Summary of Comments Concerning the Rule Proposal Mandating Edgar Filing for Foreign Issuers
|A. Accounting and Consulting Firms|
|1.||Deloitte Touche Tohmatsu||(Deloitte)|
|2.||Ernst & Young LLP||(Ernst)|
|4.||KPMG Japan||(KPMG J)|
|B. Attorneys and Law Firms|
|1.||Cleary, Gottlieb, Steen & Hamilton||(Cleary)|
|2.||Davis Polk & Wardwell||(Davis)|
|3.||Freshfields Bruckhaus Deringer LLP (United Kingdom)||(Freshfields)|
|4.||Fried, Frank, Harris, Shriver & Jacobson||(Fried)|
|5.||Proskauer Rose LLP||(Proskauer)|
|6.||Stephen Quinlivan, Esq.||(Quinlivan)|
|7.||Reboul, MacMurray, Hewitt, Maynard & Kristol||(Reboul)|
|8.||Seward & Kissel LLP||(Seward)|
|9.||Shearman & Sterling||(Shearman)|
|10.||Sullivan & Cromwell||(Sullivan)|
|11.||Ziegler, Ziegler & Altman LLP||(Ziegler)|
|1.||Australia and New Zealand Banking Group Ltd.||(ANZ Bank)|
|2.||The Bank of New York||(BNY)|
|3.||UBS AG (Switzerland)||(UBS)|
|1.||BHP Billiton Ltd. (Australia)||(BHP)|
|2.||Companhia Siderurgica Nacional (Brazil)||(CSN)|
|3.||DaimlerChrysler AG (Germany)||(DaimlerChrysler)|
|4.||Matsushita Electric Industrial Co., Ltd. (Japan) on behalf of itself and the following Japanese companies:|
a. Canon Inc.
b. Hitachi Ltd.
c. Honda Motor Co. Ltd.
d. Ito-Yokado Co. Ltd.
e. Komatsu Ltd.
f. Kubota Corporation
g. Kyocera Corporation
h. Makita Corporation
i. Mitsui & Co. Ltd.
j. NEC Corporation
k. Nidec Corporation
l. Nippon Telegraph and Telephone Corporation
m. Pioneer Corporation
n. Ricoh Company Ltd.
o. TDK Corporation
p. Wacoal Corporation
|(Matsushita et al.)|
|5.||Promotora de Informaciones S.A. (Spain)||(Promotora)|
|6.||Siliconware Precision Industries Corporation and United Microelectronics Corporation (Taiwan)||(Silicon/United)|
|7.||Telefonos de Mexico, S.A. de C.V. (Mexico)||(Telmex)|
|E. Financial Printers and Filing Agents|
|1.||Bowne & Co., Inc.||(Bowne)|
|2.||The Consortium of Filing Agents and Software Developers, including:|
a. American Financial Printing
b. Bowne & Co., Inc.
c. Burrups (United Kingdom)
d. Capital Printing
e. Color Art Printing Co.
f. Command Financial Press
g. Davis Polk & Wardwell
i. Imperial Financial Printing
j. Merrill Corporation
k. Pacific Financial Printing
l. R.R. Donnelley Financial
|(Consortium of Filing Agents)|
|3.||Michael Mostransky of Burrups (United Kingdom)||(Mostransky)|
|F. Professional Associations|
|1.||American Society of Corporate Secretaries||(ASCS)|
|2.||Financial Executives International, Committee on Corporate Reporting||(FEI)|
|3.||American Institute of Certified Public Accountants, SEC Regulations Committee||(AICPA)|
We received 32 comment letters from 31 distinct commenters.1 Three of the letters represented multiple entities.2 Consequently, the letters received represented comments from a total of 57 separate entities, including 24 corporations, 12 financial printers and filing agents,3 10 law firms and one individual attorney,4 four accounting and consulting firms, three banks, and three professional associations.
The letters comprise approximately four categories. The first category consists of letters that strongly expressed approval of our proposal either unconditionally or with brief comment concerning one or two aspects of the proposal. Five letters fell into this category (ASCS, FEI, Quinlivan, Seward, and UBS.)
The second category consists of letters that expressed general approval or support of our proposal but have concerns about multiple aspects of it. Fourteen letters fell into this category (AICPA, ANZ, Cleary, Davis, Deloitte, Ernst, Freshfields, Fried, KPMG and KPMG J, Pricewaterhouse, Shearman, Silicon/United, Sullivan, and Ziegler.)
The third category consists of letters that do not express either general approval or disapproval of the proposal. Instead, these letters solely criticize one or more aspects of the proposal. 11 letters fell into this category (BHP, Bowne, Consortium of Filing Agents, CSN, DaimlerChrysler, Matsushita et al., Mostransky, Promotora, Proskauer, Reboul, and Telmex.)
The fourth category consists of one letter that expressed general disapproval of the proposal while also criticizing one or more aspects of it. The sole letter that fell into this category was from BNY.
Overall, the specific proposals that generated the most comments were:
Many commenters also criticized the current EDGAR filing hours and the inability to make an official filing in PDF.5
ASCS commented as the representative of U.S. companies that either have invested in or have business relationships with foreign issuers. It approved of our proposal because "mandatory EDGAR filing supports the goals of transparency and of making material information available to everyone at the same time," which would benefit its members that have invested in foreign issuers. In addition, according to ASCS, mandatory EDGAR filing for foreign issuers "would facilitate due diligence, negotiations and communications," which would benefit its members that have business relationships with foreign issuers.6
FEI similarly strongly endorsed the proposal, stating that "[a]lthough it may not have been the case in 1993, we believe that current foreign issuers now possess the technology necessary to file electronically without incurring excessive cost or experiencing undue hardship." FEI then voiced its belief that "in an effort to present a level playing field for domestic and foreign issuers, both groups should be required to file under the EDGAR rules."7
Seward expressed its overall approval of our proposal based on its experience as a law firm having many clients that are or have invested in foreign private issuers that have securities registered under the Securities Act and Exchange Act. Regarding its investor clients, Seward commented that "[m]any of these clients have expressed to us their frustration over not having quick access to reports and press releases filed by foreign issuers that do not file via EDGAR, and not being able to locate reports and registration statements that have been filed on paper." Regarding its foreign private issuer clients, Seward stated that "[a]s a matter of course we have informed our foreign clients that have become subject to the Exchange Act's periodic reporting requirements of the availability and benefits of EDGAR" and "[n]early all of these clients have chosen to file via EDGAR because they have realized that it is in their interest to disseminate information to the public as quickly and efficiently as possible." Seward further commented that its foreign issuer clients "have expressed to us the difficulties they often face in having their press releases carried by U.S.-focused press services." According to Seward, those "foreign issuer clients that have elected to use EDGAR appreciate their ability to refer investors to the Commission's EDGAR web site for reference to their periodic reports, press releases and announcements."8 Seward also stated that because "foreign private issuers who have not made the transition to EDGAR have experienced an unnecessary delay in learning about third-party filings such as Schedules 13D or 13G since those filings continue to be made on paper. . .[e]xtending EDGAR to foreign issuers will enhance the accessibility and timeliness of information disseminated by those issuers, including information from third party filers. . ."9 Seward then commented:
"All of the foreign private issuers with whom we deal are capable of drafting filings with widely-accepted word processing software and making arrangements with third parties to convert and file them via EDGAR. We believe that the relatively small burden of having a financial printer, law firm or other qualified third party convert and file those reports and registration statements via EDGAR is more than outweighed by the benefits. These benefits include improved relationships with investors and enhanced dissemination of information to all interested parties."10
UBS also voiced strong support for the proposal based on its use of the EDGAR system for most of its filings since becoming a publicly traded company in the United States. Based on this experience, UBS noted that "electronic filing does not involve a significant expenditure of cost or effort beyond that already spent preparing the documents for printing, in the case of offering documents filed under the Securities Act of 1933, or printing and posting the documents on our own website, in the case of documents filed under the Securities Exchange Act of 1934."11
UBS then commented:
"As a result of our use of the EDGAR system, UBS has become aware of the tremendous advantages the system provides. We believe that the ease with which our investors and other stakeholdersnot just in the United States, but around the worldcan find information about UBS through EDGAR has increased investor interest in our debt securities and ordinary shares in the US and other markets. EDGAR has become an important channel of distribution for our information, furthering our disclosure goals of transparency and equal treatment of all shareholders."12
Quinlivan voiced his overall support for our proposal as a practicing securities lawyer because "the technological burdens have lessened since the EDGAR rules were adopted, and it is essential to have electronic access to all disclosure documents with respect to issuers accessing the public capital markets."13
Most of the commenters in this category expressed brief support generally for our proposal before expressing detailed concerns about various aspects of it. Typical of this category are the remarks of the AICPA, ANZ, Davis, Deloitte, KPMG, Pricewaterhouse, Silicon/United, Shearman, Sullivan, and Ziegler. For example, the ANZ stated that it "fully supports initiatives to automate the filing, dissemination and analysis of financial information. . ."14 Silicon/United stated that "[i]n general, we agree with the Commission's view that electronic filing for foreign issuers will provide investors better access to important information."15
A few in this category were more emphatic in their general support of our proposal. For example, Freshfields commented:
"From the dual standpoints of protecting US investors and promoting efficient US capital markets, the Proposed Amendments are a timely response to recent global advances in information technology. They would operate to present information about foreign persons to the market on the same basis and with the same speed, broad dissemination and ease as information relating to domestic persons. Foreign issuers would reap the benefits currently enjoyed by domestic issuers filing by EDGAR: increased efficiencies in the filing process, enhanced staff review, greater market exposure and faster and more efficient storage, retrieval and analysis of financial and other information. The Proposed Amendments are also consistent with other recent changes aimed at placing foreign and domestic issuers on a more equal footing, such as the decreased availability of confidential filings for follow-on offerings by foreign issuers and the greater consistency between the disclosure requirements for foreign and domestic issuers. By moving toward more equal treatment of foreign and domestic issuers, the Commission is helping to make the US capital markets as efficient a home for foreign issuers as they are for domestic issuers and to ensure that US investors in foreign securities are as well protected as US investors in domestic securities."16
"We agree with the Commission that electronic filing will foster the more rapid dissemination of information, facilitate research and analysis of data and increase market exposure for foreign issuers. These are worthwhile objectives, and we concur with the Commission's conclusions that these goals generally outweigh the additional burdens imposed on foreign issuers by mandated electronic filing."17
Ernst similarly remarked:
"Overall, we agree with the proposed amendments and believe they will benefit foreign issuers and market participants. We agree that mandated electronic filing benefits investors and the financial community by making information publicly available in an electronic format that facilitates timely access and efficient retrieval. We concur that the benefits of universal electronic filing outweigh the additional costs that would be imposed on foreign issuers."18
"We share the Commission's desire to improve the availability of information to the capital markets about companies whose securities trade in the U.S. markets. The use of EDGAR by domestic companies has widened access to information about these companies to anyone with a desktop computer and an Internet link. It is a laudable goal to provide similar access to information by non-U.S. issuers that have securities that trade in the U.S. markets."19
Several commenters noted the need to balance the benefits of EDGAR against the need to accommodate foreign issuers. For example, Fried stated:
"However, there is also a competing goal that must also not be thwarted in the process. That goal is to encourage non-U.S. issuers to access the U.S. capital markets. The preeminence of the U.S. capital markets will only continue if this goal is also met. Today's capital markets are increasingly competitive. Non-U.S. issuers have numerous choices on where to raise capital. It is therefore important to weigh the benefits U.S. investors will obtain from having Internet access to information about non-U.S. companies with the disadvantage that added costs and requirements could deter non-U.S. issuers from seeking financing or listing in the U.S. capital markets."20
Freshfields similarly commented:
"We respectfully submit, however, that portions of the Proposed Amendments may violate this equal treatment principle by placing disproportionate burdens on foreign filers, many of which, because of their linguistic and regulatory environment and geographic distance from the US, deserve special consideration. Although the specific purpose of the Proposed Amendments may be best served by having foreign filers follow existing EDGAR procedures applicable to US persons as closely as possible, we suggest that certain accommodations be made to avoid having the costs of the Proposed Amendments outweigh the benefits to foreign filers and to the US capital markets. The Commission has adopted similar accommodations in the past, including the initial exclusion of foreign issuers from EDGAR filing requirements. Without continued accommodations for foreign filers, the goals of promoting access by foreign issuers to US capital markets and providing US investors with increased opportunities for diversification into foreign securities may be undercut."21
Other commenters in this category echoed the need to recognize countervailing objectives when adopting the final rule mandating EDGAR filing for foreign issuers. For example, Sullivan stated:
". . .the Commission should carefully weigh the benefits of its latest proposal against the cost of increasing the regulatory burden on non-U.S. issuers and thereby discouraging them from participating in the U.S. capital markets, particularly at a time when those issuers have more real choices than ever before about which markets to access."22
Similarly, Cleary urged us to adopt an approach that:
". . .would be consistent with the Commission's policy of imposing less rigid disclosure requirements on foreign issuers in certain respects in order not to impose burdens inconsistent with their home jurisdiction requirements. This policy has successfully encouraged foreign issuers, including those in emerging markets, to access the U.S. capital markets, which has allowed U.S. investors a broader array of investment opportunities while still affording them the protections of the U.S. disclosure regime."23
Commenters in this category voiced their criticism of various aspects of the proposal without stating whether they generally approved or disapproved of it. These concerns are discussed in Section III below.
BNY was the only commenter that expressed general disapproval of the proposal along with specific criticism:
"BNY believes that the requirement to submit documents through the EDGAR system will increase the burdens on foreign issuers of registering their securities under the Securities Act of 1933 and becoming reporting companies under the Securities Exchange Act of 1934."24
Four entities commented specifically on the proposed mandated EDGAR filing for foreign governments.25 Quinlivan is the only commenter that supported electronic filing requirements for foreign governments. According to Quinlivan, "[t]here is no reasoned policy reason calling for a different result."26
Both Shearman and Sullivan opposed mandated EDGAR filing for foreign governments for substantially similar reasons. Both argued that foreign governments face "substantial logistical difficulties in meeting their reporting and disclosure obligations under U.S. securities laws," such as language barriers, time zone differences and "internal approval procedures that are often cumbersome." According to both, mandated EDGAR filing would compound these problems.27 According to Sullivan, one of its "Schedule B clients has expressed concern that the additional time required to convert documents into EDGAR-compatible electronic format would jeopardize its ability to prepare and file prospectus supplements on a timely basis pursuant to Rule 424(b)."28 Sullivan further noted that neither foreign governments nor the Commission have any experience with the filing of Schedule B documents on EDGAR. Both Shearman and Sullivan also noted that Form 18-K contains very little information that is as current as information available in economic reports published by multilateral agencies.29
Consequently, both Shearman and Sullivan argued that because few benefits would result from mandated EDGAR filing for Schedule B filers, the Commission should permit foreign governments to file their securities documents on EDGAR on a voluntary basis. Sullivan further argued that, alternatively, should the Commission adopt mandated EDGAR filing for foreign issuers, the first filing subject to mandated EDGAR filing should be the Form 18-K for the fiscal year ended December 31, 2003. According to Sullivan, this lengthy transition period is necessary to "allow sufficient time for preparation, training and testing, the need for which is compounded by the lack of any experience on the part of the staff and the sovereign issuer community with the electronic submission of Schedule B documents via EDGAR."30
Cleary and Sullivan were the only entities to comment specifically on the Commission's proposal to continue to require the filing of a foreign government's annual budget on EDGAR only if an English translation is available and to require the filing of a paper copy of the foreign language annual budget under cover of Form SE when no English translation is available.31 Cleary "strongly" supported this "annual budget" proposal.32 However, Sullivan opposed this proposal on the grounds that, due to the "voluminous, heavily formatted" nature of a foreign government's annual budget, the Commission should permit a foreign government to file a copy of its annual budget in paper even if an English version is already available. In any event, concluded Sullivan, "foreign governments should not be discouraged from or penalized for producing English translations by thereby losing their option to submit annual budgets on paper."33
Twenty entities commented on our proposed elimination of the English summary or version option.34 All but one of these commenters criticized this proposal on the grounds that the costs of translating into English all exhibits and other filed or submitted documents would be excessive and constitute an undue burden on foreign filers.35 Seven of these commenters also stated that the elimination of the English summary or version option would cause delays in the completion, or otherwise preclude the timely filing, of registration statements and reports.36
Most of the commenters criticized this proposal on the grounds that its adoption would require a foreign issuer to translate into English a lengthy document, such as a material contract or lease, which it intended to attach as an exhibit to a Securities Act registration statement or a Form 20-F registration statement or annual report, when only part of the document was material to investors. Nine commenters noted their agreement with the Commission's position, stated in the proposing release, that some exhibits were too important to be the subject of an English summary or version.37 Most of these commenters urged the Commission to adopt a rule that would codify this position by specifying those exhibits that could and could not be the subject of an English summary or version.
For example, Freshfields commented that the Commission should continue to require full English language translation for articles of incorporation, memoranda of association, bylaws, instruments defining the rights of security holders, voting agreements and financial statements.38 For other exhibits, a foreign issuer could electronically file an English language summary that would cover all material points. For these exhibits, a foreign issuer would have to file in addition a paper copy of the exhibit in the original foreign language. Freshfields included in this latter category material contracts, certain directors', officers' and promoters' contracts, contracts on which the registrant's business is substantially dependent, contracts for the acquisition or sale of property, plant or equipment, material leases, and certain compensatory plans.39
Fried similarly urged the Commission to adopt a rule that would require the English translation of some exhibits, such as charters and bylaws, and the summary of others. Fried also suggested that the Commission adopt two exceptions to Regulation S-T Rule 306, which precludes the filing on EDGAR of a foreign language document. The first exception would permit the electronic filing of a document that contains provisions in both English and a foreign language when the home country or province, such as Quebec, requires a document to be prepared in both languages. The second exception would permit the electronic filing of an English translation that contains one or two foreign language sentences instructing the reader that a foreign language version is available upon request.40
Ernst also urged the Commission to adopt a final rule that would require an English translation of some exhibits and a summary for others. Ernst's "required translation" category was virtually identical to that of Freshfields. In its "English summary" category, Ernst included "leases, employee benefit plans, merger documents, sales and supply contracts."41 Similarly, KPMG and KPMG J recommended that "Regulation S-T codify existing Commission practices in this area and provide guidance as to the types of documents for which full English translations must be provided, and those for which a summarized English translation would suffice."42 Pricewaterhouse's recommendation was almost identical to that of Ernst and KPMG.43 Deloitte simply suggested that the Commission retain its current practice of "accepting English summaries in certain circumstances."44
Similarly, Proskauer understood "the need for codifying current SEC staff practices that require articles of incorporation, by-laws and other governing instruments, instruments defining the rights of security holders, voting agreements, exhibits containing financial statements and exhibits subject to requests for confidential treatment be translated into English." However, it then stated its belief that "documents, such as material contracts, that are not routinely translated into English" should be summarized rather than translated. Proskauer then suggested that the Commission require a filer that is submitting an English summary to provide an undertaking that it will furnish the Commission with a full English translation upon request.45
Some commenters criticized the proposal primarily or additionally because of its impact on current Form 6-K requirements. For example, Shearman noted that General Instruction D of Form 6-K permits a foreign issuer to submit English summaries or versions of foreign language press releases and communications or other materials directly distributed to security holders. For other foreign language documents, including circulars or prospectuses that pertain to solely foreign offerings, General Instruction D permits a Form 6-K filer to provide a brief description of the foreign language document if no English translation, summary or version has been provided. According to Shearman, adoption of the "full English translation" proposal would cause foreign issuers to expend large sums to translate statutory reports and offshore offering circulars into English, which could also cause them to miss their home country deadlines or "prompt" filing deadline for the Form 6-K. As a result, Shearman urged the Commission to retain the English summary or version option for home country documents filed on Form 6-K as well as material contracts filed as exhibits to registration statements or Form 20-F annual reports.
Similarly, Sullivan requested that the Commission continue to permit foreign issuers to provide brief descriptions of documents, other than press releases and direct shareholder communications, submitted on a Form 6-K because they constitute "public information" filed with home country regulators and securities exchanges. Sullivan gave as examples heavily formatted statutory reports filed with home country regulators as well as board meeting minutes regarding rountine matters. Because of the frequency with which foreign issuers file "public information" Form 6-Ks, Sullivan argued that the "brief description" option provides "essential" relief for many foreign issuers.46
Cleary noted that the "burden imposed by elimination of the summary option is especially onerous for foreign issuers given the ongoing reporting requirements applicable to foreign issuers under Form 6-K, which would not be required to be filed by a domestic issuer on Form 8-K or as an exhibit to a Form 10-Q." Because of this burden and the marginal benefits that it perceived would derive from the "full English translation" proposal, Cleary recommended that the Commission retain its current framework for disclosure of material information in foreign language documents.47
For similar reasons, Davis also believed "that any expansion of the translation requirement beyond that currently imposed on an informal basis by the staff would impose a burden on foreign issuers without generating any material benefits for investors." Davis then recommended that no change be made to Securities Act Rule 403(c), Exchange Act Rule 12b-12(d), and the foreign language instructions in Form 6-K, Form CB, and the MJDS forms.48
The AICPA agreed with the Commission that "certain documents required to be filed as exhibits to registration statements or annual reports on Form 20-F are of such importance that filing of summarized English translations would be detrimental to an understanding of the registrant's affairs." However, the AICPA further commented that "the cost of the proposal to require English language translations of many items submitted using Form 6-K, including regulatory filings, such as statutory reports, and offerings of securities only made to non-U.S. investors, would exceed the benefit of users in the US." The AICPA suggested that the Commission codify existing practice by specifying which documents could be the subject of an English summary.49
Matsushita et al. stressed that elimination of the English summary or version option would cause Japanese companies to expend large amounts translating statutory reports, such as those reporting unconsolidated financial information about the parent company, and documents that pertain to non-U.S. offerings. Because "such matters do not directly concern U.S. investors," Matsushita et al. urged the Commission to continue "the current policy of permitting the submission of relevant press releases and other similar documents through Form 6-K." Matsushita et al. also noted that Japan lacks professional translators that can provide accurate English translations of complex financial and legal documents in a timely, cost-effective manner. Consequently, if the Commission adopted the "full English translation" proposal, it would cause Japanese companies to hire accounting and legal firms to provide English translations of Form 20-F and Form 6-K exhibits, which would be "extremely expensive."50
Silicon/United also expressed concern about the lack of competent English translation services in Taiwan. According to these two companies, a typical Form 6-K filing "may include local regulatory documents. . .such as licenses and other regulatory certificates that are heavily formatted with traditional Chinese terms that constitute forms but have no substance." Consequently, these documents "are very difficult to translate and would present a practical challenge to the companies." Silicon/United similarly argued that the complexity and sheer volume of other documents, as well as the current dearth of adequate English translation services in Taiwan, would make their full English translation difficult and costly. Included in this list were Form 20-F exhibits such as local leases, wafer purchase agreements, supply contracts, and waste disposal agreements. As a result, Silicon/United opposed altering the current treatment of foreign language documents for either Form 20-F or Form 6-K.
KPMG J and KPMG voiced their opposition to a full English translation requirement for documents filed on EDGAR. In particular, KPMG J noted that many documents submitted on Form 6-K, such as Japanese company statutory reports and offering circulars for Japanese and other non-U.S. offerings, "which contain redundant information, including non-consolidated financial information that pertains primarily to the parent company only, will not stand up to a reasonable cost-benefit analysis."51 KPMG concurred in this assessment.52
Other commenters mentioned Form 6-K concerns without emphasizing them when opposing the "full English translation" proposal. For example, Ernst mentioned that "in some cases, an identification of the subject matter of the foreign language document may be sufficient (e.g. documents filed on Form 6-K solely because they are being filed in the home jurisdiction)."53 Freshfields requested that the Commission clarify whether "the Proposed Amendments would require a full English language translation and the furnishing of the entire local prospectus, instead of simply an English language press release or similar announcement summarizing the material aspects of the local offering."54 Freshfields further stated that press releases attached to Form 6-Ks should be subject to a full English translation requirement.55
Of the 19 commenters that criticized the "full English translation" proposal on the grounds that it would result in significant costs for foreign issuers that would far exceed its benefits, three (Davis, Silicon/United, and Matsushita et al.) offered quantitative analysis to support the "excessive cost" argument. Davis stated that the proposal, if adopted, would cause foreign issuers to incur additional costs to translate, for example, a 50 page document such as a material contract, into English based on the following New York prices: from $2,250 to $3,000 for a romance language document; from $2,500 to $2,750 for a German document; from $3,500 to $3,750 for a Russian document; and from $4,000 to $4,375 for a Japanese document. Davis further stated that, for every additional foreign language document required to be translated because of our proposal, a foreign issuer would have to pay a bilingual attorney to proofread the translated document "as professional translators generally do not have sufficient legal and technical training to understand many aspects of the documents they are asked to translate."56 Davis estimated that, in most cases, the cost of this legal layer of translation review would exceed the cost of the translation services themselves. Davis concluded that the "expense associated with subjecting all documents to a line-by-line translation, while not prohibitive, would constitute a burden on foreign issuers."57
Silicon/United argued that, if the Commission adopted the "full English translation" proposal without clarification or refinement, it would cost $100,000 to translate into English a standard local offering circular of 300 pages, based on their "conversation with the Hong Kong office of one of the largest international printing services that also provides translation services which it plans to expand in anticipation of the adoption of the Proposed Rule. . ." Silicon/United argued that these costs would constitute triple the normal transactional costs and would cause foreign issuers to reconsider engaging in offshore offerings.58 Silicon/United further noted that it would cost approximately $5,800 to have a CPA translate into English a full quarterly financial report, which is currently typically summarized in English and submitted on a Form 6-K. Silicon/United argued that, because of the dearth of adequate English translators in Taiwan, resort to accounting and legal firms for translation services would be necessary. Because of this "tremendous increase" in transactional costs, Silicon/United recommended that the Commission maintain the status quo on the treatment of foreign language documents filed on a Form 20-F or submitted on a Form 6-K. In the alternative, should the Commission adopt some form of English translation requirement, Silicon/United requested that the Commission also adopt temporary and continuing hardship exemptions that address the concerns raised about the claimed excessive costs and delays that can occur when translating foreign language documents into English.59 The Consortium of Filing Agents also made a similar request for hardship exemptions specifically tailored to any English translation requirement adopted.60
Silicon/United also stated that, because of the excessive English translation costs, they opposed the proposal to require the electronic filing as an exhibit of any portion of a foreign issuer's annual or other report to security holders that has been incorporated by reference into an EDGAR filing. Instead, they urged the Commission to create an exception for foreign issuers' reports similar to the existing treatment of investment company reports to security holders,61 although EDGAR's filing requirements do not apply to incorporation by reference from investment company annual or quarterly reports because investment companies must already file these reports electronically.
Matsushita et al. commented that the adoption of the "full English translation" proposal would cause a Japanese company to incur more than $200,000 to translate into English documents that it currently does not file with the Commission on Form 6-K. Like Silicon/United, Matsushita et al. stressed the dearth of adequate English translators in Japan that can handle complex legal and technical documents, which would cause Japanese companies to use the more highly paid services of a legal or accounting firm for their English translation needs.62
Ten entities commented specifically on whether the Commission should permit or require the submission of the original, unabridged foreign language document with a filing. 63 Davis stated that the Commission should amend Regulation S-T Rule 306 to permit the electronic filing of an English summary and amend Form SE to permit the contemporaneous filing of the original, unabridged foreign language document.64 Four other entities made similar comments.65 One additional commenter, Cleary, favored requiring the paper filing on Form SE of foreign language documents that have been summarized in submissions on Form 6-K if the Commission found the English summary option to be "insufficient." According to Cleary, this paper filing requirement would be "a less burdensome approach" than a "full English translation" requirement.66
Two commenters, Shearman and the AICPA, opposed a requirement to file paper copies of foreign language documents contemporaneously with English language summaries. Shearman stated "[t]hat Form 6-K does not require English language summaries to be accompanied by the original language documents has long been perceived by non-U.S. issuers as part of that accommodation [for foreign issuers]."67
Instead of formally requiring the submission in paper of a copy of the original foreign language document, the AICPA recommended requiring a foreign filer to indicate that the foreign language document "would be available upon request."68
Two commenters urged that the Commission permit the electronic filing of foreign language documents on the ground that the legally binding document is the underlying foreign language document, not the English translation or summary. Because the "translation of foreign language documents into English can be complex and invariably involves judgments and interpretations that can have significant legal and accounting implications," Ernst stressed the need to have readily available for public inspection the official foreign language document. Consequently, Ernst urged the Commission to permit filers to submit the unabridged foreign language document in PDF.69 DaimlerChrysler also favored the electronic submission of foreign language documents since "[t]his may provide some protection against claims that the English language translation purposefully failed to convey accurately the meaning or capture a significant nuance of the foreign language document, since the reader would have the opportunity to evaluate the translation him or herself."70
Ten commenters opposed the proposal to require an officer or official of a foreign issuer to certify in writing that a filed or submitted English translation is a fair and accurate translation of the underlying foreign language document. 71 Most opposed this proposal on the same or similar grounds. For example, Sullivan stated that the written representation requirement is unnecessary because of the signature requirements and antifraud liability provisions that currently exist under the Securities Act and Exchange Act. According to Sullivan, these provisions are sufficient deterrence and protection against the making of misleading and fraudulent misrepresentations in securities documents. Sullivan further stated that the written representation requirement would be unduly burdensome because many foreign issuers lack officers that are competent to judge the accuracy of an English translation of a complex document replete with legal and technical terms.72
For substantially similar reasons, Shearman,73 Davis,74 and Freshfields75 opposed the elimination of the written representation requirement for both domestic and foreign filers.76 When voicing their opposition, Silicon/United77 and Matsushita et al.78 emphasized the lack of competency of officers among Taiwanese and Japanese companies, respectively, to judge the accuracy of an English translation. Matsushita et al. did state, however, that in the event that the Commission deemed necessary a written certification requirement, the Commission should permit certification from a qualified expert rather than an officer of the filer.79
Although CSN did not explicitly oppose the written representation proposal, it did request that the Commission consider an alternative. Instead of a rule requiring a written certification for each English language summary, CSN urged the Commission to adopt a rule that would require a filer to execute a "general certificate" representing that all electronically filed translations are fair and accurate.80
Ten entities commented on the proposed mandated EDGAR filing of all Form 6-Ks except for those Form 6-Ks the sole purpose of which is to submit an attached annual report to security holders.81 The Commission proposed to permit foreign issuers to submit or file these "annual report" Form 6-K reports in paper.
Five of the commenters specifically approved of the proposal to permit the filing of the "annual report" Form 6-K in paper.82 In support these commenters cited the desire to achieve the same treatment as domestic filers regarding the glossy annual report,83 the graphics-intensive nature of these documents that makes EDGAR filing difficult,84 and the fact that most of the information in the glossy annual report is also contained in the Form 20-F annual report that will be the subject of mandated EDGAR filing.85
Only one commenter, Quinlivan, disapproved of the proposal to permit the paper filing of the "annual report" Form 6-K. Quinlivan would like all Form 6-Ks, including the "annual report" Form 6-K, to be the subject of mandated EDGAR filing. According to Quinlivan, "[t]he annual report is an essential disclosure document that should be publicly available."86
Seven commenters disagreed with the proposal to mandate EDGAR filing for all Form 6-Ks except for the "annual report" Form 6-K.87 These commenters noted that, unlike a U.S. registrant, which is required to file an "occasional" Form 8-K to report material events in addition to the Form 10-K annual report and Form 10-Q quarterly reports, a foreign issuer is required to file a Form 6-K whenever: material information is made or is required to be made public in its home country; it makes or is required to make a filing with its securities exchange; or it distributes or is required to distribute information to its security holders.88 According to these commenters, in practice the average foreign issuer ends up submitting many more Form 6-Ks than the number of Form 8-Ks and Form 10-Qs filed by the average domestic registrant.89 These commenters further argued that, because a foreign issuer must submit a Form 6-K "promptly" after the public issuance or dissemination of the subject document or information in the home country, there is very little "lead" time in which to translate many of the Form 6-K documents into English let alone prepare the document for EDGAR submission.90
These commenters recommended different ways to remedy the "short lead time" problem. Three of the commenters would like the Commission to adopt a rule that would permit a foreign issuer to file a Form 6-K in paper "promptly" after the home country triggering event as long as it subsequently filed an electronic version within some reasonable grace period defined by the rule.91 Fried suggested a 30 day grace period during the first year after adoption of the rules mandating EDGAR filing for foreign issuers. In subsequent years, the grace period would shorten to 15 days.92 Deloitte also recommended a 30 day grace period but only until December 31, 2003.93
Freshfields also recommended that the Commission permit a foreign issuer to file a Form 6-K in paper as long as it subsequently filed an electronic version within a reasonable grace period. Freshfields suggested an exception to the "grace period" rule, which was that a foreign filer would have to file promptly on EDGAR a Form 6-K that solely had one or more press releases attached. In Freshfields' opinion, most foreign issuers already routinely translate press releases, which are typically short, into English. Therefore, according to Freshfields, "the cost and coordination required to translate a few pages of text and submit it by EDGAR does not appear. . .to be unduly burdensome."94
Other commenters recommended that the Commission exclude specified categories of Form 6-Ks from mandated EDGAR filing. Davis distinguished between Form 6-Ks that are "furnished" to the Commission and those that are incorporated by reference into a Securities Act registration statement and are, therefore, deemed "filed" with the Commission. Davis would subject to mandated electronic filing only those furnished Form 6-K reports that contain interim financial statements and "filed" Form 6-K reports. According to Davis, both of these types of Form 6-K report are likely to share the long lead time that is characteristic of Form 10-Qs. Therefore, it would not be unduly burdensome to require foreign issuers to include EDGAR preparation along with the other types of preparation required for these Form 6-K reports. Moreover, since a foreign issuer's Securities Act registration statements will be subject to mandated EDGAR filing, it makes sense to require the electronic filing of a Form 6-K that is being incorporated into that registration statement.95
Sullivan urged the Commission to adopt mandated EDGAR filing for Form 6-Ks only when used to submit press releases and shareholder communications. According to Sullivan, Form 6-Ks that submit "public information" documents, such as statutory reports, should not be the subject of mandated EDGAR filing because of their frequency and volume. Sullivan stated that "a number of [its] clients have indicated that if all Form 6-K material became subject to mandatory electronic submission (as opposed to just press releases and shareholder communications), they would almost certainly be forced to seek exemptive relief from the Commission for many documents, creating substantial additional work for the staff and regulatory uncertainty for issuers."
In contrast to Sullivan and Freshfields, Ziegler would like the Commission to permit the submission of Form 6-Ks in paper when "they relate to press releases carried by one or more of the major news retrieval or wire services (including paid services)." Ziegler noted the high degree of frequency of Form 6-K press release submissions.96
CSN urged the Commission to continue to permit foreign issuers to submit Form 6-Ks in paper as long as they provide summaries or press releases regarding any submitted paper document. CSN gave as examples of Form 6-Ks that should be accepted in paper those that pertain to statutory reports prepared for the Brazilian Securities Exchange Commission and analyst presentations.97
Two entities commented negatively on the proposed mandated EDGAR filing of the Form F-6 registration statement. Ziegler argued that, unlike other registration statements, the Form F-6 requires the disclosure of very little information. Moreover, the deposit agreement, Form F-6's main exhibit, is fairly standard. Consequently, according to Ziegler, mandated EDGAR filing of the Form F-6 would yield little benefit to investors but could increase the depositary's costs by up to 20%.98 Accordingly, Ziegler recommended that the Commission adopt one of the following counterproposals:
BNY opposed the mandated EDGAR filing of any Form F-6 primarily because of the "time-consuming conversion" and significant costs that the EDGAR process would entail for the depositary. According to BNY, the depositary would have to pass on these costs to the issuer, which would factor them into the decision regarding whether to maintain an ADR facility. BNY also noted that the Form F-6 "tends to be quite standard from one registration statement to another" and contains very little issuer information.100
Five entities commented on the proposed mandated EDGAR filing of Form CB when either the bidder or target company is an Exchange Act reporting company.101 Only one of the five entities, Quinlivan, specifically endorsed this proposal. According to Quinlivan, "Form CB should be required to be filed electronically when an Exchange Act reporting company is involved [because] [t]hat is when the market needs the information the fastest."102
Both Sullivan and Fried opposed the proposal on the grounds that the increased costs stemming from EDGAR filing would discourage parties from engaging in cross-border transactions that include U.S. shareholders. Sullivan noted that "the proposal conflicts with the Commission's fundamental approach to cross-border transactions, which is intended to lessen the burden to bidders and issuers of including U.S. investors by deferring to home country regulation. . ." Sullivan feared "that adding a requirement to submit Form CB electronically may prove decisive in some cases, prompting a greater number of bidders and issuers simply to exclude U.S. investors." Accordingly, Sullivan urged the Commission to permit the filing of Form CB and any related Form F-X in paper.103
Similarly, Fried noted that the "Tier I exemption was established to encourage offerors to include U.S. shareholders in a tender or exchange offer of a non-U.S. company." According to Fried, because "[r]equiring an EDGAR filing of the Form CB in any context will make the process of complying with the Tier I exemption requirements more burdensome and may undermine the advantages of using the Tier I exemption . . . this rule change could lead to the exclusion of U.S. security holders from such tender or exchange offers." Fried then concluded that "EDGAR filing should not be mandated for Form CBs submitted by companies in connection with a Tier I transaction."104
Freshfields opposed the part of the Form CB proposal that would require the filing of the Form CB on EDGAR by a non-Exchange Act reporting company if the target company was an Exchange Act company. Freshfields noted that, in that situation, the non-reporting bidder would typically be accustomed to using a local financial printer with only local language capabilities and little to no EDGAR experience. In order to comply with the proposal, the non-reporting bidder would have to incur both English translation and EDGAR costs. Because Freshfields believes "that any additional costs associated with mandated EDGAR filing may eliminate the already apparently small degree to which foreign bidders who are not Exchange Act filers have relied on the cross-border exemptions," it proposed "that furnishing of Form CB by EDGAR remain voluntaryat least for foreign persons who are not already Exchange Act filers."105
Regarding the part of the proposal that would require bidders or acquirors that are Exchange Act reporting companies to file the Form CB on EDGAR, Freshfields concurred "that the additional burden imposed on the foreign bidder is not substantial." However, Freshfields commented that, even for this part of the proposal, there is a problem stemming from the proposed English translation requirements for all documents filed on EDGAR. Freshfields noted that "[a]lthough Form CB already requires an English language translation of home jurisdiction disclosure documents delivered to US holders, supplemental information and documents incorporated by reference into the home jurisdiction document or required to be put "on display" under home country rules may be submitted to the Commission in paper form with an English language summary."106 Freshfields then observed that, under the currently proposed mandated EDGAR filing rules, these home country materials, "which may be voluminous, would have to be translated into the English language prior to being submitted by EDGAR a single business day after dissemination in the home jurisdiction." Because of the "time-sensitive nature of Form CB transactions," Freshfields concluded that "any added risk of delay caused by an English language translation requirement may preclude a bidder from seeking to use the cross-border exemptions altogether."107
Accordingly, Freshfields suggested the voluntary submission of Form CB on EDGAR. Alternatively, Freshfields proposed that the Commission permit the filing of home country documents in PDF to accompany the English language summaries of these documents submitted on EDGAR.108
Shearman stated its general disapproval of the proposal but primarily focused its opposition on the proposed requirement to file the Form CB on EDGAR when the target company is an Exchange Act company even when the bidder or acquiror is not. Like Freshfields, Shearman stated that "[r]equiring use of EDGAR will lead more non-U.S. companies to the conclusion that including U.S. holders is too burdensome and not worth the cost or liability risk." Shearman also argued that because the "Form CB is not an especially informative document. . .investors will not necessarily benefit from its more rapid dissemination to the marketplace. . ."109
Only three entities, Shearman, Sullivan, and Bowne, commented specifically on the proposal to permit, rather than require, the submission of designated supranational entities' reports on EDGAR. Both Shearman and Sullivan supported this permissive treatment. Both opposed mandated EDGAR filing for these supranational entities for substantially the same reasons as they opposed mandated EDGAR filing for foreign governments' securities documents.110
In contrast, Bowne favored mandated EDGAR filing of supranational entities' reports. According to Bowne, "the investor community and the issuing community are best served by having supranational entities file electronically."111
Four entities, Shearman, Sullivan, UBS, and Quinlivan, commented specifically on the proposal to continue requiring the submission of applications and supporting documents under Exchange Act Rule 12g3-2(b) on paper.112 Shearman supported this proposal because "[i]mposing additional requirements such as electronic filing could cause various new issuers to forego establishing the exemption and existing issuers to allow their exemption to lapse."113
Similarly, Sullivan endorsed this proposal because "these companies have only limited access to U.S. capital markets, thus reducing any perceived incremental benefit in making their submissions available in electronic form versus paper form." Sullivan also supported the retention of the English language summary and description options available under Exchange Act Rule 12g3-2(b), as contemplated by the proposal.114
UBS voiced its support for a rule that would permit, but not require, the submission of Exchange Act Rule 12g3-2(b) documents on EDGAR. UBS stated that although it believed that "very few issuers entitiled to the exemption would choose to use EDGAR. . .if they choose to, we see no argument against their doing so." However, UBS also noted that the costs of mandated EDGAR filing for these issuers would easily outweigh the limited US public interest in them.115
Quinlivan urged the Commission to require the submission of Exchange Act Rule 12g3-2(b) applications and supporting documents on EDGAR. According to Quinlivan, "[a]nalysts and other issuers have an interest in being able to easily track such data and submissions."116
We received 11 comment letters that specifically addressed whether the Commission should extend its EDGAR filing hours.117 While the 11 commenters each favored extending these hours, they did so in various ways.
Eight of the commenters favored extending the EDGAR filing hours to 24 hours a day, seven days a week, or to 24 hours a day, Monday through Friday.118 For example, ASCS favored 24 hour availability/7 days a week not just because it would "provide filers in any part of the world the opportunity to make EDGAR filings during their normal business hours" but because "in light of Regulation FD and many issuers' experience that investors desire more information on a current basis, such extended hours would also be of great benefit to U.S. issuers."119
Bowne favored at the very least extending the availability of the administrative components of the EDGAR filing website to 24 hours a day, seven days a week. According to Bowne, "[t]he ability to download the EDGARLink software, filing templates, and the fee table as well as the ability to check on the status of submissions should not continue to be restricted to the 8:00 A.M. to 10:00 P.M. ET hours as they are today." Bowne then favored extending EDGAR's live filing hours to at least midnight or 1:00 A.M. It also sought extension of the hours during which a filing fee could be wired to the Mellon Bank.120 The Consortium of Filing Agents similarly requested an extension of the hours for wiring filing fees.121
Sullivan favored extending the EDGAR filing hours to 24 hours a day, Monday through Friday. It also sought the concurrent extension of EDGAR filer support, which it viewed as "critical to realizing the benefits of extended EDGAR operating hours."122 Freshfields urged the Commission to adopt EDGAR filing 24 hours a day based on its understanding that "current computer and networking technology would permit EDGAR filing 24 hours a day." It further stated that "[i]f domestic and foreign issuers are indeed to receive equal treatment, then foreign issuers should also be able to submit EDGAR filings during their local business hours."123 Ernst similarly stated that "it seems reasonable for the SEC to provide for virtually around the clock transmission of filings on EDGAR, as opposed to the current 14 hour window."124 ANZ Bank also supported "unrestricted electronic lodgements in any 24 hour period."125 FEI favored extending the EDGAR filing hours to 24 hours a day "or to some other extended interval beyond the current" filing period.126
The Consortium of Filing Agents favored extending EDGAR's filing hours to 24 hours a day in addition to extending filer support for at least part of the extended filing period. In addition, the Consortium of Filing Agents requested that the Commission consider "date stamping filings with a "filing date" that is the day on which the filing is actually made." Regardless of how the Commission resolves the filing hours issue, the Consortium of Filing Agents, like Bowne, further requested that the Commission make its website located at www.edgarfiling.sec.gov available 24 hours a day so that an issuer could check on the status of a filing and obtain EDGAR software and other information.127
Two other commenters, Shearman and Deloitte, favored extending EDGAR filing hours without specifying a particular extended time of filing. Shearman noted that "[t]he current EDGAR filing hours could prove to be an undue burden for many non-U.S. companies, some of whose business hours overlap minimally or not at all with the EDGAR filing hours." Shearman further argued that it is not reasonable "for the Commission to assume that all, or many, non-U.S. issuers have the resources to engage filing agents on an ongoing basis, nor should non-U.S. issuers be expected to incur the expense of doing so, which would cause them to incur higher costs in the implementation of EDGAR than those faced by U.S. issuers."128
Deloitte noted that, "[f]or many foreign issuers, particularly those in Asia, the current EDGAR filing hours could prove to be an undue burden as the business hours in Asia overlap minimally, or not at all, with the EDGAR filing hours." Deloitte then recognized that the Commission may incur additional costs by extending the EDGAR filing hours. However, Deloitte then concluded that, "after taking into consideration these concerns, foreign issuers should be given an opportunity to file during as long a period comprising local business hours as practicable."129
Finally, Mostransky requested that the Commission extend its EDGAR filing hours by five hours from 3:00 A.M. EST to 8:00 A.M. EST, which would coincide with 8:00 A.M. GMT (Greenwich Mean Time) to 1:00 P.M. GMT. This extension would give filing agents and foreign issuers in the United Kingdom and other GMT zone countries the full working morning in which to file EDGAR documents. Mostransky further stated that he did not believe "that the SEC would have to offer any technical support prior to 8:00 EST."130
Eleven entities specifically commented on the proposed transition period by which the rule amendments would not become effective until four months after their adoption.131 While all the commenters found the proposed transition period to be too short, their recommendations fell into three categories. In the first category, the commenters proposed a transition period based on a length of time that was longer than the proposed four month period. In the second category, the commenters proposed a transition period based on the filing date of a particular filing. In the third category, a commenter proposed a transition period based on the type of filer involved.
In the first category, seven commenters favored a longer transition period than the proposed four month period. CSN and Telmex each favored a transition period of six months from the date of adoption.132 KPMG favored a transition period that would run until six months after the date of adoption or until October 1, 2002, whichever date was later.133 Similarly, Pricewaterhouse and AICPA each favored a transition period that would run until six months from the date of adoption or until July 1, 2002, whichever date was later.134 Cleary favored a transition period that would run at least until eight months after the date of adoption.135 Matsushita et al. proposed a transition period of one full year following the date of adoption.136
KPMG's discussion of the proposed four month period was fairly typical of this first group. KPMG stated, "[w]e believe that a longer transition period is appropriate based on the large number of foreign private issuers that will be filing electronically for the first time and the diverse characteristics of that group, including the degree of sophistication and familiarity with electronic media."137 Cleary favored a longer period "so as to permit two quarterly cycles or one semiannual cycle for experimentation."138
In the second category, three commenters proposed that the transition period should run until the date that a particular filing was due. Shearman proposed that, for foreign issuers that are already Exchange Act reporting companies, the first filing required to be filed on EDGAR would be the second Form 20-F annual report due after adoption of the rule amendments. These reporting foreign issuers would have to file on EDGAR any registration statement and any Form 6-K report filed after the first electronically filed Form 20-F annual report. For new registrants, the transition period would run until nine months from the date of adoption.139
Deloitte proposed that the transition period run until the due date for the foreign issuer's Form 20-F annual report for the year ending after June 30, 2002. Foreign issuers with year ends on or before June 30, 2002 could still file their Form 20-F annual reports on paper. Deloitte further proposed that the transition period for all other foreign issuer filings would run through December 31, 2002. Both Deloitte and Shearman stated that their recommendations were consistent with the transition adopted by the Commission for the revised Form 20-F.140
Ernst proposed that the transition period run until the due date for the foreign issuer's first Form 20-F annual report, or the date of filing of its first Securities Act registration statement, following the four month period after the date of adoption. Ernst stated that this transition period would prevent a foreign private issuer from having to use EDGAR for the first time "on a more time-sensitive document, such as a Form 6-K."141
In the third category, one commenter proposed a transition period that would vary depending upon the type of filer involved. Sullivan proposed that the Commission adopt a transition period for "larger issuers" and one for "smaller issuers." Sullivan recommended a definition for "larger issuers" that would capture approximately 25-30 % of reporting foreign private issuers. For larger entities, Sullivan proposed a transition period that would run until the due date of an issuer's second Form 20-F annual report following the date of adoption. A larger issuer would have to file on EDGAR this second Form 20-F annual report and any document filed or submitted after this second annual report. A larger issuer would be able to file in paper or on EDGAR its first Form 20-F annual report due following the adoption date. A smaller issuer would be able to file in paper or on EDGAR its first two Form 20-F annual reports due after the adoption date. It would have to file on EDGAR its third Form 20-F annual report due after the adoption date and any document filed or submitted after the third Form 20-F annual report. Sullivan stated that this two-phase transition was necessary in order to "allow smaller non-U.S. issuers more time to prepare for EDGAR and the opportunity to benefit from the experience of larger non-U.S. issuers and their filing agents."142
Although the Commission did not solicit comment regarding the adequacy of its electronic formatting standards, eight commenters criticized the inability of EDGAR filers to file documents officially in PDF.143 Most of these commenters cited the ease of use, relatively low costs, and widespread use of PDF as advantages over ASCII and the version of HTML mandated for EDGAR. For example, Cleary noted that the French electronic reporting system, SOPHIE, permits the filing of documents in PDF.144 Ernst noted that PDF is now the only acceptable filing format for Canada's SEDAR.145 Sullivan similarly noted that Argentina, Canada, France, and Spain permit the filing of PDF documents as official filings.146 Similarly, Silicon/United noted that the Taiwan Securities and Futures Commission accepts PDF filings.147 While all of these commenters requested that the Commission revise EDGAR to permit the use of PDF and other formats when adopting mandated EDGAR filing for foreign issuers, two commenters, Ernst and Cleary, requested that the Commission work with international groups, such as IOSCO, to develop an international electronic formatting standard for securities documents.148
A few of the commenters recommended the use of PDF for specific documents. Ernst explicitly stated, and DaimlerChrysler suggested, that the Commission permit the electronic filing of foreign language documents in PDF.149 Freshfields recommended that the Commission permit the electronic filing of foreign language "home jurisdiction" documents in PDF submitted with a Form CB.150
A few of the commenters requested that the Commission permit the formatting of documents in other languages in addition to PDF. Sullivan noted that the ability to file via the Internet has somewhat lessened the burden on filers of using EDGAR, but the inability to use standard HTML adds to the cost of electronic filing. Accordingly, Sullivan recommended modifying EDGAR to accept official filings in standard HTML rather than the "outdated version of HTML" that requires filers to "manually purge all documents of characters not included in a designated character set, rendering an otherwise straightforward process time-consuming and expensive."151 Similarly, BHP requested the ability "to be able to use the full set of HTML V.3.2 tags." 152 ANZ Bank requested the ability to file on EDGAR documents formatted in XBRL.153
Bowne and the Consortium of Filing Agents commented on the need for technical improvements in areas other than electronic formatting. Bowne urged the Commission to modernize the Form ID to accommodate the international community. Bowne noted that there is no place to provide foreign country information. In addition, the "zip code" portion of the form needs to be changed to reflect international postal codes. Bowne further noted that there is no place for the Form ID filer to provide its e-mail address. Bowne also noted that the "company database" located at www.edgarcompany.sec.gov needs to be updated in many instances.154
The Consortium of Filing Agents similarly commented on the need to update the Form ID and the company database. In addition, the Consortium of Filing Agents noted that the filer website needs to be updated to allow for country information and foreign postal codes. The Consortium further urged the Commission to adopt an EDGAR e-mail support line that would be operational 24 hours a day. The Consortium further requested that the Commission eliminate the 24-48 hour delay that currently occurs before an EDGAR filing becomes available on the Commission's website. It also asked that the Commission reconsider the manner in which a filer must reapply for a new password following expiration of an old password. The Consortium further would like the Commission to restore some previously deleted material contained in Appendix B of the older version of the EDGAR Filer Manual that pertained to "metadata requirements for each submission type." Finally, the Consortium requested that the Commission upgrade the search engine used to locate filings on its EDGAR website.155
Finally, Ernst made a suggestion regarding how the Commission could improve EDGAR filer support for foreign issuers filing for the first time on EDGAR. Ernst urged the Commission to develop a "communications package" that would be distributed to foreign registrants as soon as the Commission adopted EDGAR filing rules for foreign issuers. The Commission would contain the "full notification and text of Regulation S-T, as amended, the latest version of the EDGAR Filer Manual, guidelines on how to locate and select a filing agent, help-line phone numbers, and any other materials deemed useful."156
Although the Commission did not solicit comment on the staff's policy of accepting draft submissions of registration statements from first-time registrants and reviewing them on a confidential basis, four entities specifically commented on this policy.157 All four urged the Commission, through the Division of Corporation Finance, to continue this policy after adopting the final rules mandating EDGAR filing for foreign issuers. One commenter, Reboul, requested that the Commission adopt an "exemption" from mandated EDGAR filing for these draft submissions.158 Seward emphasized the success that this program has had "in attracting foreign private issuers to the U.S. capital markets."159 Both KPMG and Pricewaterhouse assumed that this confidential review policy would continue after adoption of mandated EDGAR filing for foreign issuers. Nevertheless, both requested that the Commission confirm the continuance of this policy in its adopting release.160 KPMG further requested that the Commission clarify what information a first-time registrant would have to file electronically when publicly filing its registration statement on EDGAR.161
1 KPMG J submitted a comment letter that was identical to one submitted by KPMG as a supplement to KPMG's original letter. Therefore, KPMG and KPMG J are treated as one commenter.
2 Matsushita et al.'s letter represented 17 Japanese companies, the Consortium of Filing Agents' letter represented 12 entities, and Silicon/United's letter represented 2 entities.
3 This includes one individual filing agent, Mostransky, a Burrups employee, who submitted comments apparently on his own behalf. Burrups officially submitted comments through the Consortium of Filing Agents.
4 The individual attorney is Quinlivan, who expressly submitted comments on his own behalf as a practicing securities attorney.
5 See Section III for a discussion of these and other issues.
6 ASCS at p. 1.
7 FEI at p. 1.
8 Seward at p. 1.
9 Seward at p. 2.
10 Seward at p. 2.
11 UBS at p. 1.
12 UBS at p. 1.
13 Quinlivan at p. 1.
14 ANZ at p. 1.
15 Silicon/United at p. 1.
16 Freshfields at p. 2.
17 Cleary at pp. 1-2.
18 Ernst at p. 1.
19 Fried at p. 1.
20 Fried at pp. 1-2.
21 Freshfields at pp. 2-3.
22 Sullivan at p. 1.
23 Cleary at p. 2.
24 BNY at p. 1.
25 The four entities were Cleary, Quinlivan, Shearman, and Sullivan.
26 Quinlivan at p. 1.
27 Shearman at pp. 4-5; Sullivan at pp. 8-9.
28 Sullivan at p. 8.
29 Shearman at pp. 4-5; Sullivan at pp. 8-9.
30 Sullivan at pp. 8-9.
31 See Release No. 33-8016 at Section II.D.1.
32 Cleary at pp. 4-5.
33 Sullivan at p. 9.
34 The 20 commenters were AICPA, BNY, Cleary, Consortium of Filing Agents, CSN, DaimlerChrysler, Davis, Deloitte, Ernst, Freshfields, Fried, KPMG and KPMG J, Matsushita et al., Pricewaterhouse, Promotora, Proskauer, Seward, Silicon/United, Shearman, and Sullivan.
35 DaimlerChrysler was the sole commenter that did not specifically express concern about the costs that could result from the proposed "full English translation" requirement when commenting on this requirement.
36 The seven commenters were Cleary, Consortium of Filing Agents, Davis, Fried, Matsushita et al., Shearman, and Sullivan. One other commenter, Promotora, urged the Commission not to eliminate the English summary option for foreign issuers submitting home country documents under Exchange Act Rule 12g3-2(b), although the Commission specifically proposed to keep these submissions as paper documents only.
37 The nine commenters were AICPA, Davis, Ernst, Freshfields, Fried, KPMG, Pricewaterhouse, Proskauer, and Shearman.
38 Freshfields at pp. 4-5. This list is identical to the non-exclusive list set forth in the proposing release at pp. 34-35.
39 Freshfields at p. 4.
40 Fried at p. 4.
41 Ernst at p. 3.
42 KPMG supplemental letter, dated December 20, 2001, and KPMG J letter, dated December 21, 2001.
43 Pricewaterhouse at p. 2.
44 Deloitte at p. 3.
45 Proskauer at p. 2.
46 Sullivan at pp. 3-4.
47 Cleary at p. 4.
48 Davis at p. 2.
49 AICPA at p. 2.
50 Matsushita et al. at pp. 1-2.
51 KPMG J at p. 1.
52 KPMG letter, dated December 20, 2001, at p. 1.
53 Ernst at p. 3.
54 Freshfields at pp. 6-7, n. 12.
55 Freshfields at p. 7.
56 Davis at p. 2.
57 Davis at p. 3.
58 Silicon/United at p. 6.
59 Silicon/United at pp. 4-5.
60 Consortium of Filing Agents at p. 2.
61 Silicon/United at pp. 4-5.
62 Matsushita et al. at p. 2.
63 The ten commenters were AICPA, Cleary, CSN, DaimlerChrysler, Davis, Ernst, Freshfields, Seward, Shearman, and Silicon/United.
64 Davis at p. 2.
65 The four commenters were CSN, Freshfields, Seward, and Silicon/United.
66 Cleary at p. 4.
67 Shearman at p. 3.
68 AICPA at p. 2.
69 Ernst at p. 2.
70 DaimlerChrysler at p. 2. See also Freshfields' suggestion regarding the submission of home country documents under Form CB discussed in Section III.E below.
71 The ten commenters were DaimlerChrysler, Davis, Ernst, Freshfields, Matsushita et al., Proskauer, Promotora, Shearman, Silicon/United, and Sullivan.
72 Sullivan at p. 5.
73 Shearman at pp. 3-4.
74 Davis at p. 4.
75 Freshfields at pp. 9-10.
76 Regulation S-T Rule 306(a) currently sets forth the written representation requirement regarding the accuracy of an English translation of a foreign language document submitted by an EDGAR filer, whether domestic or foreign.
77 Silicon/United at pp. 4.
78 Matsushita et al. at p. 3.
79 Matsushita et al. at p. 3.
80 CSN at p. 2. Promotora also opposed the written representation proposal. However, it did so as a submitter of home country documents under Exchange Act Rule 12g3-2(b) under the impression that the proposal, if adopted, would affect such submissions. Since the proposal maintains the status of Exchange Act Rule 12g3-2(b) submissions as paper submissions only, the written representation proposal has no bearing on these submissions.
81 The ten commenters were BHP, CSN, DaimlerChrysler, Davis, Deloitte, Freshfields, Fried, Quinlivan, Sullivan, and Ziegler.
82 The five commenters were BHP, CSN, DaimlerChrysler, Sullivan, and Ziegler. Ziegler asked the Commission to "reconsider the proposed requirement that annual reports be submitted on Form 6-K through EDGAR," Ziegler at p. 3, although the Commission proposed to permit the submission of the "annual report" Form 6-K in paper.
83 Sullivan at p. 7.
84 DaimlerChrysler at p. 1.
85 Ziegler at p. 3.
86 Quinlivan at p. 1.
87 These seven commenters were CSN, Davis, Deloitte, Freshfields, Fried, Sullivan, and Ziegler.
88 See, for example, Fried at p. 3; Freshfields at p. 6. See also General Instruction B to Form 6-K.
89 See, for example, Davis at p. 5; Ziegler at p. 3.
90 See, for example, Davis at p. 5; Freshfields at pp. 6-7.
91 The three commenters were Fried, Freshfields, and Deloitte.
92 Fried at p. 3.
93 Deloitte at p. 2.
94 Freshfields at p. 7.
95 Davis at pp. 4-6.
96 Ziegler at p. 3.
97 CSN at p. 1.
98 Ziegler at p. 2.
99 Ziegler at p. 4.
100 BNY at p. 2.
101 The five commenters were Freshfields, Fried, Quinlivan, Shearman, and Sullivan.
102 Quinlivan at p. 1.
103 Sullivan at p. 7.
104 Fried at p. 4.
105 Freshfields at p. 9.
106 Freshfields at p. 8. See also Form CB Part II(1), which permits the use of an English summary for home jurisdiction documents that must be made publicly available in connection with the transaction but are not required to be sent to security holders; and Form CB Part II(2), which requires the furnishing of any documents incorporated by reference into the home jurisdiction documents.
107 Freshfields at p. 8.
108 Freshfields at pp. 8-9.
109 Shearman at p. 4.
110 Shearman at p. 5; Sullivan at p. 9.
111 Bowne at p. 3.
112 See Release No. 33-8016 at Section II(G).
113 Shearman at p. 3.
114 Sullivan at p. 8.
115 UBS at pp. 1-2.
116 Quinlivan at p. 1.
117 The 11 commenters were ASCS, ANZ Bank, Bowne, Consortium of Filing Agents, Deloitte, Ernst, FEI, Freshfields, Mostransky, Shearman, and Sullivan.
118 The eight commenters were ANZ Bank, ASCS, Bowne, Consortium of Filing Agents, Ernst, FEI, Freshfields, and Sullivan.
119 ASCS at p. 2.
120 Bowne at pp. 1-2.
121 Consortium of Filing Agents at p. 2.
122 Sullivan at p. 6.
123 Freshfields at pp. 10-11.
124 Ernst at p. 4.
125 ANZ Bank at p. 2.
126 FEI at pp. 1-2.
127 Consortium of Filing Agents at p. 1.
128 Shearman at p. 4.
129 Deloitte at p. 3.
130 Mostransky at p. 1.
131 The 11 commenters were AICPA, Cleary, CSN, Deloitte, Ernst, KPMG, Matsushita et al., Pricewaterhouse, Shearman, Sullivan, and Telmex.
132 CSN at p. 2; Telmex at p. 1.
133 KPMG letter, dated December 3, 2001, at p. 1.
134 Pricewaterhouse at p. 2; AICPA at p. 2.
135 Cleary at p. 5.
136 Matsushita at al. at p. 3.
137 KPMG at p. 1.
138 Cleary at p. 5.
139 Shearman at p. 5.
140 Deloitte at pp. 1-2; Shearman at p. 5.
141 Ernst at pp. 1-2.
142 Sullivan at pp. 2-3. Sullivan also opposed the Commission's proposal to permit a registrant that has filed a Securities Act registration statement in paper before the new rules' effective date to continue to file in paper for a reasonable amount of time, for example, one month following the rules' effective date until its registration statement is effective. Sullivan objected to this proposal on the grounds that such a registrant should have an indefinite amount of time to complete its paper filing. Sullivan at p. 3.
143 The eight commenters were ANZ Bank, BHP, Cleary, DaimlerChrysler, Ernst, Matsushita, Silicon/United, and Sullivan.
144 Cleary at p. 5.
145 Ernst at pp. 3-4.
146 Sullivan at pp. 5-6.
147 Silicon/United at pp. 6-7.
148 Ernst at pp. 3-4; Cleary at p. 5.
149 Ernst at pp. 2-3; DaimlerChrysler at p. 2. DaimlerChrysler generally supported the electronic filing of foreign language documents without specifying a particular format. It then later stated its general support for the EDGAR filing of securities documents in PDF.
150 Freshfields at p. 9.
151 Sullivan at p. 6.
152 BHP at p. 1.
153 ANZ Bank at pp. 1-2.
154 Bowne at pp. 2-3.
155 Consortium of Filing Agents at pp. 1-3.
156 Ernst at p. 2.
157 The four commenters were KPMG, Pricewaterhouse, Reboul, and Seward.
158 Reboul at pp. 1-2.
159 Seward at p. 2.
160 KPMG at p. 2; Pricewaterhouse at p. 1.
161 KPMG at p. 2.
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