Thank you, Mr. Chairman, Cicely, and Kelsey, and thank you to the staff for their efforts on this concept release. The questions we are posing are timely and appropriate. The Commission formally adopted rules meant to accommodate foreign companies attempting to register securities in the United States ninety years ago.[1] The decision then was sensible. After all, American investors should not be prohibited from investing in good companies because our laws make selling to Americans more trouble than it is worth.

Since that initial recognition of the “peculiar circumstances” of foreign companies in 1935[2] our rules, from time to time, have changed how foreign companies are regulated in the United States.[3] One of the animating principles behind some of our past rulemakings has been the notion that various accommodations and relief from domestic rules are appropriate because foreign companies are subject to meaningful regulation and disclosure obligations in their home jurisdictions.[4]

Our role as market regulator is not simply to make new rules but to evaluate old rules to ensure that they are still effective and appropriate in light of new developments. In the nearly 20 years since our last examination of the foreign private issuer regulatory framework in 2008[5], a lot has changed. Among the things that have changed is the composition of 20-F foreign private issuers. Back in 2003, 20-F foreign private issuers were predominately incorporated and headquartered in Canada, our neighbor to the north.[6] Fast-forward to 2023 and the picture looks a bit different; the Cayman Islands and China are now the preferred location of incorporation and headquarters, respectively. Additionally, we have been trending further toward a world in which foreign private issuers trade almost exclusively in the United States.[7] Digging a little deeper into that trend, we see that companies that do trade almost exclusively in the United States “have a higher propensity of being incorporated in the Cayman Islands and headquartered in China.”[8]

Those observations address only a portion of what has changed since our last evaluation of the foreign private issuer framework. Today, the Commission is asking a broader fundamental question: have the changes in the characteristics of the foreign issuers that choose to access our capital markets contravened the policy rationales and objectives that have made our foreign private issuer regime into what it is today? The Concept Release puts forward potential solutions, some better than others, along with a series of questions that will help the Commission assess their respective merits.

A particularly weak solution that the Commission is considering today asks whether a foreign private issuer should be required to be “incorporated or headquartered in, and subject to the oversight of the signatory authority of, a jurisdiction in which the foreign securities authority has signed the [International Organization of Securities Commissions] (“IOSCO”) Multilateral Memorandum of Understanding Concerning Consultation, Cooperation, and the Exchange of Information (“MMoU”) or the Enhanced MMoU (“EMMoU”)”[9]. The answer is “no.” Neither the MMoU nor the EMMoU does anything to ensure that American investors have access to the material disclosure that is an essential part of our regulatory regime. With that reality in mind, the Commission concedes from the beginning that such a solution “would likely function as a complement to other regulatory responses.”[10] Therefore, why would we choose to adopt, as a potentially unnecessary sidecar requirement, a “solution” that does nothing to provide investors with material information while simultaneously ceding regulatory authority to an international organization? Were this solution to be adopted, we could lose control of the foreign private issuer definition altogether, as IOSCO could unilaterally increase the commitments required by the MMoU and the EMMoU.

Despite my reservations, I believe we are asking the right questions. I want to thank the staff again for their thoughtful examination of this issue. This concept release is a welcome return to a data-driven approach to rulemaking. I look forward to hearing from the public.

I have two questions for the staff:

• What are we planning to do to make sure FPIs and their countries of domicile and incorporation are aware of this concept release?
• If we were to move forward with a change, what kind of transition period would you envision recommending?