Foreign Private Issuer
A Foreign Private Issuer (FPI) is a non-US company that qualifies under SEC rules for a streamlined disclosure regime, allowing it to file financial statements prepared under IFRS or home-country GAAP, use SEC forms designed for foreign companies, and observe less frequent and less extensive reporting obligations than domestic US registrants.
The Foreign Private Issuer category reflects the SEC's recognition that subjecting non-US companies to the same comprehensive disclosure framework required of US domestic issuers could create barriers to US capital market access without commensurate investor protection benefits, particularly when the companies are already subject to robust disclosure requirements in their home jurisdictions. The FPI accommodation is designed to welcome global companies into US markets while preserving the integrity of the disclosure system.
To qualify as an FPI, a company must be incorporated or organized under foreign law and must satisfy one of two tests: (1) more than 50 percent of its outstanding voting securities are held by non-US residents, or (2) a majority of the company's directors or managers are not US citizens or residents, more than 50 percent of its assets are outside the United States, or its business is administered principally outside the United States. The FPI determination is made annually as of the last business day of the company's second fiscal quarter, and a company that fails the test loses FPI status effective the first day of the fiscal year following the test date.
FPIs that register equity securities with the SEC use Form 20-F for annual reports (the equivalent of the 10-K for US companies) and Form 6-K for interim reports of material information that the company discloses or is required to disclose in its home country. Companies must file the 20-F within four months of fiscal year-end, compared to the 60-day deadline for large accelerated US filers. FPIs are not required to file quarterly reports on Form 10-Q, proxy statements on Form DEF 14A, or Current Reports on Form 8-K — a significant reduction in reporting burden. Canadian companies may use the multijurisdictional disclosure system (MJDS) and file Canadian-form annual and quarterly reports with the SEC.
FPIs may present their financial statements under International Financial Reporting Standards (IFRS) as issued by the IASB without reconciliation to US GAAP, pursuant to a 2007 SEC rule change. Home-country GAAP is also acceptable with a US GAAP reconciliation. This accommodation is particularly valuable for companies from the European Union, where IFRS is mandatory for listed companies, eliminating the significant cost of preparing dual-standard financial statements.
Sarbanes-Oxley Act provisions apply to FPIs with some modifications. Section 302 (management certification of financial reports) and Section 906 (criminal penalties for false certifications) apply. Section 404 internal control attestation requirements apply to FPIs that are large accelerated or accelerated filers, though the management assessment and auditor attestation are conducted under standards comparable to those applicable to domestic issuers. The PCAOB audits registered foreign accounting firms that audit FPIs, though this oversight has been a point of contention with China, which for years prevented PCAOB inspections of audit firms based there.