SEC Considers Revising Foreign Private Issuer Definition

The Securities and Exchange Commission (SEC) issued a concept release seeking public comment by September 8, 2025, on its definition of “foreign private issuer” (FPI). The SEC indicated that a review is warranted due to significant changes in the FPI population over the last two decades, including shifts in jurisdictions of incorporation and headquarters, evolving trading patterns, and various regulatory frameworks. The SEC is considering whether the current FPI definition effectively balances investor protection with capital formation and access to U.S. capital markets.

Currently, a foreign issuer qualifies as an FPI if:

1. 50% or less of its outstanding voting securities are held by U.S. residents; or

2. more than 50% of its outstanding voting securities are held by U.S. residents, but none of the following applies:

1. the majority of its executive officers or directors are U.S. citizens or residents;
2. more than 50% of the issuer’s assets are located in the United States; or
3. the issuer’s business is administered principally in the United States.

The SEC invites comments from market participants, investors, issuers, and other stakeholders on the questions and regulatory approaches outlined in the release. The outcome of this process may result in material changes to the regulatory landscape for foreign issuers accessing U.S. capital markets with implications for investor protection, market competitiveness, and cross-border capital flows.

Background and Current Framework

The SEC’s regulatory framework for FPIs has historically recognized the unique challenges faced by non-U.S. companies accessing U.S. capital markets. FPI status provides certain accommodations to eligible foreign issuers and their insiders and beneficial owners, including relief from some reporting, disclosure, and governance requirements applicable to domestic issuers, management, and their beneficial owners. FPI eligibility is determined annually based on the factors described above.

Key accommodations for FPIs include extended annual reporting deadlines, exemption from quarterly reporting and certain proxy requirements, less onerous current reporting requirements, flexibility in accounting standards, and relief from some of the Sarbanes-Oxley and Regulation FD obligations, as explained in greater detail below.

• Extended Filing Deadlines: FPIs have four months after their fiscal year-end to file their annual report on Form 20-F (20-F) as compared to 60 days (large-accelerated filer), 75 days (accelerated filer) or 90 days (non-accelerated filer) for domestic issuers filing their annual report on Form 10-K.
• Exemption from Quarterly Reporting: FPIs are not required to file any quarterly reports for their first, second, and third fiscal quarters, whereas domestic issuers must file within 40 days (large-accelerated filer and accelerated filer) or 45 days (non-accelerated filer) after each fiscal quarter end.
• Proxy and Say-on-Pay Exemptions: FPIs are exempt from proxy requirements and say-on-pay rules.
• Simplified Current Reporting: FPIs furnish current reports on Form 6-K, limited to disclosures required or made public in their home jurisdiction, filed with their stock exchange, or distributed to securityholders, unlike the broader Form 8-K requirements for domestic issuers.
• Flexible Accounting Standards: FPIs may present financial statements pursuant to International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board, generally accepted accounting principles (GAAP) in the United States (U.S. GAAP) or home country GAAP with a reconciliation to U.S. GAAP, as compared to domestic issuers who are required to use U.S. GAAP.
• Exemptions from Disclosure Rules: FPIs are exempt from the disclosure requirements of Regulation FD (selective disclosure) and Regulation G (non-GAAP disclosures).
• Relief for Insiders and Beneficial Owners: Insiders and 10% beneficial owners of FPIs are exempt from Section 16(a) and Section 16(b) short-swing trading rules under the Exchange Act.

These accommodations were predicated on the expectation that most FPIs would be subject to meaningful home country disclosure regulations and that their securities would primarily trade in foreign markets.

Recent Developments in the FPI Population

The concept release includes detailed graphics and analysis on changes in the FPI population from 2003 to 2023.

Key trends highlighted by the SEC include:

• Jurisdictional Shifts: The most common jurisdictions of incorporation among FPIs are now the Cayman Islands and Israel, while the most common headquarters location are mainland China and Israel. In 2003, Canada and the United Kingdom predominated in both categories.
• Divergence Between Incorporation and Headquarters: The proportion of FPIs incorporated in a different jurisdiction than their headquarters has increased from 7% in 2003 to 48% in 2023, driven in part by the rise of China-based issuers (CBIs) incorporated in offshore jurisdictions such as the Cayman Islands and British Virgin Islands.
• Trading Patterns: A majority of FPIs now have their equity securities traded almost exclusively in U.S. capital markets. In 2023, approximately 55% of FPIs filing a 20-F had at least 99% of their global trading volume in the United States, a significant increase from prior years. These FPIs tend to have smaller market capitalizations and are disproportionately incorporated in the Cayman Islands and headquartered in China.
• Regulatory Implications: Many FPIs, particularly those incorporated in certain offshore jurisdictions, may not be subject to robust home country disclosure or regulatory requirements. In some cases, foreign regulators defer to U.S. securities laws for FPIs, potentially leaving U.S. rules as the primary source of investor protection.

Issues for Reassessment

The concept release suggests the SEC is concerned that the current FPI definition may no longer align with its original intent, and noted the above-mentioned trends “raise questions about whether the current FPI definition is appropriately tailored.”

Key issues flagged by the SEC include:

• The adequacy of investor protection for U.S. investors in FPIs that are not subject to meaningful home country regulations that trade exclusively in the United States.
• The potential for regulatory arbitrage, as some FPIs may select jurisdictions of incorporation or listing to minimize regulatory burdens.
• Competitive implications for domestic issuers, who may face more stringent requirements than FPIs operating primarily in the U.S. market.
• The effectiveness of current accommodations in light of the diminished role of foreign regulation for a significant subset of FPIs.

Potential Regulatory Responses

The concept release calls for public input on a range of possible amendments to the FPI definition and related regulatory accommodations to address these trends, including:

• Updating Existing Eligibility Criteria: Revising the U.S. ownership threshold or business contacts test to better capture issuers that merit accommodation. Recall, the criteria in the current FPI definition were originally set forth by the SEC to determine whether an issuer is an “essentially U.S. issuer.”
• Requiring a Foreign Trading Volume Requirement: Conditioning FPI status on a minimum level of trading volume in non-U.S. markets, with various thresholds under consideration.
• Requiring a Major Foreign Exchange Listing Requirement: Requiring FPIs to be listed on a “major foreign exchange” to ensure meaningful foreign regulatory oversight.
• Imposing the Commission’s Assessment of Adequate Foreign Regulation: Limiting FPI status to issuers incorporated or headquartered in jurisdictions with robust regulatory frameworks, as determined by the SEC.
• Establishing New Mutual Recognition Systems: Expanding mutual recognition arrangements, similar to the Multijurisdictional Disclosure System (MJDS) with Canada, to other jurisdictions with comparable regulatory standards.
• Requiring an International Cooperation Arrangement: Conditioning FPI status on the home country regulator’s participation in international information-sharing agreements, such as the IOSCO Multilateral Memorandum of Understanding.

The SEC also seeks comment on transition issues, potential impacts on capital formation and market efficiency, and whether any changes should apply only to new FPIs or to the existing population after a transition period.

What’s Next?

The SEC’s concept release is a first step in potentially updating the FPI definition. Comments are due by September 8, 2025. If you are interested in submitting comments or would like further information on the concept release, please contact one of the listed authors or your regular Orrick contact.

The outcome of this process may result in material changes to the regulatory landscape for foreign issuers accessing U.S. capital markets, with implications for investor protection, market competitiveness, and cross-border capital flows.