Continuing Obligations

Capital Markets 2008/09 Cross-border

Continuing obligations

Giles Elliott, Vica Irani, Alireza Odouli and Sebastian Orton, Jones Day

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This chapter compares the principal continuing obligations relating and the Admission and Disclosure Standards of the London to disclosure, material transactions and corporate governance that Stock Exchange. apply to issuers with primary listings of equity securities on the UKLA’s Main Market in the UK or a principal market in the US. It  Applicable corporate law. does not include a detailed analysis on the less onerous obligations associated with a listing on a junior market or a secondary listing In addition to specific continuing obligation requirements, is- on a regulated market. suers must comply with six overriding listing principles (Listing Principles), designed to ensure that the spirit as well as the letter

of the Listing Rules is adhered to. The Listing Principles require Cross-border Different approaches an issuer to, among other matters: The obligations, responsibilities and duties to which issuers and  Take reasonable steps to enable its directors to understand their directors are subject following an IPO vary considerably be- their responsibilities. tween the EU and the US and, to a more limited extent, within the EU itself. However, the underlying principle of fair, accurate  Establish and maintain adequate procedures, systems and and timely disclosure is one that applies across the board. controls to enable it to comply with its obligations. Directive 2003/71/EC on the prospectus to be published when se-  Treat shareholders equally. curities are offered to the public or admitted to trading (Prospec- tus Directive) (a maximum harmonisation directive implemented  Communicate information to holders and potential holders throughout the EU) has, to a large extent, standardised the process of their securities in such a way as to avoid the creation or of obtaining a primary listing on a regulated market in the EU. In continuation of a false market. contrast, the continuing obligations imposed on issuers under the rules implemented within the EU in accordance with the Directive US 2003/6/EC on insider dealing and market manipulation (market abuse) (Market Abuse Directive) and the Directive 2004/109/EC In the US, an issuer is subject to continuing obligations imposed on transparency requirements for securities admitted to trading on by: a regulated market and amending Directive 2001/34/EC (Trans- parency Directive), both minimum harmonisation directives, vary  Federal securities laws, including the regulations and between member states. In addition, each jurisdiction remains disclosure requirements of the Securities Exchange Act of subject to its own legislation regulating listed issuers, insider deal- 1934, as amended (Exchange Act), and the Sarbanes-Oxley ing and market abuse. However, given that many of the basic prin- Act of 2002 (Sarbanes-Oxley Act) and case law interpreting ciples and rules flow from EU legislation, this chapter concentrates those laws. on the obligations in one EU jurisdiction, the UK, and compares those with the approach taken in the US.  The corporate statutes and court decisions of the state in which it is incorporated, including with respect to fiduciary duties and liabilities of directors. The regulatory framework UK Typically, the obligations apply to an issuer that has completed an initial public offering (IPO) registered with the Securities and Ex- In the UK, all issuers admitted to the Official List with securities change Commission (SEC) under the Securities Act of 1933, as admitted to trading on the Main Market must comply with the amended (Securities Act). An issuer is also subject to the regula- continuing obligations that are imposed by: tions and other guidance promulgated by the SEC, as well as the listing standards of the exchange on which the issuer’s securities  The Financial Services and Markets Act 2000 (FSMA). are listed for trading, most notably the New York Stock Exchange (NYSE) and the Nasdaq National Market (NASDAQ).  The Listing Rules, the Disclosure and Transparency Rules

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© This chapter was first published in the PLC Cross-border Capital Markets Handbook 2008/09 and is reproduced with the permission of the publisher, Practical Law Company. For further information or to obtain copies please contact [email protected], or visit www.practicallaw.com/capitalmarketshandbook. Cross-border Capital Markets 2008/09

General obligation of disclosure Delaying disclosure of material information UK UK

Following the implementation of the Transparency Directive and the Once a UK issuer has identified inside information, it must as- Market Abuse Directive across the EU, most member states have sess whether or not it should be disclosed or whether there is a published specific rules designed to promote prompt disclosure of genuine, permissible reason to delay disclosure. In the UK, an relevant information to the market. In the UK, both directives were issuer may, at its own risk, delay the public disclosure of inside implemented through amendments to the FSMA and the publication information so as not to prejudice its legitimate interests pro- of the Disclosure and Transparency Rules (DTRs). The DTRs provide vided that: that an issuer must notify a Regulatory Information Service (RIS) as soon as possible of any inside information that directly concerns the  The delay is not likely to mislead the public. issuer unless the issuer is permitted to delay disclosure in specific circumstances. Inside information, for these purposes, constitutes  Any person receiving the information before its public information which is precise, is not generally available, relates to an disclosure owes the issuer a duty of confidentiality (whether issuer or its securities and would, if generally available, be likely to under law, regulations or contract). have a significant effect on the price of the issuer’s securities.  The issuer is able to ensure the confidentiality of the infor- The starting point for determining whether unpublished informa- mation. tion should be disclosed is to ask whether the information would be likely to be used by a reasonable investor as part of the basis of The FSA has made it clear that there are few circumstances that his investment decision and would, therefore, be likely to have a would justify delaying disclosure so as not to prejudice an is- significant effect on the share price given the totality of the issuer’s suer’s legitimate interests. The most commonly used exemption activities and all other relevant circumstances. The regulators have relates to impending developments or negotiations in course, or deliberately avoided setting a specific materiality threshold (percent- related elements where the outcome or normal pattern of those age change or otherwise) that could be used to establish what con- negotiations would be likely to be affected by public disclosure. stitutes a significant effect on an issuer’s price, as this varies from The DTRs recognise that if the financial viability of an issuer is issuer to issuer. in grave and imminent danger, public disclosure of inside infor- Cross-border mation may be delayed for a limited period where such disclo- US sure would seriously jeopardise the interests of existing potential shareholders by undermining the conclusion of specific negotia- The position is different in the US where, as a general rule and in tions designed to ensure the long term financial recovery of the the absence of insider trading or previous inaccurate disclosures, issuer (although it should be noted that this does not allow an an issuer has no affirmative duty to disclose material information, issuer to delay public disclosure of the fact that it is in financial apart from an obligation to make periodic filings under the Ex- difficulty or of its worsening financial condition and is limited change Act in the form of annual, quarterly and current reports, to the fact or substance of the negotiations to deal with such a proxy statements and the like. As a practical matter, however, day- situation). to-day circumstances impose an affirmative obligation of disclosure on an issuer, stemming largely from constant inquiries from Where an issuer is permitted to delay public disclosure of inside the investment community for current information and an issuer’s information (for example for the reasons referred to above) it may motivation to keep the investment community apprised of current only disclose that information on a selective basis to persons in developments. Consequently, most issuers adopt an affirmative the normal course of the exercise of their employment, profes- policy to disclose material information, subject to exceptions such sion or duties provided that the recipients owe the issuer a duty as when it is necessary to keep the information confidential or of confidentiality. Persons to whom an issuer may be able to dis- when the issuer has a legitimate business reason for not disclosing close inside information on a selective basis include: it. In addition, Regulation FD (short for fair disclosure) requires that all material disclosures that are made, be made to the public  Advisers. and not selectively to groups such as professional analysts.  Negotiating counter parties. As with the UK, determining what constitutes material information is a matter of judgement. Under relevant case law and the general  Employer representatives or trade unions. rule that has evolved under numerous court decisions, material information has been deemed to be information to which a reason-  Major shareholders. able investor would be likely to attach importance in determin-  Lenders and credit rating agencies. ing whether to purchase or sell an issuer’s securities. However, no comprehensive guidelines have ever been offered by the SEC to  Statutory or regulatory authorities. distinguish material from non-material information. At a minimum, the materiality standard requires an issuer’s management to evalu- An issuer must also take precautions when disclosing information ate the materiality of each potential disclosure issue on a case-by- internally, in particular: case basis in light of all of the circumstances. Materiality must be

determined in the context of an issuer’s business as a whole, taking  Effective arrangements must be established to deny access into account both the immediate financial impact of an event and to inside information to persons other than those who re- its significance for the issuer’s future results of operations. quire it for the exercise of their functions within the issuer.

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 The issuer must also ensure that it (and persons acting on ever, the issuer must take extreme care to keep the information its behalf or on its account) draw up a list of those persons confidential, and to remind persons who possess the information working for them who have access to inside information relat- of their obligation to refrain from trading on insider information. ing directly or indirectly to the issuer whether on a regular or occasional basis. These insider lists must be maintained and Affirmative disclosure obligations kept updated and provided to the FSA on request. In addition to the general obligation of disclosure applicable to Even where the delay of public disclosure is permitted, the re- issuers in both the UK and the US, there are certain specific quirement to make a public announcement of inside informa- circumstances that impose an affirmative disclosure obligation tion may be accelerated if this is necessary to respond to market in both jursidictions: rumours or speculation. Accordingly, the wider the group of re-

cipients of inside information, the greater the likelihood of a leak  An issuer has an immediate duty of disclosure where it is which would trigger full public disclosure of the information in aware that insiders possessing inside information are trading in question. the issuer’s securities, subject to certain technical exceptions.

US  In some circumstances, an issuer will have a duty to correct existing information in the marketplace that was inaccurate Again, the position in the US is different, in that the timing of when published. This duty may arise where the previously disclosure of material information, outside an issuer’s periodic existing information: and current reporting obligations, is generally a matter of the issuer’s business judgement. In this regard, most issuers promptly

 was published by the issuer; Cross-border disclose material information as a matter of practice unless there

is a legitimate business reason for delaying disclosure. Some con-  is attributable to the issuer through express or tacit siderations in determining whether a legitimate business reason endorsement; or exists for delaying disclosure include where:  was generated by a person or institution with whom  An issuer is gathering and verifying the basis for and reli- the issuer has a special relationship. ability of such information. An issuer generally is not required to rectify or correct rumours  Disclosure would be premature and would require future in the marketplace that are not attributable, directly or indirectly, revisions or clarifications. to the issuer.

 Disclosure would have an anti-competitive effect. Moreover, the FSA has stated that there is no regulatory obligation to deny false rumours. Should, however, an issuer in the UK choose  Disclosure would likely adversely impact the ability to to make a denial, it should do so via an RIS, thereby ensuring the reach agreement on a pending transaction (for example, whole market is informed. Over the past few months, there have a merger). However, when price, terms and structure have been several instances of issuers making reassuring statements to been agreed upon, courts have ruled the information gener- their media contacts rather than through an RIS and, in doing so, ally becomes material. running the risk of a subsequent share price movement which may expose the issuer to investigation by the FSA. In making these disclosure decisions, an issuer must consider NYSE and NASDAQ requirements calling for prompt public dis- In addition, if an issuer discloses material non-public information closure of any material news that might affect the market for its to a person who uses that information to deal in the issuer’s secu- securities. This obligation exists alongside those imposed by the rities (that is, someone who is not bound to keep it confidential by SEC and federal securities laws, and results in an affirmative dis- oral or written agreement or by terms of employment), the issuer closure obligation for companies listed on the NYSE or NASDAQ may be exposed to liability, unless the issuer has previously pub- that may not otherwise exist. Material news includes information licly disclosed the information. In the context of an issuer’s dis- that might: cussions with investment analysts, institutional investors or any other investors who may trade on material non-public information  Reasonably be expected to have an impact, favourable or disclosed by the issuer during those discussions, the applicable unfavourable, on the market for an issuer’s securities. regulations in both the US and the UK require the issuer to disclose such information simultaneously to the investing public.  Affect the value of the issuer’s securities or influence an If the issuer unintentionally discloses this information, it must investor’s decision to trade in the issuer’s securities. promptly disclose it to the public. Categories of material news are very broad; generally, all significant events affecting the issuer, including its business, products, Periodic financial reporting management and finances, presumably merit prompt public disclosure. UK. The DTRs require an issuer to adhere to certain periodic financial reporting requirements within set timescales in respect of Both the NYSE and NASDAQ permit a listed issuer to refrain from the publication of an annual financial report, the announcement announcing material news if it is necessary and possible for the of half-yearly results and, unless an issuer publishes quarterly issuer to maintain its confidentiality, while still treating all inves- financial reports, the release of two interim management state- tors equally and allowing no unfair information advantage. How- ments each financial year.

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US. Similarly, an issuer subject to the Exchange Act must file The deadline for filing Form 10-K generally depends on the size of annual, quarterly and current reports with the SEC. These reports the issuer as measured by its public equity float, with accelerated regularly update and supplement the information that the issuer deadlines for larger issuers who have previously been subject to the has made available to the public in previous Securities Act and Exchange Act’s reporting requirements. The SEC recently adopted Exchange Act filings. Issuers file the reports within a specified rule amendments that will accelerate the reporting deadline for an- number of days after the end of each reporting period, or after nual reports filed on Form 20-F by foreign private issuers from six certain material events. The reporting requirements are similar months to four months after the issuer’s fiscal year-end, following for US issuers and non-US issuers, although they are less burden- a three-year transition period. The new deadline will apply to fiscal some for non-US issuers that qualify as foreign private issuers. years ending on or after 15 December 2011.

Annual reporting requirements Half-yearly reporting

UK. Issuers in the UK must publish an annual financial report not UK. Issuers in the UK must publish a half-yearly report which later than four months after the end of the financial year to which must be made public within two months of the end of the period it relates. The report must remain publicly available for at least to which it relates. A half-yearly financial report must include: five years. An annual financial report must include:  A condensed set of financial statements.  The issuer’s audited financial statements prepared under the applicable accounting standards.  An interim management report which must include:

 A management report.  an indication of the important events that have occurred during the first six months of the financial year and their

 An appropriate statement of assurance from persons respon- impact on the condensed financial statements; sible within the issuer.  a description of the principal risks and uncertainties fac- The Disclosure and Transparency Rules include detailed require- ing the issuer in the next six months together with details ments for these reports and, in addition, the UK’s Combined of related party transactions. Code on Corporate Governance (Combined Code) recommends Cross-border that directors should explain their responsibility for preparing the  A responsibility statement. accounts and should present a balanced and understandable as- sessment of an issuer’s position. The report must indicate if it has been audited or reviewed by audi- tors and if so, the audit report or review must be reproduced in full. The Listing Rules impose further content requirements for an is- US. US regulations do not impose any requirement for half-yearly suer’s annual financial report such as particulars of related party reports and US issuers are simply required to comply with the transactions or arrangements. An issuer must also disclose de- quarterly reporting obligations described below. tails of whether or not it complies with Combined Code or (in the case of a non-UK entity) the corporate governance regime of its Quarterly reporting country of incorporation and the significant ways in which its actual corporate governance practice differs from the requirements UK. Unless an issuer in the UK publishes quarterly financial re- set out in the Combined Code. ports, it must release an interim management statement during the first and second six-month period of the financial year. The Additionally, throughout the EU, an issuer must publish an annual statement must be released between ten weeks after the begin- information update that refers to or contains all information which ning and six weeks before the end of the relevant six-month pe- has been published or made available to the public over the previ- riod. It must explain any material events and transactions that ous 12 months in one or more European member states and in oth- have taken place since the start of the relevant period, and their er countries in compliance with its obligations under community or impact on an issuer’s financial position, describing the financial national laws or rules relating to the issuer’s securities. The annual position and performance of the issuer during that time. information update may refer to information rather than include that information but must indicate where that information can be US. Issuers file a quarterly report on Form 10-Q after the end of obtained from. Issuers typically seek to comply with this obligation each of their first three fiscal quarters. The main portion of the at the time of publication of their annual reports. quarterly report is an updated MD&A, together with unaudited interim financial statements in compliance with Regulation S- US. The annual report on Form 10-K is the most comprehensive X. Additionally, Form 10-Q includes any updates to risk factors periodic report filed with the SEC and includes much of the same included in previous filings to reflect any material changes, as information that is required in a registration statement filed for an well as any changes in the issuer’s internal control over financial IPO under the Securities Act. The primary focus of the annual report reporting during the quarter that have materially affected, or are is on management’s discussion and analysis (MD&A) of the finan- reasonably likely to materially affect, the issuer’s internal control cial condition and results of operations, as well as presentation of over financial reporting. selected and full year-end audited financial information, including the independent auditor’s opinion, in compliance with Regulation As with Form 10-K, the deadline for filing Form 10-Q depends on S-X. Additionally, Form 10-K includes risk factor disclosure of cir- which category an issuer falls under, with accelerated deadlines cumstances, trends or issues that may affect the issuer’s business, for larger issuers. Foreign private issuers are not required to file prospects, future operating results and financial condition. quarterly reports.

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Current report  The half-yearly report.

Unlike the obligation on issuers in the UK to simply announce  The interim management statement. information on material events through an RIS as and when it arises, in the US, issuers must file a Form 8-K (a current report)  Any preliminary statement published in advance of the an- between quarterly and annual reports to provide the public with nual financial report. information on recent material events. Form 8-K disclosure is mandatory if specified events occur. In addition, many issuers An issuer will be liable if a person discharging managerial respon- make optional filings on Form 8-K to ensure maximum public sibilities for the publication: disclosure of material developments. Items giving rise to mandatory disclosure include entry into or termination of, or material  Knew that the statement was wrong or misleading. amendment to, material agreements, including compensation agreements, as well as significant acquisitions or dispositions.  Was reckless as to whether it was wrong or misleading.

Mandatory Form 8-Ks generally must be filed within four business  Knew any omission was a dishonest concealment of a mate- days of the reported event, while an optional report should be rial fact. filed promptly after the triggering event. Foreign private issuers An issuer will only be liable to third parties although the directors submit current reports to the SEC on Form 6-K. Unlike Form 8-K, concerned may be liable to an issuer (section 90A(5), FSMA). there are no specific substantive disclosures that are required by Form 6-K. Instead, foreign private issuers furnish under cover of US. Issuers and their officers and directors face potential- per Form 6-K whatever information that they: sonal liability resulting from the failure to make required periodic Cross-border reports or making materially misleading statements in them. Sec-  Make or are required to make public under the law of the tion 10(b) of the Exchange Act and related Rule 10b-5 make it jurisdiction of their domicile or in which they are incorpo- unlawful for a person, in connection with the purchase or sale rated or organised. of a security, to make any untrue statement of a material fact, or to omit to state a material fact necessary in order to make a  File or are required to file with a stock exchange on which their securities are traded and which was made public by statement made, in the light of the circumstances under which that exchange. it was made, not misleading. This anti-fraud rule applies to vir- tually any statement by an issuer, officer or director, including

 Distribute or are required to distribute to their security holders. statements in periodic reports and press releases. As a practical matter, an issuer and its officers and directors may face personal These reports are required to be furnished promptly after the ma- liability under Rule 10b-5 for making an intentional or reckless terial contained in the report is made public. misrepresentation or omission that influences the price of the issuer’s stock. Issuers and individuals can be subject to SEC en- Liability for periodic financial reports forcement actions or private civil actions, including class actions and derivative actions. Failing to comply with all securities laws UK. A director is liable for any loss suffered by an issuer as a result requirements for periodic reporting may also cause an issuer to of any untrue or misleading statement in, or omission from, the di- lose eligibility to use short-form Securities Act registration state- rectors’ report, directors’ remuneration report or a summary finan- ments for future offers and sales of securities. cial statement, if the director knew or was reckless as to whether the statement was untrue or misleading or knew the omission to be dishonest concealment of a material fact (Companies Act 2006). Material transactions Although, the directors’ liability in respect of these reports is to an UK issuer only, the Companies Act 2006 sets out a new derivative right of action which may be brought by any shareholder on behalf of an The Listing Rules contain detailed requirements as to the pro- issuer. The action may be brought for acts or omissions involving vision of information and the need for obtaining shareholders’ negligence, default, breach of duty or breach of trust. approval when an issuer proposes to enter into certain transactions. The level of disclosure required, and the requirement for Under section 501 of the Companies Act 2006, a person also shareholders’ approval depends on: commits an offence if he knowingly or recklessly makes a materially misleading, false or deceptive written or oral statement to  The size of the transaction in relation to the size of an an auditor that conveys or purports to covey any information or issuer. explanations which the auditor requires, or is entitled to require. A person committing such a criminal offence is liable for up to  The identity of the parties to the transaction. two years’ imprisonment or a fine or both. All transactions of an issuer and its subsidiary undertakings are Section 90A of the FSMA imposes a statutory liability regime for included, other than transactions of a revenue nature, or where periodic financial information published by UK issuers. An issuer finance is being raised by an issue of securities not involving the will be liable to pay compensation to a person who has acquired acquisition or disposal of any fixed assets. securities and suffered loss as a result of any untrue or misleading statement in, or omission from: The specific requirements depend on the percentage ratios of the acquisition or disposal compared to the company on a number  The annual report. of bases, encompassing asset value, profits, consideration and

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market capitalisation. In addition, industry-specific tests are en- While the federal securities laws do not impose any share- couraged, where relevant, to support these bases. The acquisition holder approval requirements in respect of material or related or disposal is compared on all relevant grounds and is classified party transactions, they do mandate disclosure of these transac- as: tions. An issuer must report entry into, or termination or material amendment of, a material definitive agreement on Form 8-K,  Class 3, where the percentage ratio is less than 5%. Class which must be filed within four business days of the reported 3 transactions require notification only of the terms to a event. The SEC defines a material definitive agreement asan RIS (and only where there is an issue of securities by the agreement that provides for either: issuer).  Obligations that are material to and enforceable against the  Class 2, where the percentage ratio is less than 25%. issuer. Class 2 transactions require more detailed particulars to be included in the press announcement.  Rights that are material to the issuer and enforceable by the issuer against one or more other parties to the agreement.  Class 1, where the percentage ratio is less than 100%. A Class 1 transaction requires an explanatory circular to be Issuers assess materiality in light of both quantitative and quali- dispatched to shareholders and must be conditional on tative factors. shareholder approval being obtained. In the area of related party transactions, SEC disclosure rules are  Reverse takeover, where the percentage ratio is 100% or aimed at providing better information about key financial relation- more. On a reverse takeover, in addition to the Class 1 ships among issuers and certain related persons. The rules require requirements, the issuer’s listing is usually suspended and a description of the issuer’s policies and procedures for the review, the enlarged group then has to re-apply for listing. approval or ratification of transactions with related persons and the identification of any reported related person transactions that did not The FSA can aggregate two or more transactions over a period of require review, approval or ratification or where the issuer’s policies 12 months. The latest transaction will then be treated as incor- and procedures were not followed. As with disclosure of compensation porating the earlier aggregated transactions for the purposes of matters, the SEC rules rely on a principles-based materiality analysis. determining the level of disclosure and consent required. Cross-border Both the NYSE and NASDAQ generally require shareholder ap- In addition, transactions between an issuer and certain categories proval before the issue of securities by an issuer that would result of related parties that exceed 5% in any of the class tests require in a change of control of the issuer. In addition, both the NYSE the approval of the independent shareholders before implementa- and NASDAQ generally require shareholder approval for a new tion. The categories of related parties include: issue of common stock above a threshold of 20%. A public offering generally does not require shareholder approval, nor does a  A substantial shareholder, entitled at any time within the private sale of common stock for cash at a price at or above the 12 months before the transaction to control 10% or more of common stock’s book and market value. the voting rights in an issuer.

 Any person who is or was within the 12 months before the Corporate governance transaction a director or shadow director of an issuer or any UK subsidiary undertaking or holding company of an issuer. The UK’s Combined Code seeks to promote good corporate gov-  A person exercising significant influence over an issuer. ernance as a whole, with emphasis on those aspects of corporate governance relating to the composition and balance of the board,  Any associate of the above. directors’ remuneration, directors’ relations with shareholders, financial reporting and accountability. Where the percentage ratios are less than 5% but any of them exceed 0.25%, the issuer must: In accordance with the UK’s comply or explain approach to corporate governance, the Listing Rules require UK incorporated is-  Inform the FSA of the details of the transaction. suers to:

 Provide confirmation from an independent adviser that the  Explain their governance policies in light of the principles of terms are fair and reasonable as far as the issuer’s share- the Combined Code. holders are concerned.

 Confirm whether or not they have complied with the Com-  Include details in its next annual accounts. bined Code. US Non-UK issuers listed on the Main Market are required to dis- An issuer’s charter document and bye-laws may require share- close whether it complies with the corporate governance regime holder approval in respect of material transactions, including su- in its home country and to explain the significant ways in which per-majority voting requirements for certain transactions such as its actual corporate governance practices differ from those set out mergers or share exchanges. in the Combined Code.

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US contributor details The governance policies and practices that an issuer adopts in Giles Elliott and Vica Irani the US are shaped primarily by both: Jones Day T +44 20 7039 5229  The rules of the exchange on which the issuer’s securities +44 20 7039 5237 are listed. NYSE and Nasdaq rules include various require- F +44 20 7039 5999 ments for the composition of the board, specific duties that E [email protected] must be performed by board committees or independent [email protected] directors and other governance matters. W www.jonesday.com

 SEC rules, which reflect the general focus on governance that has prevailed since the adoption of the Sarbanes-Oxley Act. Although SEC rules generally only require the disclosure of information about the issuer’s corporate governance practices, these rules effectively result in the adoption of some practices because issuers do not want to have to explain, as SEC rules require, why the board has determined that a particular practice is not appropriate for the issuer. Cross-border

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