On February 19, 2016, the SEC approved a new NYSE proposed rule, requiring NYSE-listed foreign private issuers to submit semi-annual financial information to the SEC on Form 6-K, aligning with the existing NASDAQ-listed requirement for FPIs.

One potentially significant impact of the new rule concerns the NYSE’s sanctions for a company that suspends financial reporting, or “goes dark.”  Any company that fails to file a required interim or annual report must file the delinquent report within six months of the original due date, or risk being delisted (subject to the NYSE’s discretion to extend the compliance period by an additional six months). Until now, a listed FPI that delayed publication of its financial statements would only trigger the suspension and delisting procedures when it failed to file the annual report on Form 20-F.  Under the new rule, those procedures will be triggered by the failure to file interim financial information for the first six months of the year.

New Section 203.03 of the NYSE Listed Company Manual requires a listed FPI, at a minimum, to submit to the SEC a Form 6-K with an interim unaudited balance sheet as of the end of its second fiscal quarter and a semi-annual unaudited income statement that covers its first two fiscal quarters. This must be presented in English and submitted no later than six months following the end of the second fiscal quarter.  However, there are no further conditions.  For example, the rule does not require a statement of cash flows, financial statement notes, presentation on a consolidated basis, compliance with any particular body of accounting principles or reconciliation to U.S. GAAP.  A listed FPI does not have to submit interim financial statements for the first and third quarters, but it may choose to provide more expansive or more frequent interim financial information.

The new rule is effective beginning with any fiscal year that starts on or after July 1, 2015.  This would mean the first semi-annual period for which interim financial statements are required is the six months ended December 31, 2015, for a listed FPI with a June 30 fiscal year.  For a listed FPI with a December 31 fiscal year, the new rule applies to the six months ending June 30, 2016.

In proposing the rule, the NYSE intended to establish a minimum interim reporting regime for all exchange-listed FPIs and provide investors with more updated financial disclosure, particularly since annual financials provide less explanation for a company’s activities toward the end of the following disclosure cycle. However, the NYSE also stated that the additional disclosure will not create an unnecessary or inappropriate burden on NYSE-listed FPIs and that almost all NYSE-listed FPIs already provide semi-annual interim financial information.  We believe very few listed FPIs will need to adjust their reporting practices to be in compliance with the new rule, since home-country requirements or market expectations lead most FPIs to publish interim financial statements, and if an FPI is NYSE-listed, it is required to file that information on Form 6-K.

SEC Release approving the new rule: https://www.sec.gov/rules/sro/nyse/2016/34-77198.pdf

New rule text: https://www.sec.gov/rules/sro/nyse/2016/34-77198-ex5.pdf