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Federal Register / Vol. 86, No. 234 / Thursday, December 9, 2021 / Rules and Regulations
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before the due date of the relevant annual report form.
Although the interim final amendments prescribed the timing and means by which such submissions were made, neither they nor the HFCA Act specified the particular types of documentation that could or should be submitted for this purpose. Moreover, in the Interim Final Release, the Commission recognized that available documentation could vary depending upon the organizational structure and other factors specific to the registrant.
Thus, registrants had flexibility under the interim final amendments to determine how best to satisfy this requirement.
2. Comments One commenter recommended that registrants make the submission of documentation establishing that the issuer is not owned or controlled by a governmental entity in the foreign jurisdiction of the PCAOB-Identified Firm in the form of a certification, but did not support requiring the submission to be filed in a Form 8K
because it should not be classified as a material event and did not support requiring disclosure that a registrant is a Commission Identified issuer under Form 8K.26 This commenter suggested that making the submission publicly available or filed as an exhibit would exceed the actions authorized by the HFCA Act and indicated that registrants may wish to seek confidential treatment for some or all of the submission. The commenter also suggested that we establish a universal due date for the submission requirement that is later than the due date for the annual report to provide registrants additional time to prepare the submission and reduce the costs of compliance, and that we should not make the determinations of Commission-Identified Issuers more often than annually.
Additionally, the commenter recommended that a registrant retain flexibility over the type of documentation a Commission-Identified Issuer must submit to establish that it is not owned or controlled by a governmental entity in the foreign jurisdiction based on its facts and circumstances, but indicated that publication of non-exclusive methods to satisfy the requirement would be valuable. This commenter suggested potential non-exclusive methods to show there is no ownership or control, such as there has been no Schedule 13D
or 13G filing by a government related entity in the foreign jurisdiction, there 26 See
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are no material contracts with a foreign governmental party, or there is no foreign government representative on the board.
Another commenter recommended additional guidance on the meaning of owned or controlled. 27 The commenter suggested that the amendments use the term significant influence under U.S. Generally Accepted Accounting Principles U.S.
GAAP and incorporate specific examples including: 1 Where a government entity or affiliate has 20
percent or greater ownership or voting interest; 2 existence and effect of potential voting rights that are currently exercisable or convertible; 3 when an entity is represented on the board of directors or equivalent governing body of the investee entity; and 4 an entitys participation in policy-making processes, including participation in decisions about dividends or other distributions.
3. Final Amendments We are finalizing the interim final amendments with respect to the submission requirements without modification. The amendments require any Commission-Identified Issuer to submit to the Commission through EDGAR,28 on or before the due date of the relevant annual report form, documentation establishing that the issuer is not owned or controlled by a governmental entity in the foreign jurisdiction of the PCAOB-Identified Firm. This submission will be made publicly available on EDGAR, which we believe is consistent with the HFCA Act given its focus on transparency.29
Additionally, the final amendments continue to permit CommissionIdentified Issuers to determine the appropriate documentation to submit in response to the requirement, based on their organizational structure and other registrant-specific factors. We decline to provide an exclusive or non-exclusive list of what documentation may demonstrate that the registrant is not owned or controlled by the relevant governmental entity. We believe that such a list may be too limiting or become the de facto means of satisfying the requirement. We believe that Commission-Identified Issuers should 27 See
letter from U.S. Acctg. Academics.
final amendments do not specify the manner in which a registrant must submit the required documentation on EDGAR. A registrant could submit the documentation with its annual report; on Forms 8K or 6K, as applicable; or using another appropriate method.
29 See letter from Sen. Kennedy stating that the purpose of the legislation is to make relevant information about publicly traded firms explicit and easily accessible to investors.
28 The
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instead make a determination of what documentation meets the requirement for their particular company. We also believe that not prescribing the specific documentation Commission-Identified Issuers must submit will limit compliance costs and could result in more relevant information being provided to investors.
Moreover, although the terms are not defined in the statute, we believe that the meaning of the terms owned or controlled, owned, and controlling financial interest in the HFCA Act reference a persons or governmental entitys ability to control the registrant as that term is used in the Exchange Act and the Exchange Act rules.
One commenter suggested that the amendments use the term significant influence under U.S. GAAP and incorporate a specified list of examples.
We note, however, that the HFCA Act refers to the Exchange Act and the Commissions Exchange Act rules.
Therefore, we believe the terms owned or controlled, owned, and controlling financial interest used in the HFCA Act are reasonably read to have the same meaning as the term control as used in the Exchange Act and the Exchange Act rules. Moreover, registrants should generally understand the concept of control and so incorporating the same meaning will result in consistent application of the concept across different regulatory contexts.
B. Disclosure Requirements 1. Interim Final Amendments Section 3 of the HFCA Act requires a Commission-Identified Foreign Issuer to provide the following additional disclosures in its annual report for the year that the Commission so identifies the issuer: 30
That, during the period covered by the form, the PCAOB-Identified Firm that has prepared an audit report for the issuer; 31
30 The HFCA Act requires these disclosures in the issuers Form 10K, Form 20F, or a form that is the equivalent of, or substantially similar to, these forms. The disclosures required by Section 3 of the HFCA Act are also required in transition reports filed on Forms 10K and in transition reports on Form 20F that include audited financial statements. The disclosures should address the transition period as if it were a fiscal year.
31 The registered public accounting firm referenced in the statute means a PCAOB-Identified Firm. See supra notes 7 through 10. The interim final amendments included slightly different terms than those in the statutory language to clarify this and other points. Specifically, the interim final amendments required a Commission-Identified Foreign Issuer to disclose that, for the immediately preceding annual financial statement period, a
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