U.S. securities regulator eases reporting requirements for foreign issuers

The United States Securities Exchange Commission [SEC] has officially made it easier for foreign companies to terminate their SEC registration, thus making it easier to cease their reporting obligations under the Sarbanes-Oxley Act.
Smaller foreign companies in particular have criticized the SECs reporting requirements for being costly and onerous. Risk managers have been working to help Canadian- and U.S.-based companies meet their legal obligations to comply with the corporate governance requirements outlined in Sarbanes-Oxley.
Summarizing the need for the March 2007 amendements, the SEC acknowledged in a Jan. 11, 2007 document that a foreign private issuer may find it difficult to terminate its Exchange Act registration and reporting obligations despite the fact that there is relatively little interest in the issuers U.S.-registered securities among United States investors.
Basically, a foreign company, even if it de-listed itself from U.S. stock markets, was still under an obligation to meet the SECs reporting requirements so long as the company had more than 300 U.S. shareholders.
In an online report, MSNBC observed: Critics said the shareholder threshold was arbitrary, dubbing it the Hotel California effect – a reference to the song about a hotel where you can check out any time but you can never leave.
The SEC passed changes to these regulations on Mar. 21, 2007.
The new regulations allow foreign companies to cease their SEC reporting obligations so long as the average daily trading volume of its subject class of securities in the United States does not exceed 5% of the companys daily trading volume in the issuers primary market.