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Federal Register / Vol. 86, No. 234 / Thursday, December 9, 2021 / Rules and Regulations
amended annual report with financial statements that include an audit report signed by a non-PCAOB-Identified Firm, the Commission shall as soon as practicable issue an order ending the initial or subsequent trading prohibition, as the case may be. An order ending an initial or subsequent trading prohibition will provide that the termination of the trading prohibition will be effective the next business day after the order is published by the Commission. We believe that once an issuer has certified to the satisfaction of the Commission that it has retained a non-PCAOB-Identified Firm, termination of the trading prohibition should not be delayed.

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G. Amendment to the Delegations of Authority of the Commission The Commission is adopting new Rule 301m that delegates Commission authority to the Director of the Division of Corporation Finance to identify a registrant as a CommissionIdentified Issuer. This delegated authority is designed to conserve Commission resources by permitting Commission staff to carry out the procedures described herein in connection with the identification of Commission-Identified Issuers. The Commission staff may nevertheless submit matters to the Commission for consideration, as it deems appropriate.
III. Procedural and Other Matters If any of the provisions of these rules, or the application thereof to any person or circumstance, is held to be invalid, such invalidity shall not affect other provisions or application of such provisions to other persons or circumstances that can be given effect without the invalid provision or application.
Pursuant to the Congressional Review Act, the Office of Information and Regulatory Affairs has designated these rules as not a major rule, as defined by 5 U.S.C. 8042.
The Administrative Procedure Act APA generally requires an agency to publish notice of a rulemaking in the Federal Register and provide an opportunity for public comment. This requirement does not apply, however, if the agency for good cause finds . . .
that notice and public procedure are impracticable, unnecessary, or contrary to the public interest. Section 2 of the HFCA Act requires Commission rulemaking within 90 days of the date of enactment in order to establish the manner and form in which a covered issuer shall make a submission required under paragraph 2B. Furthermore, Section 3 of the HFCA Act requires
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certain disclosure from issuers, and the amendments to Form 10K, Form 20F, Form 40F, and Form NCSR clarify issuers obligations under the HFCA
Act. Because the interim final amendments conformed the specified forms to the requirements of a newly enacted statute and in light of the 90day rulemaking directive in Section 2 of the HFCA Act, the Commission found in the Interim Final Release that notice and public comment were impracticable and unnecessary.94 The revisions to the interim final amendments being adopted in this release are in response to feedback received on requests for comment in the Interim Final Release.
IV. Economic Analysis A. Introduction and Broad Economic Considerations As discussed above, we are finalizing amendments to Form 10K, Form 20F, Form 40F, and Form NCSR that implemented the disclosure and submission requirements of the HFCA
Act. We are mindful of the costs imposed by, and the benefits obtained from, our rules. In this section, we analyze potential economic effects stemming from the amendments.95 We 94 Accordingly, the interim final amendments did not require a final regulatory flexibility analysis under the Regulatory Flexibility Act. See 5 U.S.C.
604a requiring a final regulatory flexibility analysis only for rules required by the APA or other law to publish a general notice of proposed rulemaking. For the same reason, these amendments do not require a final regulatory flexibility analysis.
95 Exchange Act Section 3f requires the Commission, when engaging in rulemaking where it is required to consider or determine whether an action is necessary or appropriate in the public interest, to consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation.
Further, Exchange Act Section 23a2 requires the Commission, when making rules under the Exchange Act, to consider the impact that the rules would have on competition and prohibits the Commission from adopting any rule that would impose a burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act. Additionally, Section 2c of the Investment Company Act requires us, when engaging in rulemaking that requires us to consider or determine whether an action is consistent with the public interest, to also consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation. Although we are adopting amendments to Form NCSR to implement the HFCA Act as applied to registered investment companies, based on recent Form N
CEN filings, no registered investment company reported having retained a registered public accounting firm located in a foreign jurisdiction for the preparation of the companys financial statements. Based on this data, and Commission staff experience, we estimate that no registered investment companies will be subject to the requirements of the interim final amendments upon the rules adoption. Accordingly, we do not expect any economic effects associated with the amendment to Form NCSR.

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analyze these effects against a baseline that consists of the current regulatory framework and current market practices.
We are finalizing the interim final amendments with a modification to clarify that a Commission-Identified Foreign Issuer listed in the United States using VIE or any structure that results in additional foreign entities being consolidated in the financial statements of the registrant, must provide the HFCA Acts required disclosures regarding government ownership of shares of the operating company. We also are adding a requirement for registrants to tag the name, jurisdiction, and the PCAOB ID
Numbers of the audit firms that sign the audit report accompanying a registrants Form 10K, Form 20F, and Form 40F. In this economic analysis, we discuss the economic effects arising from the interim final amendments as finalized, including the modifications discussion above. Where possible, we have attempted to quantify the expected economic effects of the amendments.
Some of the potential economic effects are inherently difficult to quantify. In some instances, we lack the information or data necessary to provide reasonable estimates for the economic effects of the amendments. Where we cannot quantify the relevant economic effects, we discuss them in qualitative terms.
The new disclosure requirements will increase transparency about the reliability of affected issuers financial statements as well as the characteristics of their ownership and control structures. High-quality disclosures, including high-quality financial statements, are a cornerstone of wellfunctioning capital markets.96 Such disclosures reduce information asymmetries between investors and issuers, with positive effects on price efficiency and capital allocation.97
Broadly speaking, academic research shows that increasing the quality of financial reporting improves price efficiency and reduces an issuers cost of capital.98
96 See, e.g., Christian Leuz & Peter Wysocki, The Economics of Disclosure and Financial Reporting Regulation, 54 J. Acct. Research 525 2016; and Anne Beyer, Daniel Cohen, Thomas Lys & Beverly Walther, The Financial Reporting Environment:
Review of the Recent Literature, 50 J. Acct. Econ 296
2010.
97 See, e.g., Douglas W. Diamond & Robert E.
Verrecchia, Disclosure, Liquidity, and the Cost of Capital, 46 J. FIN. 1325 1991.
98 See, e.g., Stephen Brown & Stephen A.
Hillegeist, How Disclosure Quality Affects the Level of Information Asymmetry, 12 Rev. Account. Stud.
443 2007 showing how better disclosure quality reduces information asymmetry; Nilabhra Bhattacharya, Hemang Desai, & Kumar Venkataraman, Does Earnings Quality Affect Information Asymmetry? Evidence from Trading
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