The Securities and Exchange Commission unanimously voted to propose rules to make it easier for foreign companies to stop listing their securities for trading in the country in order to avoid the expense of complying with U.S. securities laws.
The SEC hopes the new rules will actually encourage foreign companies to list in the United States, knowing it would be relatively easy to leave.
The rule would allow a company to leave if less than 5 percent of the trading volume of its stock takes place in American markets, but only if less than 10 percent of the shares are owned by American residents. If less than 5 percent of its stock is owned by American residents, a company can leave the American market no matter how large the trading volume.
For stock issuers, deregistration would be allowed if a company has met SEC filing requirements for two years, has not sold stock in the United States for 12 months and has been listed on its home country exchange for two years.
A group of European companies had originally requested that corporations be able to drop their securities registration if trading volume in the United States was low, though SEC officials noted that volume along wasn't a good indicator of U.S.-based ownership.
Current rules make it very difficult for a company that registers in the United States to leave the market. A company could suspend its registration if it has fewer than 300 American owners, but it faces the risk that it will have to resume compliance if the number of American owners rises above 300.The rule will soon be sent out for public comment.
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