Since the Sarbanes-Oxley Act was adopted in 2002, non-U.S. issuers have become increasingly disenchanted with the regulatory burden of being listed on a U.S. stock exchange or otherwise having SEC reporting obligations. The most significant reason for non-U.S. issuers wanting to terminate their U.S. obligations is to avoid the internal control requirements under section 404 of S-Ox. In response to criticism that the criteria for exiting the U.S. markets were too stringent, the SEC has adopted new rules to make it easier for these issuers to terminate their reporting obligations when there is relatively little interest in their securities among U.S. investors.

Under the new rules, foreign private issuers will generally be entitled to deregister with the SEC and cease reporting if, during a recent 12-month period, the average daily trading volume of their equity securities on U.S. stock exchanges is 5% or less of the worldwide average daily trading volume. Under the existing rule—to be eliminated for equity securities—a foreign private issuer may terminate its registration and cease filing reports with the SEC only if there are fewer than 300 U.S. resident holders. (Issuers who fail to satisfy the 5% trading test may still deregister if they have fewer than 300 holders.)

[1] Mondaq: New Rules Make It Easier For Non-U.S. Issuers To Terminate Their SEC Reporting Obligations