Roadmap to OTCQX International Listing: SEC Rule 12g3-2(b)

OTCQX International Listing

This is the third step in our Roadmap to OTCQX International qualified Dual Listings.

In our first post we described the markets upon which your company or your client company must trade to enter into this OTCQX International qualified Dual Listing Program.

In our second post we told you about having to locate a  Principal American Liaison (PAL)  to serve as a securities professional knowledgeable in both the disclosure requirements of U.S. securities laws and the most effective investor communications practices.  Our firm would initially by your PAL.

Our role as your PAL is to help you understand all of the listing requirements.  At the cornerstone of these requirements is SEC Rule 12g3-2(b).  This is the next step:

Step 3:  Learn SEC Rule 12g3-2(b)

Why is this so important?  Our theory in this blog series is that qualified foreign companies would love to have their securities listed on a high tier US market like the OTCQX.  But they don’t want to have to become subject to all those expensive and time consuming SEC rules and regulations.

The theory here is that by limiting the qualified foreign exchanges to highest tier exchanges in a foreign country, these companies have already gone through the same type of expensive and time consuming securities compliance regulations in their home country.  And like U.S. SEC Reporting companies, they are required to file information investors would find important to making an investment decision in their own foreign country.

In this post, we’re just going to give you exactly what SEC Rule 12g3-2(b) provides, word for word.  Not to worry, however.  Our next series of posts will break down every aspect of this rule so you can understand fully what it means and what is required.

So here’s the Rule:

Rule 12g3-2   Exemptions for American depository receipts and certain foreign securities.

(b)(1) A foreign private issuer shall be exempt from the requirement to register a class of equity securities under section 12(g) of the Act (15 U.S.C. 78 l (g)) if:

(i) The issuer is not required to file or furnish reports under section 13(a) of the Act (15 U.S.C. 78m(a)) or section 15(d) of the Act (15 U.S.C. 78o(d));

(ii) The issuer currently maintains a listing of the subject class of securities on one or more exchanges in a foreign jurisdiction that, either singly or together with the trading of the same class of the issuer’s securities in another foreign jurisdiction, constitutes the primary trading market for those securities; and

(iii) The issuer has published in English, on its Internet Web site or through an electronic information delivery system generally available to the public in its primary trading market, information that, since the first day of its most recently completed fiscal year, it:

(A) Has made public or been required to make public pursuant to the laws of the country of its incorporation, organization or domicile;

(B) Has filed or been required to file with the principal stock exchange in its primary trading market on which its securities are traded and which has been made public by that exchange; and

(C) Has distributed or been required to distribute to its security holders.

Note 1 to paragraph ( b )(1): For the purpose of paragraph (b) of this section, primary trading market means that at least 55 percent of the trading in the subject class of securities on a worldwide basis took place in, on or through the facilities of a securities market or markets in a single foreign jurisdiction or in no more than two foreign jurisdictions during the issuer’s most recently completed fiscal year. If a foreign private issuer aggregates the trading of its subject class of securities in two foreign jurisdictions for the purpose of this paragraph, the trading for the issuer’s securities in at least one of the two foreign jurisdictions must be larger than the trading in the United States for the same class of the issuer’s securities. When determining an issuer’s primary trading market under this paragraph, calculate average daily trading volume in the United States and on a worldwide basis as under Rule 12h-6 under the Act (§ 240.12h-6).

Note 2 to paragraph ( b )(1): Paragraph (b)(1)(iii) of this section does not apply to an issuer when claiming the exemption under paragraph (b) of this section upon the effectiveness of the termination of its registration of a class of securities under section 12(g) of the Act, or the termination of its obligation to file or furnish reports under section 15(d) of the Act.

Note 3 to paragraph ( b )(1): Compensatory stock options for which the underlying securities are in a class exempt under paragraph (b) of this section are also exempt under that paragraph.

(2)(i) In order to maintain the exemption under paragraph (b) of this section, a foreign private issuer shall publish, on an ongoing basis and for each subsequent fiscal year, in English, on its Internet Web site or through an electronic information delivery system generally available to the public in its primary trading market, the information specified in paragraph (b)(1)(iii) of this section.

(ii) An issuer must electronically publish the information required by paragraph (b)(2) of this section promptly after the information has been made public.

(3)(i) The information required to be published electronically under paragraph (b) of this section is information that is material to an investment decision regarding the subject securities, such as information concerning:

(A) Results of operations or financial condition;

(B) Changes in business;

(C) Acquisitions or dispositions of assets;

(D) The issuance, redemption or acquisition of securities;

(E) Changes in management or control;

(F) The granting of options or the payment of other remuneration to directors or officers; and

(G) Transactions with directors, officers or principal security holders.

(ii) At a minimum, a foreign private issuer shall electronically publish English translations of the following documents required to be published under paragraph (b) 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.

(c) The exemption under paragraph (b) of this section shall remain in effect until:

(1) The issuer no longer satisfies the electronic publication condition of paragraph (b)(2) of this section;

(2) The issuer no longer maintains a listing of the subject class of securities on one or more exchanges in a primary trading market, as defined under paragraph (b)(1) of this section; or

(3) The issuer registers a class of securities under section 12 of the Act or incurs reporting obligations under section 15(d) of the Act.

So there’s the Rule.

In the coming weeks well talk about what all of this means.

We encourage you to stay tuned to our Blog and our LinkedIn posts in the coming weeks as we give you more steps in our Roadmap to the OTCQX International Market.  We are also interested in establishing strategic relationships within the confines of Florida Bar Rules governing attorney conduct with consultants in foreign countries to help us work with foreign companies that may want to take advantage of this exciting program.

If you are a foreign company interested in this program, or if you are a consultant to foreign companies looking for qualified U.S. SEC counsel, please contact us for more information.

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