Dorien Fransens, Secretary General, Europeanissuers
Total Page：16
File Type：pdf, Size：1020Kb
5+ aitbl - ivzw RucBelliard 4 6 Tel| +32(012 289 25 70 info@europeafi issuers,eu 8-1040BRUSSEIs Fax:+32 (0)2 512 l5 60 wM/w.€uropeanitsuers,eu U.S.Securftles and Exchange Commission Tothe att. of Ms.Nancv M. Morris Secretary1.00 F Street, NE washington,D.c. 20549-9303 U5A r.iFcH!l/HD MAY13 2008 Brussels,8 May 2008 Re: Commentson ProposedAmendments to RulesRelating to ForeignPrivate lssuer Reportingunder the SecuritiesExchange Act of 1934 FileNo. 57-05-08 DearMs. Morris, We are submittingthis letter in responseto the requestof the Securitiesand Exchange Commission(the "Commission") for commentson the Commission'sproposal to amendthe rulesand forms that governreporting by foreignprivate issuers under the Securities ExchangeAct of 1934,as amended(the "ExchangeAct"). The proposalis discussedin ReleaseNo. 33-8900; 34-57409i International series Release No. 1308; File No. 57-05-08 (the "Release"), Europeanlssuers'has for severalyears supported the effortsof the Commissionto review the applicationof the U.S.securities laws and regulations to non-U.S.issuers. These efforts haveresulted in substantialimprovements to the U.S.regulatory regime in the pastfew years,including the modernizationof the rulesgoverning deregistration and the elimination of U.S.GAAP reconciliation for companiesthat publishIFRS financialstatements. Unfortunately,we cannotsupport the Commission'sproposal to requirelarge non-U.S. issuersto file their annualreports on Form20-F within 90 daysof the end of their fiscal years. We regardthis proposalas a step in the oppositedirection compared to the I Europeanlssuersis a pan Europeanorganisation that representsthe vast majority of publicly quoted companiesin Europe. Europeanlssuerswas formed when EALIq the EuropeanAssociation of Listed Companies,and UNIQUE, the Unionof lssuersQuoted in Europe,combined their organisations in early 2008. Itsmembers are national associations and companies from the followingcounfties: Austria, Belgium, Bulgaria, Cyprus,Finland, France, Germany, Greece, ltaly, the Netherlands,Poland, Portugal, Spain, Switzerland and the UnitedKingdom. These markets count some9,200 listed companies wlth a combinedmarket value of some€ 8,500billion. Europeanlssuersis an lnternationalNon ProfitAssociation under Belglan law with registeredseat andpermanent secretarlat in Brussels. Commission'sother recentinitiatives, and we hope that the Commissionwill decideto reconsiderits position. TheCommission's proposal would, if adopted,significantly increase the burdenson foreign issuerswithout providing material benefits to u.s.investors. lt wouldalso be contraryto the spiritof dialogueand mutualcooperation that has developedover the last few years betweenthe Commissionand its non-U.S.counterparts, including CESR and the European Commission. Thereare a numberof reasonswhv we believethe Commissionshould modify its proposal: It would placesignificant strain on the limitedresources of non-U.S,companies, which are requiredto meet ever more stringenthome country reporting requirementsin additionto theirU.S. reporting requirements. For most companies, the same peoplework on both home countryreporting and U.S.reporting. It wouldeffectively impose an equivalentdeadline on companiesin their home jurisdictions,as most companiesare prohibitedunder home country rules from publishinginformation in the UnitedStates without simultaneously publishing the sameinformation in their homecountries. The Commission would in substancebe adoptingan amendmentto the home countryreporting deadlines of non-U.S. comoantes. It wouldnot recognize the significantadditional work that Soes into the preparation of a Form20-F after a company'shome country report is published.This includes internalcontrol evaluation, disclosure committee review and the preparationof disclosurethat is not requiredin the sameform, or sometimesat all,under home country rules (for example,critical accounting policy disclosure,market risk information,statistical information for banksand oil and gasreserves disclosure)' Formany companies, the preparationof the Form20-F requires translation, which is a long and difficultexercise for documentsthat must meet the highestguality standards.lt alsoincludes U.5. GAAP reconciliation for somecompanies, although thisis lessof a concernfor mostof the Europeancompanies that our organization represents,as they publish financial statements in accordancewith IFRS. It wouldprovide minimal benefits for U.S.investors, as most companies publish the materialinformation contained in a Form20-F on a continuousbasis over the course of the year(continuous disclosure is mandatoryfor Europeancompanies under the EuropeanMarket Abuse Directive), Most si8nificantly,large companies systematicallypublish annual resultsannouncements well before the 90-day deadline,providing the marketwith the mostimportant information contained in the Form20-F. We believethat today's global markets require a cooperativeapproach among regulators to adoptcoordinated rules that servethe interestsof investorsworldwide (including in the UnitedStates) without placingunnecessary burdens on companies.The Commission's proposalunfortunately seems to be contraryto thisspirit, as it representsa unilateralrule proposalthat does not take into account the deadlinesapplied by non-U.S. regulators for the publicationof analogousdocuments. Based on the Commission'sstrong past recordof internationaldialogue and cooperation, we areconfident that the Commissionwill giveall considerationto adopting a differentapproach. Inthis spirit, we believethat it wouldbe appropriate for theCommission to linkthe Form20- Fdeadline with a company'shome country reporting calendar. Specifically, we proposethat the Form20-F deadline be one month after a company'shome country deadline (four monthsafter year-end for Europeancompanies under the Transparency Directive). The one- monthperiod would give the companytime to_prepare translations and to completeother proceduresthat are specificto the FormzO-F.' The final rule could also provide that the one-monthperiod would start on the dateof actualpublication of the homecountry annual report,if thattakes place earlier tha n the dateof thedeadline. In additionto the go-dayfiling deadline, we havecomments on someof the otherproposals madebv the Commissionin the Release: . We supportthe proposalthat a companydetermine its status as a "foreignprivate issue/'once a year,rather than on a continuousbasis, and that it be givena transitionperiod to beginreporting as a U.S.issuer if it doesnot meetthe definition of "foreignprivate issuer." . We alsosupport the proposalfor a transitionperiod before a shortenedForm 20-F filing deadlinewould apply(regardless of whetherthe Commissionaccepts our recommendationfor thefiling deadline). We understandthe Commission'sproposal to requirefinancial disclosure when a companymakes an acquisitionthat issignificant at the50% level, but we believethat requiringcompanies to providepro forma and target financial statements prepared underSEC rules in a Form20-F is not the rightapproach. In manycases, non-U'S. companieswill not haveaccess to the informationnecessary to preparepro forma or separatefinancial statements (particularly if they must be preparedunder the IASB versionof IFRSand audited under PCAOB standards), In somecases, the acquisition targetor sellermay be unwillingor unableto furnishthe requiredinformation, meaningthat an SEc-registeredcompany subject to thesedisclosure requirements mighthave to abandona majortransaction that otherwise would be in the interests of shareholders(or deregisterin orderto completethe transaction). We believethat the final rule shouldrely on generalprinciples of materiality,with companies providingat a minimumthe informationthey publish in theirhome countries, as well as any other informationnecessary to makethe Form20-F complete and not misleading,without requiring the informationto be presentedunder any speclfic format, '? Additionaltime might be appropriate for companiesthat a.e required to reconcile their financial statements to U.S,GAAP, lf theCommission nonetheless decides to adopta rulerequiring financial statements, we believeit shouldprovide flexibility for companiesto includefinancial information basedon homecountry jurisdictional variants of IFRSand localauditing standards, andto omitfinancial information when it cannotbe producedwithout unreasonable burdenor exoense.We alsobelieve that the ruleshould determine significance only by referenceto the investmentand assets tests, and not the net incometest, which doesnot always provide an accurateindication of the importanceof an acquisitionto a consolidatedgroup. Finally,the Commissionshould provide a transitionperiod of threeyears so companiescan plan for the requiredfinancial reporting when they negotiatefuture acquisitions. We are not opposedto the proposalthat companiesdisclose fees charged by ADR depositarVbanks, but they shouldbe protectedfrom liabilityfor this disclosureif theyrely on informationprovided by the depositary banks. Asa generalmatter, we alsobelieve that it is importantfor the Commissionto continueto adhereto IOSCOprinciples as a basisfor Form20-F disclosure. The application of these principleson a globalbasis benefits investors by providingthem with informationon companiesfrom multiple jurisdictions based on a familiardisclosure regime. Inthis spirit, the Commission'sproposal to requiredisclosure regarding changes in auditors, whilenot especiallyburdensome, is an exampleof a deviationfrom IOSCOstandards that seemsunnecessary to