 
securities.
---------------------------------------------------------------------------

    Moreover, some economists have noted that various securities 
markets measure trading volume differently. Accordingly, adoption of a 
benchmark that relies only on trading volume could result in 
overstating the trading volume of a particular foreign company's 
securities either in its home country or the United States.\69\ 
Reliance solely on trading volume could also induce attempts to affect 
the trading volume of a foreign private issuer's securities in global 
markets in order to affect the determination of whether the issuer 
could exit the U.S. reporting system.
---------------------------------------------------------------------------

    \69\ See, for example, Anne-Marie Anderson and Edward A. Dyl, 
``Market Structure and Trading Volume,'' The Journal of Financial 
Research, Vol. XXVIII, No. 1, pp.115-131 (Spring 2005).
---------------------------------------------------------------------------

    As U.S. trading volume increases as a percentage of the trading 
volume of a foreign company's securities in its primary trading market, 
so does the concern that U.S. investor interest in that foreign 
company's securities may be large enough to warrant establishing a 
stricter ownership threshold before the company could exit the Exchange 
Act reporting regime. In order to mitigate this concern, under the rule 
proposal, if a foreign well-known seasoned issuer has a U.S. average 
daily trading volume that is greater than 5 percent of its average 
daily trading volume in its primary trading market for a class of 
securities, it must have a smaller percentage of its worldwide public 
float held by U.S. investors than a foreign well-known seasoned issuer 
that has a U.S. average daily trading volume below 5 percent of its 
average daily trading volume in its primary trading market.
    We have not proposed a similar benchmark based on trading volume 
for non-well-known seasoned issuers because, based on our review of 
data for non-well-known seasoned issuers, it does not appear that U.S. 
trading volume as a percentage of worldwide trading volume is a 
dispositive factor that would permit a significant number of these 
smaller issuers to terminate their Exchange Act registration and 
reporting under proposed Rule 12h-6. Instead we have proposed to permit 
a smaller foreign company to rely on the percentage of its worldwide 
public float held by U.S. investors as the primary benchmark governing 
whether it may terminate its Exchange Act registration and 
reporting.\70\
---------------------------------------------------------------------------

    \70\ Both a smaller foreign company and a WKSI may also rely on 
proposed Rule 12h-6(a)(6), which uses a ``300 record holder'' 
standard, as discussed below.
---------------------------------------------------------------------------

    In proposing these benchmark conditions, we believe that a foreign 
company that meets any of them is more likely to be one for which the 
protections afforded by the Exchange Act registration and reporting 
regime are no longer justified in light of the costs and burdens borne 
by the company in complying with that regime. We hold this view because 
the benchmarks suggest that the relative interest of U.S. investors in 
the foreign private issuer's securities would be low. Moreover, for 
such a foreign company, the U.S. securities markets would generally 
have played little role in determining the prevailing price of its 
equity securities in world markets. Consequently, once such a foreign 
company has exited the Exchange Act reporting system, there should be 
little disruption in the information flow relating to, and the global 
pricing of, its securities. U.S. investors would be able to look to a 
foreign company's primary trading market should they desire to trade 
the company's equity securities in an established securities market 
once it has exited the Exchange Act reporting system.\71\
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    \71\ As discussed in Part II.C of this release, following a 
foreign private issuer's termination of reporting under proposed 
Rule 12h-6, its securities, including its ADRs, could be traded in 
the unlisted over-the-counter market in the United States.
---------------------------------------------------------------------------

    A Canadian issuer that files its Exchange Act annual report on Form 
40-F under the MJDS would be eligible to terminate its Exchange Act 
registration and reporting obligations under proposed Rule 12h-6. 
However, because a MJDS filer is not eligible to be a well-known 
seasoned issuer as defined under Rule 405 of the Securities Act, a MJDS 
filer would not be able to proceed under the well-known seasoned issuer 
provisions of proposed Rule 12h-6.\72\ However, a MJDS filer could take 
advantage of the non-WKSI conditions regarding a class of equity 
securities and the debt securities provision of proposed Rule 12h-6.
---------------------------------------------------------------------------

    \72\ See question 16 of the Securities Offering Reform FAQ 
located at http://www.sec.gov/divisions/corpfin/faqs/securities_offering_reform_qa.pdf
.

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Comment Solicited

    We solicit comment on the proposed U.S. trading volume and public 
float benchmarks. In particular, we solicit comment on the trading 
volume and ownership information developed by Commission staff and our 
conclusions derived from them, as discussed in this section, and also 
solicit additional information regarding trading volume and ownership 
data.
     Should we adopt a termination of reporting condition for 
well-known seasoned issuers that relies on two measures--trading volume 
and public float--as proposed?
     If not, should we adopt a benchmark that uses just trading 
volume, public float, or some other measure?
     Does the potential for manipulation of trading volume make 
it an inappropriate benchmark, either alone or in combination with 
other benchmarks?
     Should we instead adopt a benchmark that uses some 
combination of measures excluding trading volume?

[[Page 77697]]

     For example, should we adopt a condition requiring a 
foreign well-known seasoned issuer to have U.S. residents holding no 
more than a specified percentage, say 10 percent or 5 percent of its 
worldwide public float at the end of a recent 12 month period, and 
having U.S. resident shareholders numbering no greater than 1,000, 
2,000, 3,000 or some other number? Should we adopt a similar condition 
for non-well-known seasoned issuers?
     Should we adopt a benchmark that requires a foreign 
private issuer to have a specified U.S. public float expressed in 
dollars rather than as a percentage of the issuer's worldwide public 
float?
     Should we adopt a benchmark that excludes using public 
float?
     Should we adopt one set of conditions for well-known 
seasoned issuers and another for foreign companies that are not well-
known seasoned issuers, as proposed? Should we instead have one set of 
conditions that applies to all?
     Proposed Rule 12h-6 would use the same definition of well-
known seasoned issuer as under Securities Act Rule 405. That definition 
contains various conditions in addition to the $700 million public 
float requirement. Should proposed Rule 12h-6 incorporate all of those 
conditions or just some of them?
     A company that is an ``ineligible issuer'' under 
Securities Act Rule 405 does not qualify as a well-known seasoned 
issuer. Should we require an ``ineligible issuer'' to meet the more 
stringent benchmarks under Rule 12h-6, as proposed?
     Should we preclude a MJDS filer from using the well-known 
seasoned issuer benchmarks, as proposed? Should we instead allow a MJDS 
filer to proceed under the well-known seasoned issuer benchmarks as 
long as it meets the $700 million public float requirement?
     Should the date of determination of well-known seasoned 
issuer status be a date within 120 days of filing the proposed Form 
15F, as proposed?
     Should we use the ``well-known seasoned issuer'' 
definition at all as the basis for making distinctions between foreign 
private issuers regarding termination of reporting? Should we instead 
use the definition of ``large accelerated filer'', which we are 
adopting in a separate release? \73\
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    \73\ See Release No. 33-8644, 34-52989 (December 21, 2005).
---------------------------------------------------------------------------

     Should we develop another measure based on a higher public 
float (for example, $1 billion) or a lower public float (for example, 
$500 billion)?
    Should we rely on a $75 million public float threshold, which we 
have previously used as a benchmark for eligibility to engage in 
certain U.S. securities transactions?\74\
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    \74\ For example, a public float of $75 million is the 
eligibility threshold that a foreign private issuer must meet to use 
Form F-3 for a primary issuance of securities. See General 
Instruction I.B.1 to Form F-3.
---------------------------------------------------------------------------

    We encourage commenters in this area specifically to support the 
use of other thresholds with information about a foreign private 
issuer's market following. With respect to trading volume information, 
the proposed rule would require a comparison between the United States 
and the issuer's primary trading market.
     Should we require the comparison of trading volume 
information in the United States with worldwide trading volume 
information instead of solely with trading volume information in the 
issuer's primary trading market?
     Do many foreign well-known seasoned issuers have 
significant trading volume activity in two or more markets, other than 
the United States, so that a benchmark based on U.S. trading volume as 
a percentage of worldwide trading volume would be more meaningful?
     Are many foreign well-known seasoned issuers subject to 
home country reporting standards that require disclosure of worldwide 
trading volume information? If so, should proposed Rule 12h-6 use 
worldwide trading volume information instead of primary trading market 
information as well?
     Should we adopt alternative conditions for a foreign well-
known seasoned issuer depending upon whether the U.S. average daily 
trading volume of a foreign company's class of securities is no greater 
than 5 percent of the average daily trading volume of that class of 
securities in its primary trading market during a recent 12 month 
period, as proposed? Should the threshold percentage instead be larger 
than 5 percent? Should it be smaller than 5 percent?
     Should we adopt a different period than a ``recent 12 
month period''? For example, should we adopt a period that is longer 
than 12 months, say 18 or 24 months? Should we adopt a period that is 
shorter than 12 months, for example, 6 or 3 months?
     Should we adopt the dual 60-day windows for determining 
U.S. trading volume and U.S. percentage of ownership? Should the 
periods be longer or shorter?
     If we should adopt the proposed ``5 percent of primary 
trading market trading volume'' benchmark, should we also adopt the 
condition that a well-known seasoned issuer that meets this trading 
volume benchmark must have U.S. residents holding no more than 10 
percent of the foreign company's worldwide public float at the end of 
the recent 12 month period, as proposed?
     Should we instead adopt a percentage that is greater than 
10 percent, for example, 15 or 20 percent? Should we adopt a percentage 
that is less than 10 percent, for example, 5 or 7 percent?
     Similarly, should we adopt the condition that would permit 
a well-known seasoned issuer to terminate its Exchange Act reporting 
obligations as long as U.S. residents held no more than 5 percent of 
its worldwide public float at a date within 120 days of the filing date 
of the Form 15F even if its U.S. average trading volume was greater 
than 5 percent of the average trading volume in its primary trading 
market, as proposed?
     Should we instead adopt a public float percentage that is 
larger than 5 percent, for example, 7, 10 or 15 percent, or smaller 
than 5 percent, for example, 3 percent?
     Should we adopt the condition permitting a foreign company 
that is not a well-known seasoned issuer to terminate its Exchange Act 
reporting obligations as long as U.S. residents held no more than 5 
percent of its worldwide public float at a date within 120 days of the 
filing date of the Form 15F, regardless of its U.S. trading volume, as 
proposed?
     If not, should we adopt a public float percentage that is 
greater than 5 percent, for example, 7 or 10 percent, or less than 5 
percent, for example, 3 percent?
    We have proposed a single benchmark for non-well-known seasoned 
issuers based on the proportion of U.S. residents who hold their 
securities.
     Should we adopt dual benchmarks, based on trading volume 
and U.S. ownership, similar to the dual benchmarks proposed for well-
known seasoned issuers?
     Does a single benchmark provide an adequate measure in 
determining when a non-well-known seasoned issuer may terminate its 
Exchange Act reporting obligations under the proposed scheme, or would 
dual benchmarks provide a more refined classification that is supported 
by data and experience?
     For example, should we adopt a condition that permits a 
non-well-known seasoned issuer to terminate its Exchange Act 
registration and reporting obligations if the U.S. average daily 
trading volume of its class of securities is no greater than a certain 
percentage,

[[Page 77698]]

say 5 percent, of the average daily trading volume of that class of 
securities in its primary trading market during a recent 12 month 
period, and U.S. residents held no more than 5 percent of its worldwide 
public float at a date within 60 days of that recent 12 month period?
     If so, should either of the U.S. trading volume or U.S. 
public float thresholds be larger or smaller than 5 percent?
e. Alternative Threshold Record Holder Condition
    Proposed Rule 12h-6(a)(6) would permit a foreign private issuer 
that could not meet one of the benchmarks in proposed Rule 12h-6(a)(4) 
or (5), but met the other conditions of the rule, to terminate its 
Exchange Act registration and reporting obligations with regard to a 
class of equity securities as long as that class of securities was held 
of record by less than 300 persons on a worldwide basis or less than 
300 U.S. residents at a date within 120 days before the filing date of 
the Form 15F. This threshold record holder condition is similar to that 
found in current Rules 12g-4 and 12h-3. Those rules also permit a 
foreign private issuer to cease its reporting obligations if the class 
of securities is held by less than 500 persons on a worldwide basis or 
by less than 500 U.S. residents where the issuer's total assets have 
not exceeded $10 million on the last day of each of the issuer's most 
recent three fiscal years.\75\ We have not proposed a similar 500 
record holder condition because, based on current experience, we 
believe that foreign private issuers seldom use the current standard.
---------------------------------------------------------------------------

    \75\ Exchange Act Rules 12g-4(a)(1)(ii) and (a)(2)(ii) (17 CFR 
12g-4(a)(1)(ii) and (a)(2)(ii)) and 12h-3(b)(1)(ii) and (b)(2)(ii) 
(17 CFR 240.12h-3(b)(1)(ii) and (b)(2)(ii)).
---------------------------------------------------------------------------

    The purpose of this 300 record holder condition is to provide that 
the new exit rules for a foreign private issuer are no more rigorous 
than the current rules. A foreign private issuer that cannot meet one 
of the proposed benchmarks, but is eligible under the current 300 
record holder standard, should be allowed to terminate its Exchange Act 
registration and reporting, assuming that it meets the other conditions 
of proposed Rule 12h-6(a).
    Although similar to the current standard, the proposed alternative 
threshold record holder condition would offer advantages compared to 
the current exit rules. As discussed below, proposed Rule 12h-6 would 
adopt a counting method that limits the jurisdictions in which a 
foreign private issuer must search for records of its U.S. resident 
holders.\76\ Moreover, in addition to enabling a foreign private issuer 
to terminate, rather than merely suspend, its section 15(d) reporting 
obligations regarding a class of securities, proposed Rule 12h-6 would 
impose a prior Exchange Act reporting requirement that is potentially 
shorter than that under current Rule 12h-3.\77\
---------------------------------------------------------------------------

    \76\ See Part II.B.4 of this release.
    \77\ Rule 12h-3(a) requires a company that has been an Exchange 
Act reporting company for at least three fiscal years to have filed 
all Exchange Act reports for those three years and for the portion 
of the current year preceding the filing of the Form 15. Proposed 
Rule 12h-6 would only require an issuer to have filed all required 
reports for a prior two year period, and have filed two Exchange Act 
annual reports.
---------------------------------------------------------------------------

    Given these advantages, if proposed Rule 12h-6 is adopted, we 
believe that few, if any, foreign private issuers would choose to 
proceed under the provisions of Rule 12g-4 or Rule 12h-3 that allow a 
foreign private issuer to terminate its registration of a class of 
securities under section 12(g) or suspend the duty to file reports 
under section 15(d) if the class of securities is held by less than 300 
U.S. residents or by 500 U.S. residents and the issuer has had total 
assets not exceeding $10 million on the last day of each of its most 
recent three fiscal years.\78\ Accordingly, we are proposing to amend 
these rules to eliminate the above provisions.
---------------------------------------------------------------------------

    \78\ See Exchange Act Rules 12g-4(a)(2) and 12h-3(b)(2).
---------------------------------------------------------------------------

Comment Solicited

    We solicit comment on proposed Rule 12h-6(a)(6).
     Should we permit an issuer that cannot meet the proposed 
benchmarks in proposed Rule 12h-6(a)(4) or (5) to terminate its 
Exchange Act registration and reporting as long as it has satisfied the 
other requirements of proposed Rule 12h-6 and has its class of equity 
securities held of record by less than 300 persons worldwide or by less 
than 300 U.S. resident holders, as proposed?
     Should we raise the record holder threshold to 500, 600, 
750, 1,000 or some other number?
     Should we adopt a record holder threshold that is higher 
for a well-known seasoned issuer than a non-well-known seasoned issuer?
     Should we require a minimum total assets threshold in 
addition to a record holder threshold as under current Rules 12g-4 and 
12h-3? For example, should we adopt the ``less than 500 U.S. residents 
and $10 million asset'' standard currently provided under Rules 12g-4 
and 12h-3? If so, should we require that the asset test be met for only 
the registrant's most recently completed fiscal year or for two or more 
previous years?
     Should we adopt an asset threshold that is more than $10 
million, for example, $25, 50, 75, or 100 million? In conjunction with 
an assets test, should we adopt a record holder threshold that is 
greater than 500, for example, 750, 1,000, 2,000, or 3,000?
     Should we amend Rules 12g-4 and 12h-3 to eliminate the 
provisions permitting a foreign private issuer to cease its reporting 
obligations, as proposed? Should we retain these provisions in addition 
to adopting proposed Rule 12h-6?
3. Conditions for Debt Securities Registrants
a. Section 15(d) Reporting Requirement
    Proposed Rule 12h-6 would require a foreign private issuer to meet 
the minimum Exchange Act reporting requirement under section 15(d) 
before it could terminate its section 15(d) reporting obligations 
regarding a class of debt securities.\79\ Under section 15(d), an 
issuer cannot suspend its Exchange Act reporting obligations even if 
its record holders have fallen below 300 during the year in which the 
Securities Act registration statement that triggered the section 15(d) 
reporting obligations became effective. Consequently, section 15(d) 
requires that, at a minimum, a foreign private issuer must file one 
annual report pursuant to section 13, and furnish Form 6-K reports 
until it has filed that one annual report, before it can effect a 
suspension based upon the number of its record holders.
---------------------------------------------------------------------------

    \79\ See proposed Rule 12h-6(b)(1).
---------------------------------------------------------------------------

    Proposed Rule 12h-6 would impose this minimum reporting requirement 
on a debt securities registrant rather than a longer period, as would 
be required for an equity securities registrant, in order to prevent 
the new exiting standard from being more burdensome than is currently 
the case for debt securities registrants under section 15(d). Because 
debt securities offerings typically result in fewer securities holders 
than equity securities offerings, it is generally easier for a debt 
securities registrant to fall below the 300 record holder threshold. 
Consequently, on several occasions, debt securities registrants have 
filed Form 15 to suspend their section 15(d) reporting obligations 
after having filed only one Exchange Act annual report. Proposed Rule 
12h-6 would permit this practice to continue.

Comment Solicited

    We solicit comment on proposed Rule 12h-6's Exchange Act reporting

[[Page 77699]]

requirement for debt securities registrants.
     Should we permit a foreign private issuer to terminate its 
section 15(d) reporting obligations regarding a class of debt 
securities after filing only one Exchange Act annual report and 
furnishing Form 6-Ks only up to the filing of that annual report, as 
proposed? Should we require a debt securities registrant to file at 
least two annual reports and furnish Form 6-Ks until it has filed its 
second annual report, as we have proposed to require for an equity 
securities registrant, before it can terminate its section 15(d) 
reporting obligations?
     Should we permit a foreign private issuer only to suspend 
rather than terminate its section 15(d) obligations regarding certain 
classes of debt securities? If so, what are those classes of debt 
securities?
b. Threshold Record Holder Condition
    Proposed Rule 12h-6 would require the record holders of a foreign 
private issuer's debt securities to be either less than 300 persons on 
a worldwide basis or less than 300 U.S. residents as of a date within 
120 days before the filing of the Form 15F.\80\ As with the alternative 
threshold record holder condition for equity securities registrants, we 
have based these thresholds on current statutory and rule conditions 
governing an issuer's suspension of reporting under section 15(d).\81\ 
Accordingly, the proposed record holder condition for termination of a 
debt securities registrant's reporting obligations would in most 
instances not pose any additional burdens.
---------------------------------------------------------------------------

    \80\ See proposed Rule 12h-6(b)(2).
    \81\ The ``less than 300 persons'' standard appears both in 
section 15(d) and in Rule 12h-3(b)(1)(i) (17 CFR 240.12h-
3(b)(1)(i)). The ``less than 300 U.S. residents'' standard appears 
in Rule 12h-3(b)(2)(i) (17 CFR 240.12h-3(b)(2)(i)). See Part II.B.4 
of this release for a discussion of proposed modifications in the 
method of counting U.S. residents.
---------------------------------------------------------------------------

    Rule 12h-3 alternatively permits a foreign private issuer to 
suspend its section 15(d) reporting obligations if its class of debt 
securities is held of record by less than 500 U.S. residents and its 
total assets have not exceeded $10 million on the last day of each of 
the issuer's three most recent fiscal years.\82\ We have not proposed 
to adopt this alternative condition for a debt securities registrant 
under proposed Rule 12h-6 because we believe that most foreign private 
issuers that are debt securities registrants would likely exceed that 
asset threshold.\83\
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    \82\ Exchange Act Rule 12h-3(b)(2)(ii).
    \83\ A foreign private issuer could still seek to suspend its 
section 15(d) reporting obligations under Rule 12h-3's alternative 
provision, which applies to any issuer, and which imposes the same 
asset standard but requires the subject class of securities to be 
held of record by less than 500 persons on a worldwide basis. See 
Exchange Act Rule 12h-3(b)(1)(ii).
---------------------------------------------------------------------------

    For purposes of Rule 12h-6, the term ``debt securities'' refers not 
only to traditional debt securities but also to non-convertible 
preferred securities, the holders of which are entitled to a preference 
in payment of dividends and in distribution of assets on liquidation, 
dissolution or winding up of the issuer, but are not entitled to 
participate in residual earnings or assets of the issuer (referred to 
as ``non-participating preferred stock''). The preferred securities 
have market characteristics more similar to traditional debt securities 
than to equity securities. This treatment of non-participating 
preferred stock under Rule 12h-6 is consistent with the treatment under 
other rules under the Federal securities laws.\84\
---------------------------------------------------------------------------

    \84\ See, for example, Securities Act Rule 902(a)(1) under 
Regulation S (17 CFR 230.902(a)(1)).
---------------------------------------------------------------------------

Comment Solicited

    We solicit comment on proposed Rule 12h-6's threshold record holder 
condition for debt securities registrants.
     Should we require that the subject class of debt 
securities be held of record by less than 300 persons on a worldwide 
basis or less than 300 U.S. residents, as proposed?
     Should we increase the record holder threshold to, for 
example, less than 500, 750 or 1,000 persons on a worldwide basis or 
who are U.S. residents?
     If we do increase the threshold number of record holders, 
should we also impose a threshold asset standard? Should we adopt the 
``less than 500 U.S. residents and $10 million asset'' standard 
currently provided under Rule 12h-3? If so, should we require that the 
asset test be met for only the registrant's most recently completed 
fiscal year?
     Should we adopt an asset threshold that is more than $10 
million, for example, $25, 50, 75, or 100 million? If so, should we 
adopt a record holder threshold as well that is greater than 500?
     Should we instead adopt a record holder condition that 
would vary depending on whether a debt securities registrant was a 
well-known seasoned issuer?
    We also solicit comment on the definition of debt securities under 
proposed Rule 12h-6.
     Should we treat as debt securities non-participating 
preferred securities, as proposed?
     Are there any other types of debt securities that should 
be included or excluded from the proposed definition of debt 
securities?
4. Counting Method
    In order to facilitate a foreign private issuer's determination 
regarding whether U.S. residents hold no more than the applicable 
threshold percentage of its worldwide public float, or whether the 
number of its equity or debt securities record holders meet the 
applicable threshold condition, proposed Rule 12h-6 would permit an 
issuer to use a method of calculating record ownership that is 
substantially similar to that we have adopted under the exemptive rules 
for cross-border rights offerings, exchange offers and business 
combinations,\85\ as well as under the definition of foreign private 
issuer.\86\ After instructing an issuer to use the method of 
calculating record ownership under Rule 12g3-2(a),\87\ proposed Rule 
12h-6(e) would provide that an issuer may limit its inquiry regarding 
the amount of securities represented by accounts of customers resident 
in the United States to brokers, dealers, banks and other nominees 
located in the United States, the foreign private issuer's jurisdiction 
of incorporation, legal organization or establishment, and the 
jurisdiction of the foreign private issuer's primary trading market if 
different from the issuer's jurisdiction of incorporation, legal 
organization or establishment.\88\
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    \85\ Securities Act Rule 800(h) (17 CFR 230.800(h)).
    \86\ Securities Act Rule 405 and Exchange Act Rule 3b-4. The 
Regulatory Flexibility Act Agenda most recently published by the 
Commission states that Commission staff are considering 
recommendations with respect to rule amendment proposals relating to 
the definition of securities ``held of record'' under the Exchange 
Act. Release 33-8608 (September 2, 2005), 70 FR 65680 (October 31, 
2005). Today's proposals relating to foreign private issuers are 
unrelated to that consideration.
    \87\ 17 CFR 240.12g3-2(a). Used to determine whether a foreign 
private issuer has fewer than 300 U.S. resident holders, that method 
requires looking through the record ownership maintained by brokers, 
dealers, banks or other nominees and counting the number of separate 
accounts held by them on behalf of U.S. customers.
    \88\ Proposed Rule 12h-6(e)(1).
---------------------------------------------------------------------------

    The purpose of this provision is to limit the number of 
jurisdictions in which an issuer must search for records regarding its 
U.S. resident shareholders. The rule would permit an issuer to restrict 
its search to those jurisdictions that represent the most probable 
locations for brokers, dealers, banks and other nominees to hold the 
issuer's securities on behalf of U.S. customers.\89\
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    \89\ This counting method would not apply to a foreign private 
issuer that is terminating its reporting because its equity or debt 
securities record holders are less than 300 persons on a worldwide 
basis. Like the current 300 worldwide record holder provisions under 
Rules 12g-4 and 12h-3, proposed Rule 12h-6's worldwide record holder 
provisions would generally not require an issuer to look through 
nominee accounts when determining its record ownership.

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[[Page 77700]]

    Proposed Rule 12h-6(e) would further provide that, if, after 
reasonable inquiry, an issuer is unable without unreasonable effort to 
obtain information about the amount of securities represented by 
accounts of customers resident in the United States, it may assume that 
the customers are the residents of the jurisdiction in which the 
nominee has its principal place of business. However, the proposed rule 
would further instruct that an issuer must count securities as owned by 
U.S. holders when publicly filed reports of beneficial ownership or 
information that is otherwise provided to the issuer indicates that the 
securities are held by U.S. residents.\90\
---------------------------------------------------------------------------

    \90\ Proposed Rule 12h-6(e)(2) and (3).
---------------------------------------------------------------------------

    We are aware that domestic and foreign issuers use third party 
service providers for the purpose of obtaining information relating to 
the identification of their security holders. In general, the primary 
purpose of obtaining this information is usually not to satisfy a 
regulatory requirement, but to assist company management in 
communicating with security holders and otherwise to promote good 
investor relations. Nonetheless, foreign private issuers currently use 
these services for the purpose of determining whether they fall below 
the current 300 U.S. holder threshold.
    In light of the difficulties associated with determining levels of 
U.S. ownership of securities, we believe it is appropriate to permit 
foreign private issuers to rely on a third party information service 
provider that is in the business of supplying security holder 
information to issuers generally. Accordingly, proposed Rule 12h-6(e) 
would provide that, when calculating the number of its U.S. resident 
security holders under proposed Rule 12h-6, a foreign private issuer 
could rely in good faith on the assistance of an independent 
information services provider that in the regular course of business 
assists issuers in determining the number of, and collecting other 
information regarding, their shareholders.\91\ By allowing a foreign 
private issuer to retain an expert when making the determination of the 
extent to which its securities are held by U.S. residents, this 
proposed provision should help increase the accuracy of that 
determination while reducing the burden posed by it for the issuer and 
its employees.
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    \91\ Proposed Rule 12h-6(e)(4).
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Comment Solicited

    We solicit comment on proposed Rule 12h-6(e).
     Should we permit an issuer to restrict its inquiry 
regarding the number of its U.S. resident holders to the jurisdictions 
referenced in that rule, as proposed?
     Are there other jurisdictions in which an issuer must 
search for evidence of U.S. ownership of its securities when 
calculating the percentage of its worldwide public float held by U.S. 
holders or the number of U.S. residents who hold its equity or debt 
securities under proposed Rule 12h-6?
     Is there another method of accurately determining the 
percentage of an issuer's worldwide public float held by U.S. residents 
that does not require using the counting method in Rule 12g3-2(a)?
     Should we permit a foreign private issuer to exclude 
institutional investors when determining the number of its U.S. 
resident shareholders?
     Should we permit a foreign private issuer to rely in good 
faith on the assistance of an independent information services provider 
when making its public float determination or calculating the number of 
U.S. residents who hold its equity or debt securities, as proposed? 
Should we also allow an issuer to rely on an information services 
provider when calculating the number of its record holders worldwide?
    We understand that some foreign jurisdictions have laws that 
provide an established and enforceable means for a public company to 
obtain information about their shareholders.\92\
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    \92\ See, for example, Section 212 of the Companies Act of the 
United Kingdom, which gives a public company the power to 
investigate the ownership of its shares by sending a written notice 
to any person or company whom it believes has or had an interest in 
its relevant share capital during the preceding three years.
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     Should we allow a foreign private issuer to rely on 
information obtained through these foreign statutory or code provisions 
when calculating the percentage of its worldwide public float held by 
U.S. residents or the number of its U.S. resident equity or debt 
holders? If so, should we permit reliance on only certain specified 
foreign provisions?
    Interested persons are requested to provide detailed information 
about such foreign provisions in their comments.
5. Form 15F
    Like our current exit rules, proposed Rule 12h-6 would require a 
foreign private issuer to file a form certifying that it meets the 
requirements for ceasing its Exchange Act reporting obligations. By 
signing and filing proposed new Form 15F,\93\ a foreign private issuer 
would be certifying that:
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    \93\ An issuer would have to file proposed Form 15F through the 
Commission's Electronic Data Gathering, Analysis, and Retrieval 
System (``EDGAR''). See the proposed amendment to Regulation S-T 
Rule 101(a)(1)(xii) (17 CFR 232.101(a)(1)(xii)), which would also 
clarify that, as currently interpreted by the Commission, Regulation 
S-T also requires an issuer to file a Form 15 on EDGAR.
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     It meets all of the conditions for termination of Exchange 
Act reporting specified in Exchange Act Rule 12h-6 (17 CFR 240.12h-6); 
and
     There are no classes of securities other than those that 
are the subject of the Form 15F regarding which the issuer has Exchange 
Act reporting obligations.
    Unlike current Form 15, proposed new Form 15F would require a 
foreign private issuer to provide disclosure regarding several items in 
order to provide investors with information regarding an issuer's 
decision to terminate its Exchange Act reporting obligations. That 
information would also help Commission staff to assess whether the 
issuer meets the requirements for termination of reporting under Rule 
12h-6. We believe that this disclosure approach is appropriate because 
of the multiple conditions that a foreign company would have to meet 
under proposed Rule 12h-6. Moreover, some of the proposed conditions, 
such as the trading volume and public float benchmarks, have not 
previously been the subject of mandatory disclosure under our Exchange 
Act reporting regime. Accordingly, without the proposed Form 15F items, 
investors would not be informed about, and Commission staff would not 
be able to assess readily, whether a foreign company was eligible to 
terminate its reporting under proposed Rule 12h-6.
    The proposed Form 15F items would solicit information regarding:
     An issuer's Exchange Act reporting history;
     When it last sold securities in the United States other 
than those excluded from consideration under proposed Rule 12h-6;
     The primary trading market for its equity securities being 
deregistered;
     Whether it is a well-known seasoned issuer;
     Trading volume data for a well-known seasoned issuer's 
securities, both in the United States and in its primary trading 
market;
     Its worldwide public float and the portion held by U.S. 
residents

[[Page 77701]]

determined pursuant to the proposed rules with respect to the equity 
securities being deregistered, if applicable;
     The number of its equity or debt securities record 
holders, if applicable; and
     The classes of equity and debt securities, if any, that 
are the subject of the Form 15F.\94\
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    \94\ Proposed Form 15F would also seek confirmation that the 
issuer has met the notice requirement of proposed Rule 12h-6(c) (17 
CFR 240.12h-6(c)) discussed in Part II.B.6 of this release.
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    As under the current deregistration regime, filing of the Form 15F 
would immediately suspend the issuer's Exchange Act reporting 
obligations regarding the subject class of securities and commence a 
90-day waiting period.\95\ During this period, Commission staff may 
review the Form 15F. If, at the end of the 90-day period, the 
Commission has not objected to the filing, the suspension would 
automatically become a termination of registration and reporting. If 
the Commission denies the Form 15F or the issuer withdraws it, within 
60 days of the date of the denial or withdrawal, the issuer would be 
required to file or submit all reports that would have been required 
had it not filed the Form 15F.\96\
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    \95\ During this period, although the issuer would not be 
required to file Exchange Act reports, its equity securities would 
continue to be registered. Consequently, security holders and others 
might continue to have obligations under Exchange Act sections 13(d) 
and 14(d) [15 U.S.C. 78m(d) and 78n(d)].
    \96\ Proposed Rule 12h-6(f).
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    We are also proposing to revise the rules governing the 
Commission's delegated authority to permit staff of the Division of 
Corporation Finance to accelerate the effectiveness of an issuer's 
termination of registration and reporting under proposed Rule 12h-6 
prior to the 90th day at the issuer's request. The issuer would have to 
make this request in writing and file it on EDGAR.\97\ Nevertheless, 
Division of Corporation Finance staff may submit requests to accelerate 
the effectiveness of an issuer's termination of registration and 
reporting pursuant to proposed Rule 12h-6 to the Commission for 
consideration, as appropriate.
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    \97\ As noted earlier, there is currently a similar delegation 
relating to Form 15, which is rarely used.
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    We are aware that in today's investing and technological 
environment, it would be overly burdensome and costly to require 
foreign private issuers to assess the level of U.S. ownership of their 
securities with absolute certainty. Accordingly, we have proposed 
methods that should provide a reasonable level of certainty to the 
process by which a foreign private issuer determines the level of U.S. 
ownership of its securities.\98\
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    \98\ See the proposed counting method and reliance on an 
independent information services provider discussed in Part II.B.4 
of this release.
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    As proposed, after filing its Form 15F, an issuer would have no 
continuing obligation to make inquiries or perform other work 
concerning the information contained in the Form 15F, including its 
assessment of U.S. ownership of its securities. However, proposed Form 
15F would require an issuer to undertake to withdraw its Form 15F prior 
to the date of its effectiveness if it becomes aware of information 
that causes it reasonably to believe that U.S. holders held more than 
the applicable threshold percentage of its worldwide public float or 
exceeded the threshold number of debt securities record holders, or 
otherwise causes the issuer no longer to believe that it meets the 
conditions for terminating its Exchange Act reporting obligations under 
proposed Rule 12h-6.

Comment Solicited

    We solicit comment on the proposed Form 15F.
     Should the Form 15F constitute an issuer's certification 
regarding each of the specified conditions, as proposed?
     Are there some conditions that we should exclude from the 
proposed Form 15F certification? Are there other conditions that we 
should include in the proposed Form 15F certification?
     Should we request an issuer to provide information on each 
of the enumerated items in the Form 15F, as proposed? Should we revise 
or omit some or all of the items on the proposed Form 15? Are there any 
other items that should be included on the proposed Form 15F?
     Should we adopt a 90-day waiting period following the 
filing of the Form 15F before termination of reporting could become 
effective, as proposed? Should we instead adopt a shorter or longer 
period?
     Should we adopt a 60-day period in which an issuer would 
have to file or submit all required reports should its Form 15F be 
denied or withdrawn, as proposed? Should we adopt instead a shorter or 
longer period?
     In the ordinary course, we anticipate that terminations 
pursuant to proposed Form 15F will become effective 90 days after 
filing, without Commission action. Should proposed Rule 12h-6 provide 
for some required processing or action by the Commission before any 
Form 15F termination of reporting would become effective?
     Should we require an issuer to provide the undertaking, as 
proposed? Are there other undertakings that we should require on Form 
15F? For example, should we also require an issuer to undertake to 
issue a press release in the United States announcing its withdrawal of 
the Form 15F? Should we not require any undertakings at all?
     Are there other means to address the possibility of 
temporary shifts in an issuer's security holders to outside the United 
States? For example, should we require a foreign private issuer to 
assess the number of its U.S. security holders at the beginning and end 
of a three or six-month period before filing a Form 15F?
     Are there other means to address the difficulties 
associated with determining the level of U.S. ownership of a foreign 
private issuer's securities through book-entry systems and nominee 
holders?
6. Notice Requirement
    As a condition to termination of reporting, proposed Rule 12h-6 
would require a foreign private issuer, not later than 15 business days 
before it files its Form 15F, to publish a notice in the United States 
disclosing its intent to terminate its Exchange Act registration and 
reporting obligations regarding each class of securities under section 
12(g) or section 15(d) or both. The issuer would be required to publish 
the notice through a means, such as a press release, reasonably 
designed to provide broad dissemination of the information to the 
public in the United States.\99\ The issuer would be required to submit 
a copy of the notice either under cover of a Form 6-K, before or at the 
time of filing of the Form 15F, or as an exhibit to the Form 15F.\100\ 
The primary purpose of this provision is to alert U.S. investors who 
have purchased the issuer's securities about the intended exiting of 
the issuer from the Exchange Act registration and reporting system. The 
notice requirement would also serve to alert investors and other U.S. 
market participants that, in the future, they will have to look to the 
issuer's home country documents, and not Exchange Act reports, for 
information regarding the issuer.
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    \99\ There are no specific proposed requirements relating to the 
form or content of the press release or other notice, although such 
matters may be addressed under the rules of a U.S. securities market 
in which the issuer's securities are listed.
    \100\ Proposed Rule 12h-6(c) (17 CFR 240.12h-6(c)).
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Comment Solicited

    We solicit comment regarding proposed Rule 12h-6(c)'s notice 
requirement.

[[Page 77702]]

     Should we require a foreign private issuer to issue a 
notice, such as a press release, disclosing its intention to terminate 
its Exchange Act reporting obligations, as proposed?
     If so, should we prescribe the form or content of the 
notice other than that it be broadly disseminated in the United States?
     Should a foreign private issuer be permitted to submit a 
copy of the notice to the Commission either prior to or at the time of 
filing the Form 15F?
     Does the filing of the Form 15F provide enough notice 
regarding a foreign private issuer's intentions to make the notice 
requirement unnecessary?
     Should a foreign private issuer be required to issue a 
notice upon the effectiveness of the termination of its Exchange Act 
registration and reporting obligations under proposed Rule 12h-6?

C. Proposed Amendment Regarding Rule 12g3-2(b)

    Under Rule 12g3-2(b), a foreign private issuer may avoid 
registering under Exchange Act Section 12(g) if, prior to incurring a 
registration obligation, it establishes and maintains the exemption by 
submitting to the Commission various materials that are made public in 
its home market. As part of our proposals, we are proposing two 
amendments under this exemption:
     We are proposing to amend Rule 12g3-2(d), which currently 
prohibits a foreign private issuer from availing itself of the Rule 
12g3-2(b) exemption for a period of 18 months after terminating its 
registration under Section 12(g) or an active or suspended reporting 
obligation under Section 15(d); \101\ and
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    \101\ As a result, under the current rules, a foreign private 
issuer is at risk that, during the 18 months after terminating 
registration under Section 12(g), it may exceed the registration 
thresholds under Section 12(g) and be required to re-register under 
the Exchange Act.
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     We are proposing new Rule 12g3-2(e), which would 
facilitate compliance with the information submission requirements by 
foreign private issuers that terminate their reporting obligations 
under proposed Rule 12h-6 by having them publish required materials on 
their Internet Web sites instead of submitting materials to the 
Commission on an ongoing basis.
    The proposed amendment to Rule 12g3-2(d) would except from its 18-
month prohibition a foreign private issuer that receives the Rule 12g3-
2(b) exemption pursuant to new proposed Rule 12g3-2(e). As proposed, a 
foreign private issuer that has filed a Form 15F with regard to a class 
of equity securities would receive the Rule 12g3-2(b) exemption 
immediately upon the effective date of the termination of its Exchange 
Act reporting obligations pursuant to Rule 12h-6.\102\ Thereafter, a 
foreign private issuer would have to publish in English on its Internet 
Web site the home country materials that it is required to furnish on a 
continuous basis \103\ under Rule 12g3-2(b).\104\ If a foreign private 
issuer's primary trading market has an electronic information delivery 
system that is generally available to the public, the issuer instead 
could publish its home country materials in English through that 
system.\105\
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    \102\ See proposed Exchange Act Rule 12g3-2(e)(1).
    \103\ Proposed Rule 12g3-2(e)(2).
    \104\ Under Rule 12g3-2(b), a foreign private issuer must 
furnish information that it: (a) has made or is required to make 
public under the laws of its incorporation, organization or 
domicile; (b) has filed or is required to file with a non-U.S. stock 
exchange on which its securities are traded and which has been made 
public by that exchange; and (c) has distributed or is required to 
distribute to its security holders. See Exchange Act Rules 12g3-
2(b)(1)(i) and (iii) (17 CFR 240.12g3-2(b)(1)(i) and (iii)).
    \105\ For example, a Canadian issuer would be able to fulfill 
its Exchange Act Rule 12g3-2(e) requirements by filing its home 
country documents through the Canadian Securities Administrators' 
System for Electronic Document Analysis and Retrieval (``SEDAR'').
---------------------------------------------------------------------------

    Proposed Exchange Act Rule 12g3-2(e) would clarify that, at a 
minimum, in order to satisfy the conditions of the exemption, a foreign 
private issuer would have to publish electronically English 
translations of the following home country documents:
     Its annual report, including or accompanied by annual 
financial statements;
     Interim reports that include financial statements;
     Material press releases; and
     All other material communications and documents 
distributed directly to security holders of each class of securities to 
which the exemption relates.\106\
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    \106\ Note 1 to proposed Rule 12g3-2(e). Exchange Act Rule 12g3-
2(b)(3) (17 CFR 240.12g3-2(b)(3)) currently provides that the 
information required to be furnished under the Rule 12g3-2(b) 
exemption is that which is material to an investment decision. This 
materiality standard would continue to apply to Rule 12g3-2(b) 
materials furnished electronically under proposed Rule 12g3-2(e).
---------------------------------------------------------------------------

    Proposed Exchange Act Rule 12g3-2(e) would further condition the 
exemption on requiring a foreign private issuer to disclose in its Form 
15F the address of its Internet Web site or of the electronic 
information delivery system on which it will publish its home country 
materials.\107\ The purpose of this proposed extension of Rule 12g3-
2(b) is to provide U.S. investors with access to material information 
about an issuer of equity securities following its termination of 
reporting pursuant to proposed Rule 12h-6.\108\ In addition, an issuer 
would be able to maintain a sponsored ADR facility with respect to its 
securities.\109\ It also would facilitate resales of that issuer's 
securities to qualified institutional buyers under Rule 144A.\110\ 
Moreover, having a foreign private issuer's key home country documents 
posted in English on its Web site would assist U.S. investors who are 
interested in trading the issuer's securities on its home country 
exchange.\111\
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    \107\ There would be no obligation to amend the Form 15F to 
update the address of the Internet Web site or electronic 
information delivery system should it change subsequent to the 
effective date of an issuer's termination of reporting under 
proposed Rule 12h-6.
    \108\ Any post-termination trading of a foreign private issuer's 
securities in the United States would have to occur through over-
the-counter markets such as that maintained by the Pink Sheets, LLC 
since, as of April, 1998, the NASD and the Commission have 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).
    \109\ In order to establish an ADR facility, an issuer must 
register the ADRs on Form F-6 (17 CFR 239.36) under the Securities 
Act. The eligibility criteria for the use of Form F-6 include the 
requirement that the issuer have a reporting obligation under 
Exchange Act section 13(a) or have established the exemption under 
Rule 12g3-2(b).
    \110\ See Securities Act Rule 144A(d)(4) (17 CFR 
230.144A(d)(4)).
    \111\ Brokers currently are exempt from complying with certain 
information 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. See Release No. 34-41110 (February 25, 
1999), 64 FR 11124 (March 8, 1999).
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    The proposed extension of Rule 12g3-2(b) would apply to both a 
class of equity securities formerly registered under section 12(g) and 
one that formerly gave rise to section 15(d) reporting 
obligations.\112\ The Rule 12g3-2(b) exemption received under proposed 
Rule 12g3-2(e) would remain in effect for as long as the foreign 
private issuer satisfied the rule's electronic publication conditions 
or until the issuer registered a new class of securities under section 
12 or incurred section 15(d) reporting obligations by filing a new 
Securities Act registration statement, which became effective.\113\ 
However, absent a new effective Securities Act registration statement, 
under proposed Rule 12h-6, the termination of reporting obligations 
under section 15(d) would be permanent and would not be

[[Page 77703]]

conditioned on continued maintenance of the Rule 12g3-2(b) exemption.
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    \112\ Our primary authority for the proposed extension of Rule 
12g3-2(b) is Exchange Act Section 12(h) [15 U.S.C. 78l(h)].
    \113\ See proposed Rule 12g3-2(e)(3).
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    Currently foreign companies maintain the Rule 12g3-2(b) exemption 
by submitting to the Commission on an ongoing basis the material 
required by the rule. This material may only be submitted in paper 
format.\114\ Although the Commission's EDGAR database contains an entry 
signifying the receipt of paper documents, materials received in paper 
are not accessible through the EDGAR system. Because paper submissions 
are more difficult to access, we have proposed the amendment to Rule 
12g3-2, which relies on electronic access to a foreign company's home 
country securities documents, although not through the Commission's 
electronic database.
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    \114\ A non-Exchange Act reporting issuer that has successfully 
filed an application for the Rule 12g3-2(b) exemption must currently 
furnish its home country documents in paper because the application 
is analogous to one submitted for an exemption under Exchange Act 
section 12(h). See Regulation S-T Rule 101(c)(16) (17 CFR 
232.101(c)(16)).
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Comment Solicited

    We solicit comment on the proposed amendment to Rule 12g3-2(d) and 
on proposed new Rule 12g3-2(e).
     Should we require a foreign private issuer that has 
terminated its Exchange Act reporting with regard to a class of equity 
securities under proposed Rule 12h-6 to comply with the home country 
publication requirements under Rule 12g3-2(b) by immediately granting 
the issuer the Rule 12g3-2(b) exemption upon the effectiveness of its 
termination of reporting, as proposed?
     Should we instead permit but not require such a foreign 
private issuer to apply for the Rule 12g3-2(b) exemption following 
termination of reporting under proposed Rule 12h-6?
     Or should we leave unamended Rule 12g3-2(d) and require a 
foreign private issuer to wait 18 months before it could apply for the 
Rule 12g3-2(b) exemption?
     If we should extend the Rule 12g3-2(b) exemption to a 
foreign private issuer that has terminated its Exchange Act reporting 
under proposed Rule 12h-6, should we require the issuer to publish 
electronically on its Internet Web site the home country documents 
required to be furnished under Rule 12g3-2(b)?
     If so, should we also allow the issuer to publish its home 
country documents through an electronic information delivery system in 
its primary trading market?
     Should we permit the issuer either to publish the required 
home country documents electronically or submit them in paper to the 
Commission?
     Should we require the issuer only to submit the required 
home country documents in paper to the Commission as is currently the 
requirement for non-Exchange Act reporting companies that have received 
the Rule 12g3-2(b) exemption?
     Should we require a foreign private issuer that has 
received the Rule 12g3-2(b) exemption under proposed Rule 12g3-2(e) to 
publish electronically English translations of the home country 
documents listed in proposed Note 1 to that proposed rule?
     Should we exclude any of the specified home country 
documents from the English translation and electronic publication 
condition? Are there other home country documents not mentioned in the 
proposed rule that should be translated in English and published 
electronically?
     Should we require the issuer to post its home country 
documents in English on its Internet Web site for a specified period of 
time? For example, should the issuer be required to keep its annual 
report in English available on its Internet Web site for at least 1, 2 
or 3 or more years? Should the issuer be required to keep its material 
press releases in English for at least 6 months or a year?
    As proposed, foreign companies that obtain the Rule 12g3-2(b) 
exemption by filing a Form 15F would be able to maintain the exemption 
through their Web site postings without the need for submitting 
material to the Commission. We would continue to require all other 
foreign companies that have the Rule 12g3-2(b) exemption to submit the 
required materials in paper to the Commission. In light of developments 
relating to information dissemination and information technology, we 
solicit comments generally on the Exchange Act exemptive scheme for 
foreign private issuers.
     Should we modify the registration thresholds under Rule 
12g3-2(a) from 300 U.S. resident holders to some other measure?
     Does the Rule 12g3-2(b) exemption continue to serve a 
useful purpose for investors seeking information on foreign companies?
     Should we consider methods of compliance with Rule 12g3-
2(b), such as Web site postings, as an alternative to the submission of 
paper documents to the Commission? How would such alternative methods 
operate in practice, and how would Commission staff oversee compliance?
     Does oversight by Commission staff in this area continue 
to be necessary or appropriate and serve to further investor 
protection? Is such oversight necessary or appropriate for a company 
that has obtained the Rule 12g3-2(b) exemption after terminating its 
reporting obligations under proposed Rule 12h-6?
General Request for Comments
    We solicit comment on proposed Rule 12h-6, proposed Form 15F, 
proposed amendments to Rules 12g-4, 12h-3, 12g3-2(d) and 12g3-2(e) as 
well as to all other aspects of the proposed rule amendments. Here and 
throughout the release, when we solicit comment, we are interested in 
hearing from all interested parties, including members and 
representatives of the investing public, representatives of foreign 
companies and foreign industry groups, representatives of broker-
dealers, domestic issuers, and other participants in U.S. securities 
markets. We are further interested in learning from all parties what 
aspects of the rule proposal they deem essential, what aspects they 
believe are preferred but not essential, and what aspects they believe 
should be modified.

III. Paperwork Reduction Act Analysis

    This rule proposal contains ``collection of information'' 
requirements within the meaning of the Paperwork Reduction Act of 1995 
(``PRA'').\115\ We are submitting our proposal to the Office of 
Management and Budget (``OMB'') for review in accordance with the 
PRA.\116\ The titles of the affected collection of informations are 
Form 20-F (OMB Control No. 3235-0288), Form 40-F (OMB Control No. 3235-
0381), Form 6-K (OMB Control No. 3235-0116), and proposed new Form 
15F.\117\ An agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information such as Form 20-F 
or proposed new Form 15F unless it displays a currently valid OMB 
control number. Compliance with the disclosure requirements of proposed 
Form 15F and proposed Rule 12h-6,

[[Page 77704]]

which will affect the above collections of information, will be 
mandatory.
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    \115\ 44 U.S.C. 3501 et seq.
    \116\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
    \117\ A limited number of foreign private issuers file annual 
reports on Form 10-K. In voluntarily electing to file periodic 
reports using domestic issuer forms, these issuers seem to have 
closely aligned themselves with the U.S. market. For purposes of the 
Paperwork Reduction Analysis therefore, these issuers would appear 
unlikely to terminate their Exchange Act registration using proposed 
Rule 12h-6, and we have assumed that none of these companies would 
seek to use proposed Rule 12h-6. Foreign private issuers that file 
periodic reports using domestic issuer forms would, nonetheless, be 
eligible to use proposed Rule 12h-6.
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    Form 20-F sets forth the disclosure requirements for a foreign 
private issuer's annual report and registration statement under the 
Exchange Act as well as many of the disclosure requirements for a 
foreign private issuer's registration statements under the Securities 
Act. The Commission adopted Form 20-F pursuant to the Exchange Act and 
the Securities Act in order to provide investors with information about 
foreign private issuers that have registered securities with the 
Commission.
    Form 40-F sets forth the disclosure requirements regarding the 
annual report and registration statement under the Exchange Act for a 
Canadian issuer that is qualified to use the Multijurisdictional 
Disclosure System (``MJDS''). The Commission adopted Form 40-F pursuant 
to the Exchange Act in order to permit qualified Canadian issuers to 
prepare their Exchange Act annual reports and registration statements 
based primarily in accordance with Canadian requirements.
    Form 6-K is used by a foreign private issuer to report material 
information that it:
     Makes or is required to make public under the laws of the 
jurisdiction of its incorporation, domicile or organization (its ``home 
country'');
     Files or is required to file with its home country stock 
exchange that is made public by that exchange; or
     Distributes or is required to distribute to its security 
holders.

A foreign private issuer may attach annual reports to security holders, 
statutory reports, press releases and other documents as exhibits or 
attachments to the Form 6-K. The Commission adopted Form 6-K under the 
Exchange Act in order to keep investors informed on an ongoing basis 
about foreign private issuers that have registered securities with the 
Commission.
    Proposed Form 15F is the form that a foreign private issuer would 
have to file when terminating its Exchange Act reporting obligations 
under proposed Exchange Act Rule 12h-6. Proposed Form 15F would require 
a filer to disclose information that would help investors understand 
the foreign private issuer's decision to terminate its Exchange Act 
reporting obligations and assist Commission staff in assessing whether 
the Form 15F filer is eligible to terminate its Exchange Act reporting 
obligations pursuant to proposed Rule 12h-6.
    The hours and costs associated with preparing, filing and sending 
Forms 20-F, 40-F, and 6-K and proposed Form 15F constitute reporting 
and cost burdens imposed by those collections of information. We have 
based our estimates of the effects that the rule proposal would have on 
those collections of information primarily on our review of the most 
recently completed PRA submissions for Forms 20-F, 40-F, and 6-K, on 
those forms' requirements and on the proposed requirements of Form 15F, 
and on relevant information, for example, concerning comparative 
trading volume and public float for numerous filers of those forms.
    The estimated effects of the rule proposal reflect the initial 
phase-in period of the Exchange Act termination process under proposed 
Rule 12h-6 and under proposed Form 15F during the first year of use. We 
expect that most if not all of these estimated effects will occur on a 
one time, rather than a recurring, basis. While we expect that some 
issuers will terminate their Exchange Act reporting under proposed Rule 
12h-6 and file Form 15F in subsequent years, we do not expect the 
resulting burdens and costs to be of the same magnitude as the burdens 
and costs currently expected during the first year.

A. Form 20-F

    We estimate that currently foreign private issuers file 1,100 Form 
20-Fs each year. We further estimate that it requires a total of 
2,893,000 annual burden hours to produce these Form 20-Fs or 2,630 
hours on average for each Form 20-F. We estimate that foreign private 
issuers incur 25% of the burden, or 723,250 annual burden hours, 
required to produce the Form 20-Fs. We further estimate that outside 
firms, including legal counsel, accountants and other advisors, account 
for 75% of the burden required to produce the Form 20-Fs at an average 
cost of $300 per hour for a total annual cost of $650,925,000.
    Proposed Rule 12h-6 would permit a foreign private issuer to 
terminate its Exchange Act reporting obligations, including the 
obligation to file an annual report on Form 20-F, regarding a class of 
securities under section 12(g) or pursuant to section 15(d) of the 
Exchange Act. It is possible that, if adopted, as many as 15% of Form 
20-F filers could terminate their Exchange Act reporting obligations 
under the rule proposal in the first year. However, if adopted, the 
rule proposal also may encourage some foreign companies to enter the 
Exchange Act registration and reporting regime for the first time. As a 
result, during this same period, the number of Form 20-F annual reports 
filed could increase by 5%, leading to a net decrease of 10% for Form 
20-Fs filed over this same period. This would result in a decrease for 
this 1 year period in:
     The number of Form 20-Fs filed by 110 to 990 Form 20-Fs;
     The total number of burden hours for Form 20-F by 289,300 
to 2,603,700 hours;
     The total number of burden hours incurred by foreign 
private issuers to produce Form 20-F by 72,325 to 650,925 hours; and
     The total cost incurred by outside firms to produce Form 
20-F by $65,092,500 to $585,832,500.

B. Form 40-F

    We estimate that foreign private issuers file 134 Form 40-Fs each 
year. We further estimate that it requires a total of 57,240 annual 
burden hours to produce these Form 40-Fs or 427 hours on average for 
each Form 40-F. We estimate that foreign private issuers incur 25% of 
the burden, or 14,310 annual burden hours, required to produce the Form 
40-Fs. We further estimate that outside firms, including legal counsel, 
accountants and other advisors, account for 75% of the burden required 
to produce the Form 40-Fs at an average cost of $300 per hour for a 
total annual cost of $12,879,000.
    Proposed Rule 12h-6 would permit a foreign private issuer filing on 
the MJDS forms to terminate its Exchange Act reporting obligations, 
including the obligation to file its annual report on Form 40-F. It is 
possible that, if adopted, as many as 10% of Form 40-F filers could 
terminate their Exchange Act reporting obligations under the rule 
proposal in the first year. However, if adopted, the rule proposal may 
encourage some foreign companies to enter the Exchange Act registration 
and reporting regime for the first time, including some that would be 
eligible to use the MJDS forms, including the Form 40-F annual report. 
As a result, over this same period, the number of Form 40-F annual 
reports filed could increase by approximately 3%, so that there would 
be a net decrease of 7% for Form 40-Fs filed over this same period. 
This would result in a decrease for this 1 year period in:
     The number of Form 40-Fs filed by 9 to 125 Form 40-Fs;
     The total number of burden hours for Form 40-F by 3,865 to 
53,375 hours;
     The total number of burden hours incurred by foreign 
private issuers to

[[Page 77705]]

produce Form 40-F by 966 to 13,344; and
     The total cost incurred by outside firms to produce Form 
40-F by $869,625 to $12,009,375.

C. Form 6-K

    We estimate that foreign private issuers file 14,661 Form 6-Ks each 
year. We further estimate that it requires a total of 127,197 annual 
burden hours for the Form 6-K, of which 9,909 annual burden hours 
relate to the work required to translate foreign language text into 
English. We estimate that foreign private issuers incur 75% of the 
burden of preparing the Form 6-K, not including the English translation 
work (87,966 hours) and 25% of the burden required to translate foreign 
language text into English (2,477 hours), which results in 90,443 total 
annual foreign private issuer burden hours to produce the Form 6-Ks, or 
6.2 burden hours on average for each response.
    We estimate that outside firms, including legal counsel, 
accountants and other advisors, account for 25% of the burden required 
to produce the Form 6-Ks, not including the English translation work, 
(29,322 hours) at an average cost of $300 per hour for an annual cost 
of $8,796,600. We estimate that each year 367 Form 6-K filings result 
in costs to translate into English 8 pages of foreign language text per 
filing. We estimate that outside firms incur 75% of these English 
translation costs at a cost of $75 per page, which results in 
additional annual costs of $165,150 for outside firms, and total annual 
costs of $8,961,750 incurred by outside firms in the preparation and 
translation of the Form 6-K.
    Proposed Rule 12h-6 would permit a foreign private issuer to 
terminate its Exchange Act reporting obligations, including the 
obligation to file Form 6-K reports. It is possible that, if adopted, 
as many as 14% of Form 6-K filers (including those that file their 
Exchange Act annual reports either on Form 20-F or Form 40-F) might 
terminate their Exchange Act reporting obligations under the rule 
proposal in the first year. However, if adopted, the rule proposal 
could encourage some foreign companies to enter the Exchange Act 
registration and reporting regime for the first time. As a result, over 
the same period, the number of Form 6-K reports filed could increase by 
as much as 5%, resulting in a net decrease of 9% for Form 6-Ks filed 
over this same period. This would result in a decrease for this 1 year 
period in:
     The number of Form 6-Ks filed by 1,319 to 13,342 Form 6-
Ks;
     The total number of burden hours for Form 6-K by 10,552 to 
116,645; \118\
---------------------------------------------------------------------------

    \118\ Although the total number of burden hours required to 
produce the 1,319 Form 6-Ks amounts to 11,443 hours, 891 of these 
hours relate to the burden of translating Form 6-K documents into 
English. We have subtracted these hours from the total burden hours 
expected to be reduced by the proposal (11,443-891 = 10,552) because 
we expect a foreign private issuer to incur approximately the same 
burden hours and costs related to English translation work when it 
fulfills the requirement under the rule proposal to publish its home 
country documents required under Exchange Act Rule 12g3-2(b) in 
English on its Internet Web site. Those home country documents are 
substantially the same as the home country documents that a 
reporting foreign private issuer must furnish under cover of a Form 
6-K.
---------------------------------------------------------------------------

     The total number of burden hours incurred by foreign 
private issuers to produce Form 6-K by 7,502 to 82,941 hours (of which 
2,272 relate to English translation burden hours); and
     The total cost incurred by outside firms to produce Form 
6-K by $744,450 to $8,217,300.\119\
---------------------------------------------------------------------------

    \119\ We have derived these estimated costs as follows: 116,645-
9,087 = 107,558 burden hours related to non-English translation 
work. 107,558 x 0.25 = 26,890 burden hours borne by outside firms. 
26,826,90 hours x $300/hour = $8,067,000 000 in costs borne by 
outside firms for non-English translation work. In addition, we 
estimate outside firms would incur an additional $150,300 in costs 
relating to English translation work, derived as follows: 334 Form 
6-Ks would each require 8 pages of foreign language text to be 
translated (a total of 2,672 pages) at a cost of $75 per page 
($200,400), of which outside firms would incur 75% ($200,400 400 x 
.75 = $150,300). $8,067,000 + $150,300 = $8,217,300.
---------------------------------------------------------------------------

D. Proposed Form 15F

    The rule proposal would further require a foreign private issuer 
seeking to terminate its Exchange Act reporting obligations under 
proposed Rule 12h-6 to file a Form 15F. As proposed, Form 15F would 
require a foreign private issuer to provide information regarding 
several items, including its Exchange Act reporting history, its 
primary trading market, and its U.S. securities market.
    It is possible that as many as 178 foreign private issuers may file 
Form 15F if adopted during the initial 1 year period. We estimate that 
it will take approximately 30 burden hours on average to produce each 
Form 15F. The filing of 178 forms 15F would take a total of 5,340 
burden hours. We estimate that foreign private issuers would incur 25% 
of this burden or approximately 1,335 burden hours to produce the Form 
15Fs. We further estimate that outside firms, including legal counsel, 
financial analysts and other advisors, would account for 75% of the 
burden required to produce the Form 15Fs at an average cost of $300 per 
hour for a total cost of $1,201,500.

Comment Solicited

    We solicit comment on the expected effects of the rule proposal on 
Form 20-F, Form 40-F, and Form 6-K and on the expected effects of 
proposed Form 15F under the PRA. In particular, we solicit comment on:
     The extent to which foreign private issuers would respond 
to proposed Rule 12h-6 by electing to file Form 15F to terminate their 
registration and reporting in the U.S.;
     How many foreign private issuers would join the Exchange 
Act registration and reporting regime for the first time as a result of 
the proposed rule;
     How accurate are our burden hour and cost estimates for 
Forms 20-F, 40-F and 6-K expected to result from proposed Rule 12h-6;
     How accurate are our burden hour and cost estimates for 
proposed Form 15F; and
     Whether most of the effects of proposed Rule 12h-6 would 
occur during the first year, as expected, or over a longer period, for 
example, during the first two or three years.
    We further solicit comment in order to:
     Evaluate whether the proposed collections of information 
are necessary for the proper performance of the functions of the 
Commission, including whether the information will have practical 
utility;
     Determine whether there are ways to enhance the quality, 
utility, and clarity of the information to be collected;
     Evaluate whether there are ways to minimize the burden of 
the collections of information on those who respond, including through 
the use of automated collection techniques or other forms of 
information technology; and
     Evaluate whether the rule proposal will have any effects 
on any other collections of information not previously identified in 
this section.
    Any member of the public may direct to us any comments concerning 
these burden and cost estimates and any suggestions for reducing the 
burdens and costs. Persons who desire to submit comments on the 
collections of information requirements should direct their comments to 
the OMB, Attention: Desk Officer for the Securities and Exchange 
Commission, Office of Information and Regulatory Affairs, Washington, 
DC 20503, and send a copy of the comments to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303, with reference to File No. S7-12-05.

[[Page 77706]]

Requests for materials submitted to the OMB by us with regard to these 
collections of information should be in writing, refer to File No. S7-
12-05, and be submitted to the Securities and Exchange Commission, 
Records Management, Office of Filings and Information Services, 100 F 
Street, NE., Washington, DC 20549. Because the OMB is required to make 
a decision concerning the collections of information between 30 and 60 
days after publication, your comments are best assured of having their 
full effect if the OMB receives them within 30 days of publication.

IV. Cost-Benefit Analysis

A. Expected Benefits

    Proposed Rule 12h-6 and the accompanying proposed rule amendments 
would benefit investors to the extent that they remove a disincentive 
for foreign companies that are not currently Exchange Act reporting 
companies to register their equity and debt securities with the 
Commission by lessening their concerns that the Exchange Act reporting 
system is one that is difficult to leave once a company joins it. In so 
doing, the rule proposal would help encourage more foreign companies to 
initiate participation in U.S. public capital markets while providing 
U.S. investors with the protections afforded by our Exchange Act 
reporting regime.
    The rule proposal would offer foreign firms stronger incentives to 
enter into our Exchange Act reporting regime by lowering the cost of 
exiting from that regime. Investors would benefit because they 
generally receive a high level of investor protection from trading in 
securities registered with the Commission. In addition, U.S. investors 
typically incur lower transaction costs when trading on U.S. exchanges 
relative to foreign exchanges. U.S. investors may further benefit as 
more foreign companies list on U.S. exchanges, to the extent that 
trading on U.S. exchanges exhibit economies of scale or scope.
    To offer incentives for foreign companies to enter U.S. public 
capital markets, the proposed rules would provide foreign Exchange Act 
reporting companies with lower costs of compliance, which may benefit 
foreign companies and their investors. These costs of compliance are 
incurred directly by the foreign companies, yet accrue to investors in 
those foreign companies.
    The proposal may result in foreign private issuers incurring lesser 
costs of Exchange Act compliance in three possible ways. The first is 
that it would decrease the issuer's cost of verifying whether it 
qualifies for Exchange Act termination of registration and reporting. 
That is, the rule proposal would enable a foreign private issuer to 
rely on the assistance of an independent information services provider 
when making that determination. The option to hire an independent 
information services provider may allow some foreign firms to save 
costs, which would benefit U.S. and foreign investors. Moreover, 
proposed Rule 12h-6 would limit the number of jurisdictions in which a 
foreign private issuer would have to search for the amount of 
securities represented by accounts of customers resident in the United 
States held by brokers, dealers, banks and other nominees when 
determining whether it qualifies for termination of reporting. The 
current rules require a foreign private issuer to conduct a worldwide 
search for such U.S. customer accounts.
    Second, once having terminated its reporting obligations under 
proposed Rule 12h-6, a foreign company would no longer be required to 
incur costs associated with producing an Exchange Act annual report or 
having to submit Form 6-K interim reports.
    Third, a foreign private issuer would face lower costs of 
compliance under proposed Rule 12h-6 and the accompanying rule 
amendments than under the current regime because the proposed rules 
would allow the foreign firm to terminate permanently its Exchange Act 
reporting obligations regarding a class of equity or debt securities. 
Accordingly, such a terminating foreign private issuer would be able to 
avoid the costs associated with continued annual verification that its 
number of holders of record remains below 300.

B. Expected Costs

    Investors could incur costs from the proposed rules to the extent 
that foreign companies respond by terminating their Exchange Act 
registration and reporting obligations with respect to their equity and 
debt securities. First, investors could face lesser investor protection 
upon Exchange Act termination. Second, around or after the time of 
Exchange Act termination, investors may incur higher costs from trading 
in the equity and debt securities.
    Depending on the implementation date of proposed Rule 12h-6, it is 
possible that by quickly terminating their Exchange Act registration 
and reporting, some current foreign registrants could avoid other 
recent U.S. regulation, such as the Sarbanes-Oxley Act.\120\ If the 
initial costs of implementing the Sarbanes-Oxley Act are high, then the 
proposal might induce some foreign registrants to terminate their 
Exchange Act registration and reporting under Rule 12h-6 as soon as 
possible. To the extent that the Sarbanes-Oxley Act is beneficial to 
investors, they would be harmed if a current foreign registrant does 
not implement the Sarbanes-Oxley Act.
---------------------------------------------------------------------------

    \120\ Pub. L. 107-204, 116 Stat. 745 (2002).
---------------------------------------------------------------------------

    Some U.S. investors might seek to trade in the equity securities of 
a foreign company following its termination of Exchange Act reporting 
under proposed Rule 12h-6. Those U.S. investors seeking to trade the 
former reporting company's securities in the U.S. unlisted over the 
counter market such as the one administered by Pink Sheets, LLC could 
encounter additional costs of transacting as a result of the proposed 
rule to the extent that brokerage fees and other costs incurred are 
higher than if the foreign company had continued to have a class of 
securities registered with the Commission.
    Those U.S. investors seeking to trade the former reporting 
company's securities in its primary trading market could also incur 
additional costs. For example, those U.S. investors who held the 
securities in the form of ADRs could incur costs associated with the 
depositary's conversion of the ADRs into ordinary shares.\121\ 
Moreover, some U.S. investors could incur costs associated with finding 
and contracting with a new broker-dealer who is able to trade in the 
foreign reporting company's primary trading market. U.S. investors may 
face additional costs due to cost of currency conversion and higher 
transaction costs trading the securities in a foreign market.
---------------------------------------------------------------------------

    \121\ A foreign company could terminate its ADR facility whether 
or not it is an Exchange Act registrant, and proposed Rule 12h-6 
does not require the termination of ADR facilities. In fact, by 
granting foreign private issuers the Rule 12g3-2(b) exemption 
immediately upon their termination of reporting with regard to a 
class of equity securities, the rule proposal would enable foreign 
private issuers to retain their ADR facilities as unlisted 
facilities following their termination of reporting under proposed 
Rule 12h-6. Therefore, the proposed rule should not significantly 
increase costs to investors in this area.
---------------------------------------------------------------------------

    Some investors who wish to make investment decisions regarding 
former Exchange Act reporting foreign companies also may incur costs to 
the extent that the information provided by such companies pursuant to 
any home country regulations is different from that which currently is 
required under the Exchange Act. Such investors could incur costs 
associated with hiring an attorney or investment adviser, to the

[[Page 77707]]

extent that they have not already done so, to explain the material 
differences, if any, between a foreign company's home country reporting 
requirements, as reflected in its home country annual report posted on 
its Internet Web site, and Exchange Act reporting requirements.
    Following termination of reporting under proposed Rule 12h-6, a 
foreign private issuer would have to publish electronically its home 
country documents in English required under Rule 12g3-2(b) on its 
Internet web site or through an electronic information delivery system 
that is generally available to the public in its primary trading 
market. Since the home country materials required under Rule 12g3-2(b) 
are substantially the same as the home country materials required to be 
submitted under cover of Form 6-K on EDGAR, we do not expect a foreign 
private issuer to incur any additional significant costs resulting from 
the proposed rule's electronic publishing requirement.

Comment Solicited

    We solicit comment on the costs and benefits to U.S. and other 
investors, foreign private issuers, and others who may be affected by 
proposed Rule12h-6, proposed Form 15F and the associated proposed rule 
amendments. We request your views on the costs and benefits described 
above as well as on any other costs and benefits that could result from 
adoption of the rule proposal. We also request data to quantify the 
costs and value of the benefits identified. In particular, we solicit 
comment on:
     The number of current foreign private issuers that are 
expected to terminate their Exchange Act registration and reporting as 
a result of proposed Rule 12h-6 and the accompanying rule proposals and 
the timing of such termination;
     The number of prospective foreign companies that are 
expected to join the Exchange Act reporting regime as a result of the 
rule proposals and the timing of such intial registration and 
reporting;
     Whether a U.S. investor would incur costs by trading a 
foreign company's securities through the U.S. unlisted over-the-counter 
market such as the one administered by the Pink Sheets, LLC following 
the foreign company's termination of reporting under the proposed 
rules, and, if so, what costs;
     Whether a U.S. investor would incur costs by trading a 
foreign company's securities in its home country market following the 
company's termination of reporting under the proposed rules and, if so, 
what costs;
     Whether some foreign private issuers would choose to 
terminate quickly their Exchange Act reporting obligations under 
proposed Rule 12h-6 to avoid having to comply with the Sarbanes-Oxley 
Act and, if so, whether that should affect the rule proposals; and
     Whether investors would benefit both directly and 
indirectly from the rule proposals, as discussed in this section.

V. Consideration of Impact on the Economy, Burden on Competition and 
Promotion of Efficiency, Competition and Capital Formation Analysis

    For purposes of the Small Business Regulatory Enforcement Fairness 
Act of 1996 (``SBREFA''),\122\ we solicit data to determine whether the 
proposals constitute a ``major'' rule. Under SBREFA, a rule is 
considered ``major'' where, if adopted, it results or is likely to 
result in:
---------------------------------------------------------------------------

    \122\ Pub. L. 104-121, Title II, 110 Stat. 857 (1996) (codified 
in various sections of 5 U.S.C., 15 U.S.C. and as a note to 5 U.S.C. 
601).
---------------------------------------------------------------------------

     An annual effect on the economy of $100 million or more 
(either in the form of an increase or a decrease);
     A major increase in costs or prices for consumers or 
individual industries; or
     Significant adverse effects on competition, investment or 
innovation.
    We request comment on the potential impact of the proposals on the 
economy on an annual basis. Commenters are requested to provide 
empirical data and other factual support for their views if possible.
    When adopting rules under the Exchange Act, Section 23(a)(2) of the 
Exchange Act \123\ requires us to consider the impact that any new rule 
would have on competition. In addition, Section 23(a)(2) prohibits us 
from adopting any rule that would impose a burden on competition not 
necessary or appropriate in furtherance of the purposes of the Exchange 
Act. Furthermore, when engaging in rulemaking that requires the 
Commission to consider or determine whether an action is necessary or 
appropriate in the public interest, Section 3(f) of the Exchange Act 
\124\ requires the Commission to consider whether the action will 
promote efficiency, competition and capital formation.
---------------------------------------------------------------------------

    \123\ 15 U.S.C. 78w(a)(2).
    \124\ 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    Proposed Rule 12h-6, proposed Form 15F and the other proposed rule 
amendments would encourage foreign private issuers to register their 
equity and debt securities with the Commission by reducing concerns of 
some foreign private issuers that our Exchange Act reporting system is 
difficult to leave once one joins it. By providing increased 
flexibility for foreign private issuers regarding our Exchange Act 
reporting system, the proposed rules would encourage foreign companies 
to participate in U.S. capital markets as Exchange Act reporting 
companies to the benefit of investors. In so doing, the proposed rules 
should foster increased competition between domestic and foreign firms 
for investors in U.S. capital markets. Moreover, by requiring a foreign 
private issuer that has terminated its Exchange Act reporting under the 
proposed rules to publish its home country documents required under 
Exchange Act Rule 12g3-2(b) in English on its Internet web site or 
through an electronic information delivery system that is generally 
available to the public in its primary trading market, the proposed 
rules would help ensure that U.S. investors continue to have ready 
access to material information in English about the foreign private 
issuer. Thus, the proposed rules should foster increased efficiency in 
the trading of the issuer's securities for U.S. investors following the 
issuer's termination of Exchange Act reporting.
    We solicit comment on whether the proposed rules would impose a 
burden on competition or whether they would promote efficiency, 
competition and capital formation. Commenters are requested to provide 
empirical data and other factual support for their views if possible.

VI. Regulatory Flexibility Act Certification

    The Securities and Exchange Commission hereby certifies, pursuant 
to 5 U.S.C. 605(b), that proposed Rule 12h-6 and proposed Form 15F 
under the Exchange Act, the proposed amendments to Rules 12g3-2, 12g-4 
and 12h-3 under the Exchange Act, and the proposed amendments to Rule 
30-1 of its Delegation of Authority rules and Rule 101 of Regulation S-
T, if adopted, would not have a significant economic impact on a 
substantial number of small entities for purposes of the Regulatory 
Flexibility Act. The reason for this certification is as follows.
    Proposed Rule 12h-6, proposed Form 15F and the accompanying 
proposed rule amendments would permit the termination of Exchange Act 
reporting by a foreign private issuer regarding a class of equity 
securities under either

[[Page 77708]]

Exchange Act section 12(g) or section 15(d) for which there is little 
U.S. investor interest. The proposed rules would further permit a 
foreign private issuer that seeks termination of reporting regarding a 
class of equity or debt securities to also terminate its section 15(d) 
reporting obligations regarding a class of debt securities as long as 
it meets conditions similar to those currently required for suspending 
reporting obligations under section 15(d). The proposed rule amendments 
would also automatically extend the Exchange Act Rule 12g3-2(b) 
exemption to a foreign private issuer that has terminated its Exchange 
Act reporting obligations with regard to a class of equity securities 
pursuant to proposed Rule 12h-6 on the condition that it publish 
material information required by its home country in English on its 
Internet Web site or through an electronic information delivery system 
that is generally available to the public in its primary trading 
market.
    Because proposed Rule 12h-6 and the accompanying rule amendments 
would only apply to foreign private issuers, they would directly affect 
only foreign companies and not domestic companies. Similarly, proposed 
Form 15F would only affect foreign companies since only foreign private 
issuers would be permitted to use this form.
    Based on an analysis of the language and legislative history of the 
Regulatory Flexibility Act, Congress did not intend that the Act apply 
to foreign issuers. Accordingly, the entities directly affected by the 
proposed rule and form amendments will fall outside the scope of the 
Act. For this reason, proposed Exchange Act Rule 12h-6, proposed Form 
15F, and the accompanying proposed rule amendments should not have a 
significant economic impact on a substantial number of small entities.
    We encourage written comments regarding this certification. We 
request in particular that commenters describe the nature of any impact 
on small entities and provide empirical data to support the extent of 
the impact.

VII. Statutory Basis and Text of Rule Amendments

    We propose to amend Rule 30-1 of Part 200, Rule 101 of Regulation 
S-T, and Exchange Act Rules 12g3-2, 12g-4 and 12h-3, and to add 
Exchange Act Rule 12h-6 and Form 15F under the authority in Sections 6, 
7, 10 and 19 of the Securities Act \125\ and Sections 3(b), 12, 13, 23 
and 36 of the Exchange Act.\126\
---------------------------------------------------------------------------

    \125\ 15 U.S.C. 77f, 77g, 77h, 77j, and 77s.
    \126\ 15 U.S.C. 78c, 78l, 78m, 78w, and 78mm.
---------------------------------------------------------------------------

Text of Proposed Rule Amendments

List of Subjects

17 CFR Part 200

    Administrative practice and procedure, Authority delegations 
(Government agencies).

17 CFR Parts 232, 240 and 249

    Reporting and recordkeeping requirements, Securities.

    In accordance with the foregoing, we propose to amend Title 17, 
Chapter II of the Code of Federal Regulations as follows.

PART 200--ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND 
REQUESTS

    1. The authority citation for part 200 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77s, 77o, 77sss, 78d, 78d-1, 78d-2, 78w, 
78ll(d), 78mm, 79t, 80a-37, 80b-11, and 7202, unless otherwise 
noted.
* * * * *
    2. Amend Sec.  200.30-1 by adding paragraph (e)(17) to read as 
follows:


Sec.  200.30-1  Delegation of authority to Director of Division of 
Corporation Finance.

* * * * *
    (e) * * *
    (17) At the request of a foreign private issuer, pursuant to Rule 
12h-6 (Sec.  240.12h-6 of this chapter), to accelerate the termination 
of the registration of a class of securities under section 12(g) of the 
Act (15 U.S.C. 78l(g)) or the duty to file reports under section 15(d) 
of the Act (15 U.S.C. 78o(d)).
* * * * *

PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR 
ELECTRONIC FILINGS

    3. The authority citation for part 232 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 77sss(a), 
78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll(d), 79t(a), 80a-8, 80a-
29, 80a-30, 80a-37, and 7201 et seq.; and 18 U.S.C. 1350.
* * * * *
    4. Amend Sec.  232.101 by:
    a. Removing the word ``and'' at the end of paragraph (a)(1)(x);
    b. Removing the period and adding ``; and'' at the end of paragraph 
(a)(1)(xi); and
    c. Adding paragraph (a)(1)(xii).
    The additions read as follows:


Sec.  232.101  Mandated electronic submissions and exceptions.

    (a) * * *
    (1) * * *
    (xii) Forms 15 and 15F (Sec.  249.323 and Sec.  249.324 of this 
chapter).
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

    5. The authority citation for part 240 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 
78w, 78x, 78ll, 78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-
3, 80b-4, 80b-11, and 7201 et seq.; and 18 U.S.C. 1350, unless 
otherwise noted.
* * * * *
    6. Amend Sec.  240.12g3-2 by revising paragraph (d)(1) and adding 
paragraph (e) to read as follows:


Sec.  240.12g3-2  Exemptions for American depositary receipts and 
certain foreign securities.

* * * * *
    (d) * * *
    (1) Securities of a foreign private issuer that has or has had 
during the prior eighteen months any securities registered under 
section 12 of the Act or a reporting obligation (suspended or active) 
under section 15(d) of the Act (other than arising solely by virtue of 
the use of Form F-7, F-8, F-9, F-10 or F-80), except as provided by 
paragraph (e) of this section;
* * * * *
    (e)(1) A foreign private issuer that has filed a Form 15F (Sec.  
249.324 of this chapter) pursuant to Sec.  240.12h-6 shall receive the 
exemption provided by paragraph (b) of this section for a class of 
equity securities immediately upon the effectiveness of the termination 
of registration of that class of securities under section 12(g) of the 
Act (15 U.S.C. 78l(g)) or the termination of the duty to file reports 
regarding that class of securities under section 15(d) of the Act (15 
U.S.C. 78o(d)), or both.
    (2) Notwithstanding any provision of Sec.  240.12g3-2(b), in order 
to satisfy the conditions of the Sec.  240.12g3-2(b) exemption received 
under this paragraph, the issuer shall publish in English the 
information required under paragraph (b)(1)(iii) of this section on its 
Internet Web site or through an electronic information delivery system 
generally available to the public in its primary trading market.
    (3) The Sec.  240.12g3-2(b) exemption received under this paragraph 
will remain in effect for as long as the foreign private issuer 
satisfies the electronic publication condition of paragraph (e)(2) of 
this section or until

[[Page 77709]]

the issuer registers a class of securities under section 12 of the Act 
or incurs reporting obligations under section 15(d) of the Act 
regarding securities that were not the subject of the Form 15F.
    Notes to Paragraph (e): 1. In order to maintain the Sec.  240.12g3-
2(b) exemption obtained under this paragraph, at a minimum, a foreign 
private issuer shall electronically publish English translations of the 
following documents required to be furnished under paragraph 
(b)(1)(iii) of this section if in a foreign language:
    a. Its annual report, including or accompanied by annual financial 
statements;
    b. Interim reports that include financial statements;
    c. Press releases; and
    d. All other communications and documents distributed directly to 
security holders of each class of securities to which the exemption 
relates.
    2. Primary trading market has the same meaning as under Sec.  
240.12h-6(d).
    3. A foreign private issuer shall disclose in the Form 15F the 
address of its Internet Web site or of the electronic information 
delivery system in its primary trading market on which it will publish 
the information required under paragraph (b)(1)(iii) of this section. 
An issuer need not update the Form 15F to reflect a change in that 
address.
    7. Amend Sec.  240.12g-4 by:
    a. Removing the authority citations following the section; and
    b. Revising paragraph (a) to read as follows:


Sec.  240.12g-4  Certifications of termination of registration under 
section 12(g).

    (a) Termination of registration of a class of securities under 
section 12(g) of the Act (15 U.S.C. 78l(g)) shall take effect 90 days, 
or such shorter period as the Commission may determine, after the 
issuer certifies to the Commission on Form 15 (17 CFR 249.323) that the 
class of securities is held of record by:
    (1) Less than 300 persons; or
    (2) Less than 500 persons, where the total assets of the issuer 
have not exceeded $10 million on the last day of each of the issuer's 
most recent three fiscal years.
* * * * *
    8. Amend Sec.  240.12h-3 by:
    a. Removing the authority citations following the section;
    b. Adding the word ``and'' at the end of paragraph (b)(1)(ii);
    c. Removing paragraph (b)(2), including the undesignated paragraph;
    d. Redesignating paragraph (b)(3) as (b)(2);
    e. Revising the cite ``paragraphs (b)(1)(ii) and (2)(ii)'' to read 
``paragraph (b)(1)(ii)'' in paragraph (c); and
    f. Revising the phrase ``criteria (i) and (ii) in either paragraph 
(b)(1) or (2)'' to read ``either criteria (i) or (ii) of paragraph 
(b)(1)'' in paragraph (d).
    9. Add Sec.  240.12h-6 to read as follows:


Sec.  240.12h-6  Certification by a foreign private issuer regarding 
the termination of registration of a class of securities under section 
12(g) or the duty to file reports under section 15(d).

    (a) A foreign private issuer may terminate the registration of a 
class of securities under section 12(g) of the Act (15 U.S.C. 78l(g)) 
or terminate the obligation under section 15(d) of the Act (15 U.S.C. 
78o(d)) to file or furnish reports required by section 13(a) of the Act 
(15 U.S.C. 78m(a)) with respect to a class of equity securities, or 
both, after certifying to the Commission on Form 15F (17 CFR 249.324) 
that:
    (1) The foreign private issuer has had reporting obligations under 
section 13(a) or 15(d) of the Act for the two years preceding the 
filing of the Form 15F, has filed or furnished all reports required for 
this period, and has filed at least two annual reports pursuant to 
section 13(a) of the Act;
    (2)(i) The foreign private issuer's securities have not been sold 
in the United States in a registered offering under the Securities Act 
of 1933 (15 U.S.C. 77a et seq.) during the preceding 12 months other 
than securities:
    (A) Sold to the issuer's employees; or
    (B) Sold by selling security holders in non-underwritten offerings;
    (ii) The foreign private issuer has not sold securities in 
unregistered offerings in the United States during the preceding 12 
months other than securities:
    (A) Sold to the issuer's employees;
    (B) Exempted from registration under section 3 of the Securities 
Act (15 U.S.C. 77c), except under section 3(a)(10) of that Act; or
    (C) Constituting obligations having a maturity of less than nine 
months at the time of issuance and offered and sold in transactions 
exempted from registration under section 4(2) of the Securities Act (15 
U.S.C. 77d(2));
    (3) The foreign private issuer has maintained a listing of the 
subject class of securities for the preceding two years on an exchange 
in its home country, which constitutes the primary trading market for 
the securities;
    (4) If the foreign private issuer is a well-known seasoned issuer, 
either:
    (i)(A) The average daily trading volume of the subject class of 
securities in the United States during a recent 12 month period has 
been no greater than 5 percent of the average daily trading volume of 
that class of securities in the issuer's primary trading market during 
the same period; and
    (B) United States residents held no more than 10 percent of the 
outstanding voting and non-voting equity securities, regarding which 
there is a reporting obligation under section 13(a) or 15(d) of the Act 
(15 U.S.C. 78m(a) or 78o(d)), held by the issuer's non-affiliates on a 
worldwide basis at a date within 60 days before the end of the same 12 
month period; or
    (ii) United States residents held no more than 5 percent of the 
outstanding voting and non-voting equity securities, regarding which 
there is a reporting obligation under section 13(a) or 15(d) of the 
Act, held by the issuer's non-affiliates on a worldwide basis at a date 
within 120 days before the filing date of the Form 15F;
    (5) If the foreign private issuer is not a well-known seasoned 
issuer, United States residents held no more than 5 percent of the 
outstanding voting and non-voting equity securities, regarding which 
there is a reporting obligation under section 13(a) or 15(d) of the Act 
(15 U.S.C. 78m(a) or 78(o)(d)), held by the issuer's non-affiliates on 
a worldwide basis at a date within 120 days before the filing date of 
the Form 15F; and
    (6) If the foreign private issuer does not meet the requirements of 
paragraph (a)(4) or (a)(5) of this section, at a date within 120 days 
before the filing date of the Form 15F, the class of equity securities 
is either held of record by:
    (i) Less than 300 persons on a worldwide basis; or
    (ii) Less than 300 persons resident in the United States.
    (b) A foreign private issuer may terminate its duty under section 
15(d) of the Act to file or furnish reports required by section 13(a) 
of the Act with respect to a class of debt securities after certifying 
to the Commission on Form 15F that:
    (1) The foreign private issuer has filed or furnished all reports 
required under section 15(d) of the Act, including at least one annual 
report pursuant to section 13(a) of the Act; and
    (2) At a date within 120 days before the filing date of the Form 
15F, the class of debt securities is either held of record by:
    (i) Less than 300 persons on a worldwide basis; or
    (ii) Less than 300 persons resident in the United States.
    (c) As a condition to termination of reporting under this section, 
a foreign private issuer must, not later than 15

[[Page 77710]]

business days before it files its Form 15F, publish a notice in the 
United States that discloses its intent to terminate its section 13 
reporting obligations regarding each class of securities under section 
12(g) or section 15(d) of the Act or both. The issuer must publish the 
notice through a means reasonably designed to provide broad 
dissemination of the information to the public in the United States. 
The issuer must also submit a copy of the notice either under cover of 
a Form 6-K (17 CFR 249.306) before or at the time of filing of the Form 
15F, or as an exhibit to the Form 15F.
    (d) Definitions. For the purpose of this section:
    (1) Affiliate has the same meaning as under Sec.  240.12b-2).
    (2) Debt security means any security other than an equity security 
as defined under Sec.  240.3a11-1, including non-participatory 
preferred stock, which is defined as non-convertible capital stock, the 
holders of which are entitled to a preference in payment of dividends 
and in distribution of assets on liquidation, dissolution, or winding 
up of the issuer, but are not entitled to participate in residual 
earnings or assets of the issuer.
    (3) Equity security has the same meaning as under Sec.  240.3a11-1.
    (4) Foreign private issuer has the same meaning as under Sec.  
240.3b-4.
    (5) Home country has the same meaning as under Sec.  249.220f.
    (6) Primary trading market means that at least 55 percent of the 
trading in the foreign private issuer's securities took place in, on or 
through the facilities of a securities market in a single foreign 
country during a recent 12 month period.
    (7) Recent 12 month period means a 12 calendar month period that 
ended no more than 60 days before the filing date of the Form 15F.
    (8) Well-known seasoned issuer means a well-known seasoned issuer 
as defined in Sec.  230.405 of this chapter that meets the requirements 
of paragraph (1)(i)(A) of that definition; provided, however, that the 
determination date of well-known seasoned issuer status shall be a date 
within 120 days of filing the Form 15F.
    (e) Counting method. When determining under this section the 
percentage of a foreign private issuer's outstanding equity shares held 
by its non-affiliates on a worldwide basis that are held by U.S. 
residents or the number of U.S. residents holding a foreign private 
issuer's equity or debt securities:
    (1) Use the method for calculating record ownership Sec.  240.12g3-
2(a), except that you may limit your inquiry regarding the amount of 
securities represented by accounts of customers resident in the United 
States to brokers, dealers, banks and other nominees located in:
    (i) The United States;
    (ii) The foreign private issuer's jurisdiction of incorporation, 
legal organization or establishment; and
    (iii) The jurisdiction of the foreign private issuer's primary 
trading market if different than the issuer's jurisdiction of 
incorporation, legal organization or establishment.
    (2) If, after reasonable inquiry, you are unable without 
unreasonable effort to obtain information about the amount of 
securities represented by accounts of customers resident in the United 
States, for purposes of this section, you may assume that the customers 
are the residents of the jurisdiction in which the nominee has its 
principal place of business.
    (3) You must count securities as owned by U.S. holders when 
publicly filed reports of beneficial ownership or information that is 
otherwise provided to you indicates that the securities are held by 
U.S. residents.
    (4) When calculating the number of your U.S. resident security 
holders under this section, you may rely in good faith on the 
assistance of an independent information services provider that in the 
regular course of its business assists issuers in determining the 
number of, and collecting other information concerning, their security 
holders.
    (f) Suspension of a foreign private issuer's duty to file reports 
under section 13(a) or section 15(d) of the Act shall occur immediately 
upon filing the Form 15F with the Commission. If there are no 
objections from the Commission, termination of the foreign private 
issuer's duty to file section 13 reports under section 15(d) of the Act 
or regarding a class of securities under section 12(g) of the Act shall 
take effect 90 days, or such shorter period as the Commission may 
determine, after the issuer has filed its Form 15F. However, if the 
Form 15F is subsequently withdrawn or denied, the issuer shall, within 
60 days after the date of the withdrawal or denial, file with or submit 
to the Commission all reports that would have been required had the 
issuer not filed the Form 15F.

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

    10. The authority citation for part 249 continues to read in part 
as follows:

    Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; and 18 U.S.C. 
1350, unless otherwise noted.
* * * * *
    11. Add Sec.  249.324 to read as follows:


Sec.  249.324  Form 15F, certification by a foreign private issuer 
regarding the termination of registration of a class of securities 
under section 12(g) or the duty to file reports under section 15(d).

    This form shall be filed by a foreign private issuer to disclose 
and certify the information on the basis of which it meets the 
requirements specified in Rule 12h-6 (Sec.  240.12h-6 of this chapter) 
to terminate a class of securities under section 12(g) of the Act (15 
U.S.C. 78l(g)) or the duty under section 15(d) of the Act (15 U.S.C. 
78(o)(d)) to file reports required by section 13 of the Act (15 U.S.C. 
78m(a)), or both. In each instance, unless the Commission objects, 
termination occurs 90 days, or such shorter time as the Commission may 
direct, after the filing of Form 15F.
    12. Add Form 15F (referenced in Sec.  249.324) to read as follows:


    (Note: The text of Form 15F will not appear in the Code of 
Federal Regulations.)


OMB APPROVAL
OMB Number: 3235-
Expires:
Estimated average burden hours per response * * *
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 15F
CERTIFICATION OF A FOREIGN PRIVATE ISSUER'S TERMINATION OF REGISTRATION 
OF A CLASS OF SECURITIES UNDER SECTION 12(g) OF THE SECURITIES EXCHANGE 
ACT OF 1934 OR ITS TERMINATION OF THE DUTY UNDER SECTION 15(d) TO FILE 
REPORTS REQUIRED BY SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number------------------------------------------------
-----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

-----------------------------------------------------------------------
(Address, including zip code, and telephone number, including area 
code, of registrant's principal executive offices)

-----------------------------------------------------------------------
(Title of each class of securities covered by this Form)

    Place an X in the appropriate box(es) to indicate the provision(s) 
relied upon to terminate the duty to file reports

[[Page 77711]]

under the Securities Exchange Act of 1934:

Rule 12h-6(a) [ballot]
Rule 12h-6(b) [ballot]
GENERAL INSTRUCTIONS

A. Who May Use Form 15F and When

    A foreign private issuer may file Form 15F, pursuant to Rule 12h-
6(a) (17 CFR 240.12h-6(a)) under the Securities Exchange Act of 1934 
(``Exchange Act''), when seeking to terminate:
     The registration of a class of securities under section 
12(g) of the Exchange Act and the corresponding duty to file or furnish 
reports required by section 13(a) of the Exchange Act;
     The obligation under section 15(d) of the Exchange Act to 
file or furnish reports required by section 13(a) of the Act regarding 
a class of equity securities; or
     Both of the above.
    A foreign private issuer may also file Form 15F, pursuant to Rule 
12h-6(b) (17 CFR 240.12h-6(b)), when seeking to terminate its reporting 
obligations under section 15(d) of the Exchange Act regarding a class 
of debt securities.

B. Certification Effected by Filing Form 15F

    By completing and signing this Form, the issuer certifies that:
     It meets all of the conditions for termination of Exchange 
Act reporting specified in Rule 12h-6 (17 CFR 240.12h-6); and
     There are no classes of securities other than those that 
are the subject of this Form 15F regarding which the issuer has 
Exchange Act reporting obligations.

C. Effective Date

    The issuer's duty to file any reports required under section 13(a) 
of the Exchange Act will be suspended immediately upon filing the Form 
15F. If there are no objections from the Commission, termination of 
registration of a class of securities under section 12(g) of the Act, 
or termination of the issuer's duty to file or submit reports under 
section 15(d) of the Act, or both, will take effect 90 days, or a 
shorter period as the Commission may determine, after the issuer has 
filed its Form 15F. An issuer that seeks an effective date sooner than 
90 days after filing the Form 15F must submit its request to the 
Commission in writing. Grant of the Rule 12g3-2(b) exemption will occur 
upon the effective date of an issuer's termination of Exchange Act 
reporting pursuant to Rule 12h-6 (17 CFR 240.12h-6).

D. Other Filing Requirements

    You must file Form 15F and related materials, including 
correspondence, in electronic format via our Electronic Data Gathering, 
Analysis, and Retrieval (EDGAR) system in accordance with the EDGAR 
rules set forth in Regulation S-T (17 CFR part 232). The Form 15F and 
related materials must be in the English language as required by 
Regulation S-T Rule 306 (17 CFR 232.306). You must provide the 
signature required for Form 15F in accordance with Regulation S-T Rule 
302 (17 CFR 232.302). If you have technical questions about EDGAR, call 
the EDGAR Filer Support Office at (202) 551-8900. If you have questions 
about the EDGAR rules, call the Office of EDGAR and Information 
Analysis at (202) 551-3610.
    If the Form 15F is subsequently withdrawn or denied, you must, 
within 60 days after the date of the withdrawal or denial, file with or 
submit to the Commission all reports that would have been required had 
you not filed the Form 15F. See Rule 12h-6(f) (17 CFR 240.12h-6(f)).

E. Rule 12g3-2(b) Exemption

    A foreign private issuer that has filed Form 15F to terminate its 
Exchange Act reporting obligations regarding a class of equity 
securities shall receive the exemption under Rule 12g3-2(b) (17 CFR 
240.12g3-2(b)) for the subject class of equity securities immediately 
upon the effective date of its termination of registration and 
reporting under Rule 12h-6. Refer to Rule 12g3-2(e) (17 CFR 240.12g3-
2(e)) for the conditions that a foreign private issuer must meet in 
order to maintain the Rule 12g3-2(b) exemption following its 
termination of Exchange Act registration and reporting.
PART I
    The purpose of this part is to assist the Commission in assessing 
whether you meet the requirements for terminating your Exchange Act 
reporting under Rule 12h-6.

Item 1. Exchange Act Reporting History

    A. State when you first incurred the duty to file reports required 
under section 13(a) of the Exchange Act.
    B. State whether you have filed or submitted all reports required 
under Exchange Act section 13(a) and corresponding Commission rules for 
the two calendar years preceding the filing of this form, and whether 
you have filed two annual reports under section 13(a).

Item 2. Recent United States Market Activity

    State when your securities were last sold in the United States in 
either a registered or unregistered offering.
Instructions to Item 2
    1. For registered offerings, do not include securities sold to your 
employees or those sold by selling security holders in non-underwritten 
offerings. If you have registered equity securities on a shelf or other 
registration statement under the Securities Act of 1933 (15 U.S.C. 77a 
et seq.) under which securities remain unsold, disclose the last sale 
of securities under that registration statement. If no sale has 
occurred during the preceding 12 months, disclose whether you have 
filed a post-effective amendment to terminate the registration of 
unsold securities under that registration statement.
    2. For unregistered offerings, do not include securities sold to 
your employees, and securities exempted from registration under section 
3 of the Securities Act (15 U.S.C. 77c), except that you must disclose 
securities sold under section 3(a)(10) of that Act. In addition, do not 
include securities constituting obligations having a maturity of less 
than nine months at the time of issuance and offered and sold in 
transactions exempted from registration under section 4(2) of the 
Securities Act (15 U.S.C. 77d(2)).

Item 3. Primary Trading Market

    A. Identify the exchange in your home country on which you have 
maintained a listing of the class of securities that is the subject of 
this Form. Further provide the date of initial listing on this 
exchange.
    B. Explain whether this home country exchange constitutes the 
primary trading market for the class of securities that is the subject 
of this Form.
Instruction to Item 3
    When responding to this item, refer to the definitions of ``home 
country'' and ``primary trading market'' in Rule 12h-6(d) (17 CFR 
240.12h-6(d)).

Item 4. Well-known Seasoned Issuer Disclosure

    State whether you are a well-known seasoned issuer.
Instruction to Item 4
    When responding to this item, refer to the definition of, and time 
of determination of status of, a ``well-known seasoned issuer'' in Rule 
12h-6(d).

[[Page 77712]]

Item 5. Comparative Trading Volume Data

    A. Identify the last day of the recent 12-month period used to meet 
the requirements of Rule 12h-6(a)(4)(i)(A) (17 CFR 240.12h-
6(a)(4)(i)(A)).
    B. For the same recent 12-month period, disclose the average daily 
trading volume of the class of securities that is the subject of this 
Form both in the United States and in your primary trading market.
    C. For the recent 12-month period, disclose the average daily 
trading volume of the subject class of securities in the United States 
as a percentage of the average daily trading volume for that class of 
securities in your primary trading market.
Instructions to Item 5
    1. ``Recent 12-month period'' means a 12-calendar-month period that 
ended no more than 60 days before the filing date of this form, as 
defined under Rule 12h-6(d). You may disclose the comparative trading 
volume data in response to this item in tabular format and attached as 
an exhibit to this Form.
    2. If you are not relying on Rule 12h-6(a)(4)(i), mark Item 5 as 
inapplicable.

Item 6. Comparative Share Ownership Information

    A. Disclose the amount of your outstanding voting and non-voting 
equity securities, regarding which there is an Exchange Act reporting 
obligation, held by your non-affiliates on a worldwide basis at a date 
within 60 days before the end of the 12-month period identified in Item 
5 of this Form, or, if Item 5 is inapplicable, at a date within 120 
days before filing this Form. Disclose the date utilized for purposes 
of Item 6.
    B. Disclose the amount and percentage of your outstanding voting 
and non-voting equity securities, regarding which there is an Exchange 
Act reporting obligation, held by your non-affiliates on a worldwide 
basis that are held by United States residents at the date identified 
in Item 6.A.
    C. If you are proceeding under Rule 12h-6(a)(6) (17 CFR 240.12h-
6(a)(6)), disclose the number of record holders of the subject class of 
equity securities on a worldwide basis or who are U.S. residents at a 
date within 120 days before filing this Form.
Instruction to Item 6
    1. When determining the number of record holders of your equity 
securities or the percentage of your outstanding equity shares held by 
non-affiliates on a worldwide basis that are held by U.S. residents, 
refer to Rule 12h-6(e) (17 CFR 240.12h-6(e)) for the appropriate 
counting method.
    2. In your response to Item 6.B, specify the provision under Rule 
12h-6(a)(4) or Rule 12h-6(a)(5) (17 CFR 240.12h-6(a)(4) or 240.12h-
6(a)(5)) upon which you have relied when filing this Form.
    3. You need not respond to Items 6.A and 6.B if proceeding under 
Rule 12h-6(a)(6).
    4. If you have relied upon the assistance of an independent 
information services provider to determine the number of your U.S. 
resident shareholders or the comparative share ownership information 
required by this item, identify this party in your response.

Item 7. Debt Securities

    Disclose whether you seek to terminate your reporting obligations 
under section 15(d) of the Exchange Act regarding a class of debt 
securities. If so, disclose the number of record holders of your debt 
securities either on a worldwide basis or who are U.S. residents at a 
date within 120 days before the date of filing of this Form.
Instruction to Item 7.
    1. When determining the number of record holders of your debt 
securities who are U.S. residents, refer to Rule 12h-6(e) for the 
appropriate counting method.
    2. If you have relied upon the assistance of an independent 
information services provider to determine the number of record holders 
of your debt securities required by this item, identify this party in 
your response.

Item 8. Notice Requirement

    Disclose the date on which, pursuant to Rule 12h-6(c) (17 CFR 
240.12h-6(c)), you have issued a notice, such as a press release, in 
the United States disclosing your intent to terminate the registration 
of a class of securities under section 12(g) or your duty under section 
15(d) to file reports under section 13(a) of the Exchange Act.
Instruction to Item 8.
    If you have submitted a copy of the notice under cover of a Form 6-
K (17 CFR 249.306), disclose the submission date of the Form 6-K. If 
not, you must attach a copy of the notice as an exhibit to this Form. 
See Rule 12h-6(c).
PART II

Item 9. Rule 12g3-2(b) Exemption

    Disclose the address of your Internet Web site or of the electronic 
information delivery system in your primary trading market on which you 
will publish the information required under Rule 12g3-2(b)(1)(iii) (17 
CFR 240.12g3-2(b)(1)(iii)).
Instruction to Item 9.
    Refer to Note 1 to Rule 12g3-2(e) for instructions regarding 
providing English translations of documents published pursuant to Rule 
12g3-2(b)(1)(iii) (17 CFR 240.12g3-2(b)(1)(iii).
PART III

Item 10. Exhibits

    List the exhibits attached to this Form.
Instruction to Item 10.
    In addition to exhibits specifically mentioned on this Form, you 
may attach as an exhibit any document providing information that is 
material to your eligibility to terminate your reporting obligations 
under Exchange Act Rule 12h-6. You should refer to any relevant exhibit 
when responding to the items on this Form.

Item 11. Undertakings

    Furnish the following undertaking:
    The undersigned issuer hereby undertakes to withdraw this Form 15F 
if, at any time prior to the effectiveness of its termination of 
reporting under Rule 12h-6, it becomes aware of information that causes 
it reasonably to believe that:
    (1) U.S. residents hold more than the applicable percentage of its 
outstanding voting and non-voting equity securities held by the 
issuer's non-affiliates on a worldwide basis as determined under Rule 
12h-6(a)(4) or 12h-6(a)(5);
    (2) If proceeding under Rule 12h-6(a)(6), its subject class of 
equity securities is held of record by 300 or more U.S. residents or 
300 or more persons worldwide;
    (3) Its debt securities are held of record by 300 or more U.S. 
residents or 300 or more persons worldwide; or
    (4) It otherwise no longer qualifies for termination of its 
Exchange Act reporting obligations under Rule 12h-6.
Instruction to Item 11.
    After filing this Form, an issuer has no continuing obligation to 
make inquiries or perform other work concerning the information 
contained in this Form, including its assessment of U.S. ownership of 
its securities.
Signature
    Pursuant to the requirements of the Securities Exchange Act of 
1934, [name of registrant as specified in charter] has duly authorized 
the undersigned person to sign on its behalf this certification on

[[Page 77713]]

Form 15F. In so doing, [name of registrant as specified in charter] 
certifies that, as represented on this Form, it has complied with all 
of the conditions set forth in Rule 12h-6 for terminating its 
registration under section 12 of the Exchange Act, its obligation to 
file reports required by section 13(a) or section 15(d) of the Exchange 
Act, or both.
 By:-------------------------------------------------------------------

 Title:----------------------------------------------------------------

 Date:-----------------------------------------------------------------

    By the Commission.

    Dated: December 23, 2005.
Jonathan G. Katz,
Secretary.
[FR Doc. 05-24618 Filed 12-29-05; 8:45 am]

BILLING CODE 8010-01-P
