Responses to the SEC’s Concept Release on Foreign Private Issuer Eligibility
Summary
On 4 June 2025 the SEC published a Concept Release seeking comment on whether and how to change the definition of a foreign private issuer (FPI). The agency flagged a shift in the FPI population since 2003 — more FPIs now trade primarily in US markets and the common jurisdictions of incorporation/headquarters have changed (Cayman and mainland China rising in prominence). The SEC offered six broad approaches for reform, from targeted updates to the FPI test to jurisdictional assessments, trading‑volume thresholds, mutual recognition or international cooperation frameworks.
The SEC received roughly 70 responses (posted as of 10 September 2025) from law firms, issuers and industry groups. Responses fall into three camps: commenters broadly supportive but urging caution and alternatives; commenters saying population change alone isn’t enough to justify rule changes and asking for data; and commenters defending the current FPI framework and warning of unintended consequences (e.g., deterring access to US markets or pushing issuers to deregister).
Common themes across letters include calls for narrowly tailored fixes, concerns about IFRS vs US GAAP conversion (many ask for multi‑year transition guidance), debate over non‑US trading thresholds and major foreign exchange safe harbours, worries about jurisdiction‑by‑jurisdiction tests, and calls to preserve the Multijurisdictional Disclosure System (MJDS) or explore mutual recognition pilots. The SEC must consider these responses; if it advances a proposing release there will be another formal comment period.
Key Points
- The SEC’s Concept Release (4 June 2025) asks whether the FPI definition should change because many FPIs now trade mainly on US markets and home‑jurisdiction profiles have shifted.
- The Concept Release outlines six possible approaches: update eligibility criteria; non‑US trading thresholds; major foreign exchange listing requirements; SEC assessments of jurisdictional regulatory robustness; mutual recognition; or international cooperation arrangements.
- About 70 responses (as of 10 Sept 2025) cluster into three views: conditional support, requests for SEC data showing investor risk, and opposition citing risks of reduced market access and unintended consequences.
- Frequent commenter asks: narrowly target changes to real disclosure gaps; avoid duplicating or conflicting with home‑country rules; preserve IFRS reporting or provide a clear multi‑year transition to US GAAP.
- Debate remains over objective non‑US trading tests versus holistic tests of ‘‘where a company is from’’ (directors, assets, revenues, controlling owners) and whether the SEC should designate robust jurisdictions or avoid jurisdictional lists due to administration burden.
- The SEC will review all comments; any proposing release would give stakeholders another opportunity to comment before final rules.
Context and Relevance
This topic matters for foreign issuers, US investors, legal and compliance teams, and capital markets policymakers. A redefinition of FPI status could change reporting obligations (including accounting standards), affect cross‑listings, influence capital‑raising decisions, and shift where companies prefer to list. It ties into broader trends: post‑2000s globalisation of equity trading, heightened regulatory scrutiny of cross‑border listings, and debates over regulatory equivalence with major markets (EU, UK, Australia, Canada).
Why should I read this
Short version: if you advise issuers, run listings, invest in foreign companies or work in compliance — this is one to read. It cuts through the SEC’s proposals, summarises the responses and flags the hot buttons that could become rule changes: IFRS vs US GAAP headaches, non‑US trading thresholds, jurisdiction tests and the real risk that firms might avoid or leave US markets. We’ve saved you the time of reading ~70 letters and pulled the themes you need to know.
Author style
Punchy: the piece zeroes in on the practical fallout. If you’re materially exposed to FPIs, don’t skim — the details matter and could change filing, listing and capital strategies.
